Latest / Masters in Business / Adam S. Posen on the Need for Fiscal Stimulus (Podcast)

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Adam S. Posen on the Need for Fiscal Stimulus (Podcast) · Masters in Business

• 0:02
  Speaker 1: This is Masters in Business with Barry Ridholts on Bloomberg Radio.
• 0:07
  Speaker 1: This weekend. On the podcast, I have an extra special guest,
• 0:10
  Speaker 1: ad Imposing, President of the Peterson Institute for International Economics.
• 0:15
  Speaker 1: This is really a whole lot of monetary policy, fiscal
• 0:20
  Speaker 1: discussion and just wonky good fun. He has worked all
• 0:25
  Speaker 1: over the world as an expert in both inflation deflation,
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  Speaker 1: monetary policy fiscal policy. There aren't that many people who
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  Speaker 1: have his breath of experience, whether it's at a think tank,
• 0:37
  Speaker 1: at the New York Fed, at the Bank of England.
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  Speaker 1: This really is quite the fascinating discussion, and the timing
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  Speaker 1: is perfect. We're recording this not knowing what the outcome
• 0:49
  Speaker 1: of the election is, and we're recording it on election day,
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  Speaker 1: so it'll be interesting to see how our discussion plays
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  Speaker 1: out in light of what probably is old news by now,
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  Speaker 1: But the discussions of policy and the discussions of what
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  Speaker 1: central bankers got right and wrong over history is timeless,
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  Speaker 1: and I think if you're at all interested in what's
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  Speaker 1: going on in banking, monetary policy, government management of emergencies
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  Speaker 1: and recessions, you're going to find this to be absolutely fascinating.
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  Speaker 1: So with no further Ado my conversation with Adam Posing.
• 1:30
  Speaker 1: This is Masters in Business with Barry Ridholts on Bloomberg Radio.
• 1:35
  Speaker 1: My special guest today is an Imposing. He is the
• 1:39
  Speaker 1: president of the Peterson Institute for International Economics, where he
• 1:43
  Speaker 1: has served since he comes to us with a PhD
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  Speaker 1: in political economy from Harvard. He has been an economist
• 1:51
  Speaker 1: at the Federal Reserve Bank of New York as well
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  Speaker 1: as a voting member of the Monetary Policy Committee of
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  Speaker 1: the Bank of England. In he co authored a book
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  Speaker 1: on inflation targeting with some guy named Ben Bernanke. Adam Posen,
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  Speaker 1: Welcome to Bloomberg. Thank you, Berry. Really excited to talk
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  Speaker 1: with you. So let's have a conversation. I'm I expect
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  Speaker 1: this to be good. Wonky fund and let's start with
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  Speaker 1: with the Peterson Institute, globally recognized think tank focusing on
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  Speaker 1: international relations and and economics. Tell us a bit about
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  Speaker 1: the institution. How does it get its funding, what are
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  Speaker 1: its goals and purposes? Thanks Verry, It's obviously a pleasure
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  Speaker 1: for me to talk about it. The Peterson Institute for
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  Speaker 1: International Economics was co founded forty years ago about by
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  Speaker 1: Fred Bergston and Pete Peterson, who had been together in
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  Speaker 1: government in the seventies in the early seventies, and they
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  Speaker 1: both saw the US as being part of a global
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  Speaker 1: economy that it wasn't yet realizing it was part of.
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  Speaker 1: And the strong point of the Peterson Institute since that
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  Speaker 1: time has been bringing together people with academic research grant
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  Speaker 1: who want to work on real world problems, which is
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  Speaker 1: in some ways may sound like, well, that's what a
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  Speaker 1: thing tank does. But doing it with quality and some
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  Speaker 1: amount of intellectual honesty and not being terribly partisan about
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  Speaker 1: it is the trick. Um I got to take over
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  Speaker 1: as the second leader of it as the president starting
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  Speaker 1: in January. Michael Peterson, head to the Peterson Foundation, succeeded
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  Speaker 1: Pete as the chair of our board, and together, I
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  Speaker 1: think we've built on the values and the core that
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  Speaker 1: uh Fred and Pete had and taken it in a
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  Speaker 1: better direction. Further, um that it's not just about the
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  Speaker 1: global economy, it's about how the global economy affects the
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  Speaker 1: domestic well being of people. That it's not just about
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  Speaker 1: how the US interacts with the global economy. But our
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  Speaker 1: target audio in are the leaders in the main in
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  Speaker 1: the major economies. Basically think the g twenty UM and
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  Speaker 1: that we're doing more education and outreach and accessible publication
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  Speaker 1: rather than academic work. So you raise an interesting question
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  Speaker 1: that I have to address. Throughout most of my career
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  Speaker 1: I followed a number of think tanks for pretty much
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  Speaker 1: what you described nonpartisan research and analysis. But at the
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  Speaker 1: same time, I've noticed a number of pretty well known
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  Speaker 1: think tanks have kind of gone, you know, just full
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  Speaker 1: partisan politics. What is that about. Aren't these thin tanks
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  Speaker 1: supposed to maintain some sort of objectivity when they pursue
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  Speaker 1: policy or have they all just become an arm of
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  Speaker 1: various political parties. Well, some have become an arm and
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  Speaker 1: some haven't. I mean, just speaking very blantly, Berry and
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  Speaker 1: you had said about funding, and they don't mean a
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  Speaker 1: duck that issue. We're much smaller than most the other
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  Speaker 1: think tanks, and so we've been fortunate to be able
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  Speaker 1: to choose UH supporters, starting with the Peterson Foundation covering
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  Speaker 1: our our core. But then we have a market test
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  Speaker 1: to raise of our money every year, and so we
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  Speaker 1: have a balance um and we only take money that's
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  Speaker 1: from private sector or individuals that's basically non restricted. Are
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  Speaker 1: only about very broad things like trade or Macro. The
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  Speaker 1: incentives to get part of in have always been there,
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  Speaker 1: but they've gotten worse, just as it's been true for
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  Speaker 1: everybody in Washington and everybody around the world recently, because
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  Speaker 1: when the government ceases to value expertise and ceases the
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  Speaker 1: value open debate, you only weigh in sometimes is to
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  Speaker 1: be part of it. I mean, we worked with people
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  Speaker 1: in both Bush administrations, the Clan administration of Bomb administration.
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  Speaker 1: We have been completely shut out of any real meaningful
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  Speaker 1: interaction with the Trump administration appointees. We don't have access
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  Speaker 1: us by right, uh, and we have to earn it.
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  Speaker 1: But in this case we're shut out because we speak
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  Speaker 1: not what they want to hear. So you just got
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  Speaker 1: to make your choice. And and and you know we
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  Speaker 1: we chose to be on the outs rather than be
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  Speaker 1: ridiculously partisans. So that raises another question. How does research
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  Speaker 1: normally anyway, how does it have an impact on public policy?
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  Speaker 1: What do think tanks do under let's just call it
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  Speaker 1: a more traditional administration than the current one. Well, think
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  Speaker 1: tanks at best, in our view, are served kind of
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  Speaker 1: like well, they serve three purposes first, and is they
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  Speaker 1: try to shoot down bad ideas. We're sort of like
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  Speaker 1: an independent council of economic advisors. We try to explain
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  Speaker 1: what are the costs, what are things that are already known,
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  Speaker 1: what are unforeseen effects? And with the Trump administration has
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  Speaker 1: been an awful lot of that. But that that's sort
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  Speaker 1: of the first thing. The second thing you tried to
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  Speaker 1: do is be a source of good ideas for what
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  Speaker 1: are the problems, and say the six months to three
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  Speaker 1: year time horizon. You're not trying to Monday, the earning
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  Speaker 1: quarterback everything day to day, but you've got a bit
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  Speaker 1: more leisure and a bit less political pressure. And ideally
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  Speaker 1: your people are good and have insights from experience and research,
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  Speaker 1: so they can say, here's a way of addressing this problem,
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  Speaker 1: or here's the problem you've overlooked. And then the third
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  Speaker 1: thing you try to do is contribute to the public
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  Speaker 1: discussion and on both those lines, not to to talk
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  Speaker 1: about what's good and what's bad. And in the normal times, again,
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  Speaker 1: I mean it sounds very establishment. One doesn't have this
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  Speaker 1: by right, one has to earn it. But in the
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  Speaker 1: normal times, people want to hear what your think tank
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  Speaker 1: says because they feel like it offers useful information, and
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  Speaker 1: so officials want to discuss with you informally or occasionally
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  Speaker 1: make their case formally so that they you can be
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  Speaker 1: a sounding more and try to make policy better. The
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  Speaker 1: one other thing I would say is that the ability
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  Speaker 1: to affect policy in our view UM and the record
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  Speaker 1: of Peterson Institute UM, is about sort of like a
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  Speaker 1: baseball player. You're doing really well if you're averaging three
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  Speaker 1: that you you don't always kill everything you seek to kill,
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  Speaker 1: and you even less frequently get proposals accepted directly as
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  Speaker 1: soon as you propose them. But over time you hope
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  Speaker 1: to change the debate. And there are a number of
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  Speaker 1: places I can cite where we've done that, including most
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  Speaker 1: recently on fiscal policy with oliving Blanchard's leadership on trade
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  Speaker 1: relations with China, and with TPP other things. So that
• 8:46
  Speaker 1: was actually a question I was thinking about, and you
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  Speaker 1: pointed me right to it. In the US, are you
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  Speaker 1: targeting the White House? Are you targeting Congress and fiscal policy,
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  Speaker 1: or are you really aiming at at having influence on
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  Speaker 1: the Federal reserve and monetary policy or some combination of
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  Speaker 1: all of them. It's some combination of all of them,
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  Speaker 1: somewhat opportunistically, I mean our commitment and I'd like to
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  Speaker 1: think a number of other think thanks, but not all.
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  Speaker 1: Our commitment is to be very open about what it
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  Speaker 1: is we're pursuing, to say why we've gotten to the
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  Speaker 1: agenda we have and these are the issues, and includes
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  Speaker 1: disclosure of our funders, and disclosure of the background of
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  Speaker 1: our fellows and and just say put it out there.
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  Speaker 1: We believe that integration with the global economy on net
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  Speaker 1: is much better for the US in terms of economic
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  Speaker 1: well being, stability, peace, domestic politics, and and just dealing
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  Speaker 1: with the big economic problems than the alternative. And so
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  Speaker 1: we're just opportunistic. So if sometimes it's about writing our
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  Speaker 1: eds and putting explainers on our website and trying to
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  Speaker 1: reach the public that way. Sometimes it's appearing with influencers
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  Speaker 1: like you or our friend Tom Key and Trincy Makar
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  Speaker 1: or David Weston on Bloomberg. Sometimes it's giving briefings directly
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  Speaker 1: the cabinet officials. Let me push back on you a
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  Speaker 1: sec here, coming to channel my inner Donald Trump and say, hey,
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  Speaker 1: we we've had the entire post war period to see
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  Speaker 1: how US economic integration with the rest of the world
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  Speaker 1: has worked. And for many Americans it hasn't worked. Globalization
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  Speaker 1: and the rise of technology, We've exported a lot of
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  Speaker 1: good paying jobs overseas. There's a huge swath of people
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  Speaker 1: in America who have been left behind. How do you
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  Speaker 1: respond to that criticism. Well, the first point is that
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  Speaker 1: the main reason a huge swath of people in the
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  Speaker 1: US have been left behind is because our politics, riven
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  Speaker 1: by race, riven by regionalism, long before Trump, has made
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  Speaker 1: us have the weakest welfare state and the weakest worker
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  Speaker 1: protections in the world for a rich country. And so
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  Speaker 1: go across the border of Canada, go across the Atlantic
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  Speaker 1: to any Western European country, go the other direction to
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  Speaker 1: Australia or Singapore or Japan, and workers have not been
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  Speaker 1: left behind as much. So that that's actually not on globalization,
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  Speaker 1: that's on us. And the second thing is that you
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  Speaker 1: at some point that where people overselling globalization. I personally,
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  Speaker 1: I think I can claim I largely haven't. But it's
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  Speaker 1: about making the best of the reality you got. You're
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  Speaker 1: not going to prevent people in China or Brazil or
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  Speaker 1: India or Poland for making a living. They are entitled
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  Speaker 1: to and they should. And so the question is given
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  Speaker 1: that they exist, how do we integrate a system that
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  Speaker 1: lets them make a living and cruise to hard benefit.
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  Speaker 1: And so the fundamental contention of Trump that you know,
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  Speaker 1: we've all been played for suckers, which of course is
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  Speaker 1: his mental worldview at times, because that's his whole game plan,
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  Speaker 1: that we've all been played for suckers. It just doesn't
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  Speaker 1: hold up with the facts. I mean, when we talk
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  Speaker 1: about the loss of these jobs in in you know,
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  Speaker 1: it's it's happens in a country where you have a
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  Speaker 1: hundred and fifty million jobs at any given time and
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  Speaker 1: fifteen plus million, twenty million, thirty million people turn over
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  Speaker 1: their jobs every year. The idea that over a twenty
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  Speaker 1: year period manufacturing jobs shrunk by a couple of million,
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  Speaker 1: you know, that's reality. And so the failures are not
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  Speaker 1: about globalization. And what we've seen over the last four
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  Speaker 1: years is the exact experiment. You roll back globalization and
• 12:40
  Speaker 1: it gets worse, not better. Right, Global labor arbitrage is
• 12:44
  Speaker 1: a real thing, and it's up to us to figure
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  Speaker 1: out a way to respond to it proactively, as opposed
• 12:49
  Speaker 1: to sitting back and doing nothing. Beautifully said, So let's
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  Speaker 1: talk a little bit about exploding dead and deficits have
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  Speaker 1: been hearing about the evils of deficits my entire life.
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  Speaker 1: I've heard warnings about the collapse of the currency and
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  Speaker 1: hyper inflation and all these other things. And yet when
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  Speaker 1: you look around the world at Japan or the US,
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  Speaker 1: none of the warnings have come to fruition. So that
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  Speaker 1: raises the question, a country with its own currency and
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  Speaker 1: own own central bank, why should we really care about
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  Speaker 1: annual deficits. Well, we shouldn't freak out about them the
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  Speaker 1: way people kept trying to make us freak out about them.
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  Speaker 1: That's for sure. Again, my colleague Olivia Blanchard of Peterson
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  Speaker 1: the noted Economists, isn't doing a lot of the intellectual
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  Speaker 1: groundwork the last couple of years to explain why this
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  Speaker 1: is the case. But a bunch of us, including Olivier
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  Speaker 1: and I and others, were already saying back in two
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  Speaker 1: thousand two nine, Hey, don't destroy the economy for the
• 13:53
  Speaker 1: sake of the false fear that somebody you're going to
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  Speaker 1: turn into grease. It goes to exactly the point you raised, Barry.
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  Speaker 1: If you're a country and the can issue debt in
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  Speaker 1: your own currency, and importantly, if you're a country where
• 14:07
  Speaker 1: it's credible that in future you can raise taxes if
• 14:11
  Speaker 1: you have to, then you don't need to worry so
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  Speaker 1: much about that. But not worrying so much it's not
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  Speaker 1: the same as not worrying at all, and so it's
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  Speaker 1: just that it's less of a knife edge, particularly when
• 14:24
  Speaker 1: we're in a bad situation like we are now. And
• 14:26
  Speaker 1: by bad situation, I don't mean just the human horror
• 14:29
  Speaker 1: of the pandemic. I mean bad situation the kind of
• 14:32
  Speaker 1: sector stagnation that Larry Summers is and others have spoken about,
• 14:36
  Speaker 1: which is that we're in a period of fundamentally deficient
• 14:40
  Speaker 1: private sector demand for productive investment. The real interest that
• 14:45
  Speaker 1: the ore star, the underlying real interest rate of the
• 14:48
  Speaker 1: economy is very low and econ speak, and so at
• 14:52
  Speaker 1: that point everybody just starts chasing safety and has to
• 14:56
  Speaker 1: stick their money somewhere, and then it all goes into
• 14:58
  Speaker 1: treasuries and then so easedly safe assets. And then when
• 15:02
  Speaker 1: interest rates are that low, you're better off using fiscal
• 15:06
  Speaker 1: policy than not. But as our cousins at the Peterson
• 15:10
  Speaker 1: Foundation rightly point out, and as I've been saying for
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  Speaker 1: several years now, you know what the debate should be about.
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  Speaker 1: What you spend it on, not how much you're spending.
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  Speaker 1: You know, that is where that is a more difficult
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  Speaker 1: debate in politics, and it's more difficult to establish and
• 15:25
  Speaker 1: having simple rules of thumb at the GDP ratio is
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  Speaker 1: bad wolves it turns out not true. But debating you know,
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  Speaker 1: what's public investment, what's useful for the next generation, what's
• 15:36
  Speaker 1: going to have a bigger or lesser payoff? Which forms
• 15:39
  Speaker 1: of taxation are better or worse. That's the discussion you
• 15:43
  Speaker 1: should be having. Even if you can borrow against the
• 15:45
  Speaker 1: equity in your home. You know, it matters whether you
• 15:48
  Speaker 1: blow it all on Domino's pizza or whether you renovate
• 15:50
  Speaker 1: your kitchen, or whether you take that money and put
• 15:52
  Speaker 1: your kids through school. Huh quite interesting. Let me throw
• 15:56
  Speaker 1: the question back at you, not so much as to
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  Speaker 1: the what we spend the money on, but the when
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  Speaker 1: we spend the money. There wasn't a whole lot of
• 16:08
  Speaker 1: fiscal stimulus post Great Financial Crisis. There wasn't the usual
• 16:13
  Speaker 1: Keynsian countercyclical spending, and yet the tax cuts were an
• 16:20
  Speaker 1: enormous pro cyclical spends. How important is the when of
• 16:25
  Speaker 1: spending versus the wa of spending? They're both important. The
• 16:30
  Speaker 1: when of spending is kind of asymmetric. It's far more
• 16:34
  Speaker 1: important that you don't blow it when you need the spending,
• 16:37
  Speaker 1: as we did by reversing fiscal course in two thousand ten,
• 16:41
  Speaker 1: as the UK did, as Germany as member of other
• 16:45
  Speaker 1: countries along with the U s mistakenly did, versus really
• 16:48
  Speaker 1: stepping up and doing the fiscal as we did. I
• 16:51
  Speaker 1: say we, as the US did, UH and the other
• 16:55
  Speaker 1: major economies did last spring. You know, that's really important.
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  Speaker 1: Wasting your money on as you put a pro cyclical,
• 17:03
  Speaker 1: feeding a boom when it didn't need the help tax
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  Speaker 1: cuts we had in is bad, but it's less dangerous
• 17:11
  Speaker 1: than failing to spend when you need it. And this
• 17:13
  Speaker 1: is one of the funny things. I mean, it's like
• 17:15
  Speaker 1: with monetary policy. Monitary policy is asymmetric too. It's very
• 17:19
  Speaker 1: good at staving off the financial panics, it's not so
• 17:22
  Speaker 1: good at creating a boom um creating a recovery. So
• 17:27
  Speaker 1: you have to start take that into account when you're
• 17:29
  Speaker 1: assessing these things. So let me go right from the
• 17:33
  Speaker 1: deficit conversation to the increasing popularity of a modern monetary theory.
• 17:40
  Speaker 1: It seems to be gaining more and more acceptance in
• 17:43
  Speaker 1: recent years. What are your thoughts on MMT And if
• 17:47
  Speaker 1: we do see some sort of unified government in the
• 17:50
  Speaker 1: United States, do you do you think that's a possibility
• 17:53
  Speaker 1: and what might that mean for the deficit? Let me
• 17:58
  Speaker 1: take it in reverse order. I think, what if we
• 18:01
  Speaker 1: get unified government, a clear president with a mandate A
• 18:06
  Speaker 1: let's assume say Democrats controlling both houses of Congress, then
• 18:11
  Speaker 1: I would expect to see a significant shift in ongoing
• 18:15
  Speaker 1: fiscal policy even as the economy recovers. I would expect
• 18:18
  Speaker 1: to see reallocation of taxes. I would expect to see
• 18:21
  Speaker 1: and pray for, a carbon tax, but redistribution to some
• 18:25
  Speaker 1: of those revenues back to the people hit by it.
• 18:28
  Speaker 1: And I would expect to see a larger investment in infrastructure, healthcare,
• 18:33
  Speaker 1: and green energy. Now, whether that's m MT or not
• 18:38
  Speaker 1: isn't going to show up in the plans for the
• 18:40
  Speaker 1: first few years because interest rates are nil, the economy
• 18:44
  Speaker 1: is far from full employment. We've way under invested in
• 18:47
  Speaker 1: green and in healthcare and in infrastructure. So it makes
• 18:51
  Speaker 1: no difference where you call it m empty or not.
• 18:53
  Speaker 1: But some people will call it m empty and use
• 18:55
  Speaker 1: that as their justification. So then the question is what
• 19:00
  Speaker 1: is the m M T tell us it's different, And
• 19:02
  Speaker 1: where I would come down and the number of my
• 19:03
  Speaker 1: colleagues would come down is saying there's a difference between
• 19:08
  Speaker 1: saying the budget constraints are not as tight as people
• 19:11
  Speaker 1: used to think, especially in these current circumstances, versus the
• 19:15
  Speaker 1: budget constraint is a myth. You know, Stephanie Kelton, I
• 19:18
  Speaker 1: guess their name is talking about deficit myth. Those are
• 19:22
  Speaker 1: very different, you know, it's it's it's it's like saying
• 19:26
  Speaker 1: to a diabetic, right, you know, if you're taking your
• 19:30
  Speaker 1: meds and you're responsible, you can occasionally cheat. Is different
• 19:33
  Speaker 1: from saints to the diabetic. You don't have to take
• 19:36
  Speaker 1: your meds and Ben and Jerry's all the time. Right.
• 19:39
  Speaker 1: That's a That's a pretty pretty good way to describe it.
• 19:43
  Speaker 1: So that raises the issue of fiscal versus monetary policy.
• 19:50
  Speaker 1: What do you say to folks like Ray Dalio and
• 19:53
  Speaker 1: others who have been arguing the mostly monetary response and
• 19:58
  Speaker 1: the limited fiscal response after the financial crisis has led
• 20:02
  Speaker 1: to a substantial increase in wealth inequality and ongoing income inequality. Again,
• 20:10
  Speaker 1: the question is compared to what and and there's no
• 20:14
  Speaker 1: question we would have been better off for a variety
• 20:16
  Speaker 1: of reasons if we hadn't cut back on fiscal abruptly
• 20:21
  Speaker 1: in and we had had to sustained public investment campaign,
• 20:25
  Speaker 1: and then monetary policy would have been different. So again,
• 20:27
  Speaker 1: in conclusion, and I heard your interview with Dahlio Um,
• 20:31
  Speaker 1: you know, in sort of implication, I'm not that different.
• 20:34
  Speaker 1: But again, just like with globalization, you can't pretend the
• 20:37
  Speaker 1: rest of the world doesn't exist. You can't pretend inequality
• 20:40
  Speaker 1: is only the fault of the fat. I mean, the
• 20:42
  Speaker 1: reason the FED does some of these things is because
• 20:47
  Speaker 1: not just their bleeding hearts for inequality, but because fundamentally,
• 20:50
  Speaker 1: if you have massed unemployment, that is so much worse
• 20:53
  Speaker 1: for those people than the fact that some rich people
• 20:56
  Speaker 1: get ahead because stock prices go up. That has perm
• 21:00
  Speaker 1: and it's scarring effects on communities, on individuals, on families,
• 21:04
  Speaker 1: on education of the next generation. And so this is
• 21:07
  Speaker 1: one of the things I used to argue when I
• 21:09
  Speaker 1: was policy maker the Bank of England back in the
• 21:11
  Speaker 1: financial crisis. You can talk about all these other things
• 21:15
  Speaker 1: that are supposedly bad about expansionary monetary policy, but the
• 21:19
  Speaker 1: failure to act has incredibly bad, real tangible effects, not
• 21:24
  Speaker 1: just paper profits for a few people. And I'm against
• 21:28
  Speaker 1: an equality, but I'm mostly against inequality because what it
• 21:30
  Speaker 1: does to people on the bottom. I'm happy to tax
• 21:34
  Speaker 1: the heck out of the people on the top, but
• 21:36
  Speaker 1: the fact that the people in the top get ahead
• 21:38
  Speaker 1: isn't going to prevent me from helping the people on
• 21:40
  Speaker 1: the bottom. Uh. Quite interesting. So let's talk a little
• 21:44
  Speaker 1: bit about what's going on with Brexit and the Bank
• 21:48
  Speaker 1: of England and all the craziness in the UK. I
• 21:52
  Speaker 1: really like your quote. There are no economic benefits for Brexit.
• 21:57
  Speaker 1: The only issue is how large the costs are. Explain
• 22:01
  Speaker 1: that to us, Well, you can make a political argument
• 22:05
  Speaker 1: for Brexit, Berry. If you're a nationalist. You're worried about immigration,
• 22:09
  Speaker 1: you're worried about so called sovereignty culturally, you're worried about
• 22:14
  Speaker 1: Europe blowing up. You know, there are a lot of
• 22:17
  Speaker 1: reasons you can do. As a free citizen in Britain,
• 22:19
  Speaker 1: you could have voted for Brexit, but you can't make
• 22:21
  Speaker 1: it an economic argument. I mean, essentially, on on the
• 22:24
  Speaker 1: negative side, you're throwing up a supply shock with your
• 22:29
  Speaker 1: largest trading partner, which is Europe, which is six your
• 22:32
  Speaker 1: trade and which is a much larger share of the economy.
• 22:36
  Speaker 1: Trade is a much larger share of the British economy
• 22:38
  Speaker 1: than like for US or China, which are huge um
• 22:43
  Speaker 1: And so you're you're effectively putting terroriffs on yourself, and
• 22:47
  Speaker 1: not just tariffs, you're you're not part of the Single market.
• 22:50
  Speaker 1: So that means all the high end stuff that Britain
• 22:53
  Speaker 1: was exporting in terms of education, business services, financial services,
• 22:58
  Speaker 1: you're no longer going to be necessary ly usually recognized
• 23:02
  Speaker 1: standards and access on those. So you're throwing up this
• 23:04
  Speaker 1: huge spanner in the works, as the Brits would say,
• 23:08
  Speaker 1: and what are you getting for it? Well, you can
• 23:11
  Speaker 1: come up with a laundry list of things you think
• 23:13
  Speaker 1: are wrong with the European Union economically, including, if you
• 23:16
  Speaker 1: feel this way, over regulation, excessive welfare state, tight labor laws, uh,
• 23:23
  Speaker 1: demographic decline, weaknesses in the euro and as I pointed
• 23:28
  Speaker 1: out and started pointing out back in, none of those
• 23:31
  Speaker 1: applied to Britain. Essentially, Britain has the weakest labor laws,
• 23:35
  Speaker 1: the least welfare state of any of the rich countries
• 23:39
  Speaker 1: in Western Europe. And less than many of the countries
• 23:43
  Speaker 1: in Eastern Europe, and it's not part of Europe. So essentially,
• 23:47
  Speaker 1: all you're getting is a slight diminution in in certain
• 23:55
  Speaker 1: industries of regulatory conformity, and you're giving up a huge
• 23:58
  Speaker 1: amount of trade access. And so it gets even worse
• 24:02
  Speaker 1: because there were many places, including American companies, including Japanese
• 24:05
  Speaker 1: companies and others, who used Britain as their platform for
• 24:10
  Speaker 1: investment that if they wanted to produce stuff inside the EU,
• 24:13
  Speaker 1: or they wanted to have services or headquarters inside the
• 24:16
  Speaker 1: EU of a subsidiary, they did in Britain because they
• 24:20
  Speaker 1: like Britain. They liked the English, like the rule of laws,
• 24:22
  Speaker 1: they liked the place. And now that doesn't work, and
• 24:25
  Speaker 1: we're seeing that all these auto manufacturers, for example, for
• 24:29
  Speaker 1: Ni San, Toyota, land Rover, they're cutting back on their
• 24:32
  Speaker 1: investment in Britain. So there is no economic upside. So
• 24:35
  Speaker 1: I would argue, and others have argued that both the
• 24:39
  Speaker 1: UK and Germany were the big winners of the creation
• 24:44
  Speaker 1: of the European Union. What does that say to us
• 24:48
  Speaker 1: about the rise of popularism? And lots of folks after
• 24:52
  Speaker 1: the Brexit vote said, hey, you and America better pay
• 24:55
  Speaker 1: attention because the same factors driving US towards Brexit is
• 25:00
  Speaker 1: going to drive you towards a Trump presidency. That turned
• 25:03
  Speaker 1: out to be a pretty accurate prediction. Yeah, I agree,
• 25:09
  Speaker 1: And I mean I was part of that crowd. I
• 25:12
  Speaker 1: had said that there were huge echoes between Brexit and
• 25:15
  Speaker 1: Trump when Trump was running, you know, but I think
• 25:18
  Speaker 1: it's really important very that we emphasize that not everything
• 25:22
  Speaker 1: is about economics. People choose to do things that matter
• 25:27
  Speaker 1: to them that may be a bad idea economically. You
• 25:31
  Speaker 1: just don't want to lie to them about it. And
• 25:33
  Speaker 1: and I think that's where we are with both Trump
• 25:36
  Speaker 1: and Brexit, is that, you know, there are people who
• 25:40
  Speaker 1: are motivated for good reasons. There are people who are
• 25:43
  Speaker 1: motivated for single issue voters, whether it's you know, abortion
• 25:48
  Speaker 1: in the United States or um local government control in
• 25:54
  Speaker 1: the UK. And there are people, frankly who are motivated
• 25:57
  Speaker 1: by evil things like racism and native and in a
• 26:00
  Speaker 1: lot of which contributes to populism. And and so yeah,
• 26:05
  Speaker 1: the same force was there in the UK and in
• 26:08
  Speaker 1: the US UM and I think it has a lot
• 26:11
  Speaker 1: to do with less well educated white males status going
• 26:16
  Speaker 1: down and they get really pissed. And that's not some
• 26:21
  Speaker 1: inevitable results of economics. That's just the reality when you
• 26:25
  Speaker 1: have both technology advancing and justice advancing, that their privileged
• 26:31
  Speaker 1: positions start to break down and they get angry. And
• 26:34
  Speaker 1: in our democratic system they're allowed to express that anger.
• 26:37
  Speaker 1: I just don't want us saying, oh, there's something underlying
• 26:40
  Speaker 1: wrong with international economic integration. And there's a bunch of
• 26:43
  Speaker 1: political science work out there and polling work cleaned by
• 26:47
  Speaker 1: my colleague Marcus Nolan and my former colleague Caroline Freud,
• 26:50
  Speaker 1: where you can just document that people are voting for
• 26:53
  Speaker 1: these things. These parties, the Trump's Forage and in the
• 26:57
  Speaker 1: UK Brexit be because of their dislike of foreigners, because
• 27:04
  Speaker 1: their dislike of change, and and so the anti globalization
• 27:08
  Speaker 1: isn't because it's doing them harm necessarily, it's because they
• 27:11
  Speaker 1: perceive it as foreign and bad. And you can see
• 27:13
  Speaker 1: this in the UK because the single biggest predictor of
• 27:17
  Speaker 1: whether you voted for Brexit and the polling data was
• 27:20
  Speaker 1: whether you voted you would like to see the death
• 27:22
  Speaker 1: penalty pack and the death is never coming back in
• 27:26
  Speaker 1: the UK, but it was. It's a symbolic issue like
• 27:29
  Speaker 1: burning the flag in the US, and and so again
• 27:33
  Speaker 1: US economists have to be humbled but also straightforward and say,
• 27:37
  Speaker 1: you know, people make decisions, have enough to do with
• 27:40
  Speaker 1: the economics. All we can do is tell you that
• 27:42
  Speaker 1: things are lies about how good the economics are won't work.
• 27:47
  Speaker 1: So let me ask you, how does an American end
• 27:50
  Speaker 1: up on the Monetary Policy Committee of the Bank of
• 27:53
  Speaker 1: England And how did you take that? Because this is
• 27:56
  Speaker 1: a funny not ha ha, but you know, interesting thing
• 28:00
  Speaker 1: about globalization having once been very open and different in Britain.
• 28:05
  Speaker 1: Uh Tony Blair, who was Prime Minister well before I
• 28:09
  Speaker 1: got there, Um talked about having a government of all
• 28:12
  Speaker 1: the talents and so the central Bank jobs at the
• 28:18
  Speaker 1: for the members of the Monetary Policy Committee were publicly
• 28:21
  Speaker 1: advertised and people could apply and you didn't have to
• 28:24
  Speaker 1: be a UK or even any use citizen. Now I
• 28:28
  Speaker 1: mean to be fair, I had done work with the
• 28:32
  Speaker 1: Bank of England as part of my previous research and
• 28:34
  Speaker 1: policy work. I had been a visitor at the Bank
• 28:37
  Speaker 1: as a researcher for six months and probably more importantly,
• 28:42
  Speaker 1: I did some consulting work for then Prime Minister Gordon
• 28:46
  Speaker 1: Brown and Chancellor Alistair Darling at the start of the
• 28:48
  Speaker 1: financial crisis. Plus my research background had a lot to
• 28:53
  Speaker 1: do with both monetary policy and what had gone wrong
• 28:56
  Speaker 1: in Japan, so I was seen as relevant anyway long
• 28:59
  Speaker 1: storage or you know, after I was appointed, but before
• 29:02
  Speaker 1: I went over, I attended a party bizarrely with members
• 29:06
  Speaker 1: of the Federal Open Market Committee, including Gellan and bernankey
• 29:11
  Speaker 1: Um in summer of twenty two tho nine, and literally
• 29:17
  Speaker 1: four different FOMC members I counted came up to me
• 29:20
  Speaker 1: and said, you're going to the Bank of England. If
• 29:22
  Speaker 1: they pointed a foreigner at the f m C, Garbass
• 29:25
  Speaker 1: would burn the FED down, you know. So it wasn't
• 29:30
  Speaker 1: seem as strange. But I spent three years there. I
• 29:33
  Speaker 1: did my best and people I never seemed to get
• 29:36
  Speaker 1: attacked at all for being a foreigner. Huh, that's quite
• 29:39
  Speaker 1: quite interesting. I read a really interesting peace in a
• 29:45
  Speaker 1: local British newspaper or a national British newspaper. Actually I
• 29:50
  Speaker 1: was steered to it Um by one of your colleagues,
• 29:54
  Speaker 1: Danny Blancheflower. The quote about you as you would sit
• 29:57
  Speaker 1: in the room where the Monetary Policy the Committee met
• 30:01
  Speaker 1: and hanging on the wall as a picture of one
• 30:03
  Speaker 1: of the governors from the nineteen thirties, Montague Norman, who
• 30:07
  Speaker 1: I kind of remember from Lords of Finance, Am I am?
• 30:11
  Speaker 1: I getting that right exactly. And anyway, anyway, you would
• 30:14
  Speaker 1: sit there when you didn't know what to do, you
• 30:17
  Speaker 1: would think what would Governor Norman do? And then you
• 30:21
  Speaker 1: would do the exact opposite. So you have to explain that. Yeah,
• 30:25
  Speaker 1: I mean, I was, I was trying to be a
• 30:26
  Speaker 1: little bit cute, but I think it to keep pretty apt.
• 30:30
  Speaker 1: I mean, so imagine that you're sitting The way to
• 30:33
  Speaker 1: translate in U S terms is imagine you're making decisions
• 30:36
  Speaker 1: about government policy in the face of recession, and there's
• 30:40
  Speaker 1: a huge picture of Herbert Hoover on the wall in
• 30:43
  Speaker 1: the room, and you would probably do well saying, okay,
• 30:47
  Speaker 1: I look at Herbert Hoover, I think what would he do?
• 30:50
  Speaker 1: What did he do in thirty one? And I'm going
• 30:54
  Speaker 1: to do the opposite. And and it's not about personalities.
• 30:58
  Speaker 1: It's about Montague Orman represented a very old school, small
• 31:06
  Speaker 1: c conservative, but most importantly recessionist or a creative destruction
• 31:12
  Speaker 1: point of view that was proven dreadfully wrong by the
• 31:18
  Speaker 1: Great Depression. And um was that the liquidate capital, liquidate, labor, liquidate.
• 31:25
  Speaker 1: That school the view that the view that monetary policy
• 31:30
  Speaker 1: could only do harm by trying to be helpful, and
• 31:32
  Speaker 1: you wanted things to liquidate, liquidate, liquidate, as Andrew Mellon,
• 31:36
  Speaker 1: who was the Treasury Secretary of the US under Hoover said,
• 31:39
  Speaker 1: and that great book by Lords of Finance is a
• 31:42
  Speaker 1: beautiful portrayal of these ideologies. And Barry I can Green
• 31:47
  Speaker 1: the economic historians also written about this, and many others.
• 31:50
  Speaker 1: Mark Blythe has a book on austerity. But these ideas
• 31:53
  Speaker 1: to just keep coming back, they just keep coming back.
• 31:55
  Speaker 1: And so in two thousand nine, you know, the Bank
• 31:58
  Speaker 1: of England made a terrible mist ache letting there be
• 32:01
  Speaker 1: a run on on a major regional bank, Northern Rock,
• 32:06
  Speaker 1: because they thought, oh, we have to fight the moral
• 32:07
  Speaker 1: hazard and not tell people and not tell people that
• 32:10
  Speaker 1: that they're going to be bailed out. And then that provoked,
• 32:13
  Speaker 1: just as it did in the thirties, although thankfully on
• 32:15
  Speaker 1: a smaller scale, a series of bank problems. And similarly
• 32:20
  Speaker 1: there were people who were very reluctant to expand the
• 32:23
  Speaker 1: central bank balance sheet to do quee when the economy
• 32:27
  Speaker 1: was vastly unemployed. In my colleague day Blanche. However, as
• 32:30
  Speaker 1: you're calling now Bloomberg who you mentioned, Um, you know
• 32:34
  Speaker 1: he was way ahead of the Kirk. He was on
• 32:35
  Speaker 1: before me in two thousand and eight two nine saying hey,
• 32:39
  Speaker 1: wake up, people, we got to do something. You're making
• 32:41
  Speaker 1: me think about the UK is a little bit of
• 32:45
  Speaker 1: a special case. How much of this derives from the
• 32:49
  Speaker 1: sort of puritanical belief that you have to suffer through
• 32:55
  Speaker 1: pain before there's any sort of redemption. You have to
• 32:59
  Speaker 1: not smooth out the sharp edges of the cycle, and
• 33:04
  Speaker 1: and trying to reduce that ultimately makes things worse. Am
• 33:08
  Speaker 1: I over analyzing this? Or is? I don't think you are?
• 33:11
  Speaker 1: I think very you put it very well. This is
• 33:13
  Speaker 1: a recurring moralistic theme. Um. My old dissertation adviser Ben
• 33:19
  Speaker 1: Friedman and Harvard has a book coming out in the
• 33:21
  Speaker 1: spring that talks about how some of these moral ideas
• 33:25
  Speaker 1: from the late eighteenth century extend to her American economic
• 33:29
  Speaker 1: policy debates today, and that's why people vote against what
• 33:33
  Speaker 1: seems to be their self interest often. Um, you know,
• 33:38
  Speaker 1: there's this old tired Keynes quote which is still applicable.
• 33:41
  Speaker 1: People of affairs don't realize how much of the the slaves
• 33:45
  Speaker 1: of the ideas of some defunct economists. And this goes
• 33:48
  Speaker 1: back to the discussion you were having with Dalio compared
• 33:50
  Speaker 1: to me about the role of central banks and easy
• 33:54
  Speaker 1: monetary policy. If you look around the world right now,
• 33:57
  Speaker 1: or you look it around the world in two thousand nine, Intendant,
• 34:00
  Speaker 1: you thought your biggest problem was people who don't deserve
• 34:03
  Speaker 1: credit or getting credit, business stocks that shouldn't be up
• 34:06
  Speaker 1: are up. You're totally missing the point. And if you
• 34:10
  Speaker 1: think that the causes of these problems are because of
• 34:16
  Speaker 1: lacks credit, you're you're ignoring the evidence. What you can
• 34:20
  Speaker 1: do if you care about lacks credit is you can
• 34:24
  Speaker 1: worry about your accounting system. You can worry about your
• 34:27
  Speaker 1: bank supervision system. You can engage in tighter regulation and
• 34:32
  Speaker 1: and that's where the effort should be. If you're worried
• 34:36
  Speaker 1: about misallocation, and that should be something that goes on
• 34:39
  Speaker 1: all the time, not waiting for some purgatory apocalyptic period
• 34:45
  Speaker 1: to wipe out the stables. That is no way to act,
• 34:48
  Speaker 1: because you wipe out a lot of human beings doing that.
• 34:51
  Speaker 1: Quite fascinating. Let's talk a little bit about your work
• 34:55
  Speaker 1: at the New York Fed. What did you do there
• 34:58
  Speaker 1: as a research economist. Well, I got the job at
• 35:02
  Speaker 1: the New York Fed right out of grad school UM
• 35:05
  Speaker 1: and they hire every year several staff, as do all
• 35:08
  Speaker 1: the Federal Reserve banks, and the Federals are Board. I
• 35:11
  Speaker 1: didn't get a job at the Board, but I was
• 35:13
  Speaker 1: very fortunate to get the job I did at the
• 35:15
  Speaker 1: New York Fed. UM Rick Michigan, professor Columbia, who I
• 35:19
  Speaker 1: think you know UM at that time, had taken leave
• 35:22
  Speaker 1: for Colombia and was the executive vice president chief economist
• 35:25
  Speaker 1: at New York Fan. And he was building a real
• 35:29
  Speaker 1: network and exciting program, and he was very open and
• 35:33
  Speaker 1: good to me to let me be part of it
• 35:35
  Speaker 1: as a junior person. And the main point was that
• 35:41
  Speaker 1: we were reacting to threats to the Federal Reserve. At
• 35:45
  Speaker 1: that time, there were several people in Congress UM who,
• 35:50
  Speaker 1: including a couple of notable senators, who wanted to change
• 35:54
  Speaker 1: the mandate of the FED to a gold standard or
• 35:57
  Speaker 1: a very tight definition of price stability. And he and
• 36:02
  Speaker 1: some of the outside academic consultants, including a person named
• 36:05
  Speaker 1: Ben bernanke Um and I myself all thought this was
• 36:10
  Speaker 1: very dangerous and as the saying goes, you can't beat
• 36:13
  Speaker 1: something with nothing. So we looked around and happened upon
• 36:18
  Speaker 1: the fact that a bunch of other central banks, including
• 36:21
  Speaker 1: the Bank of England, Reserve Bank of New Zealand, the
• 36:23
  Speaker 1: Bank of Canada, Reserve Bank of Australia, had moved to
• 36:26
  Speaker 1: this thing called inflation targeting. And so I did a
• 36:30
  Speaker 1: bunch of other stuff while I was there, and Rick
• 36:31
  Speaker 1: Michigan certainly did a bunch of other stuff while he
• 36:34
  Speaker 1: was there. But our main output in this regard was
• 36:38
  Speaker 1: creating his book with Bernankee Michigan, the now late sadly
• 36:43
  Speaker 1: Thomas Labak, and myself looking at the international experience of
• 36:47
  Speaker 1: inflation targeting. And it was essentially meant to adjust, not
• 36:52
  Speaker 1: just to send the FED, but adjust to a couple
• 36:54
  Speaker 1: of realities of the time. That central banks hadn't been
• 36:59
  Speaker 1: transparent enough, and under Greenspan that was an issue. Uh
• 37:04
  Speaker 1: central banks had been a little too discretionary. And this
• 37:07
  Speaker 1: is how you ended up with the weekend to Bernie's
• 37:09
  Speaker 1: problem that if if Greenspan died, they wanted to problem
• 37:12
  Speaker 1: up because it was too much faith in an individual.
• 37:16
  Speaker 1: And three that central banks had to avoid being too
• 37:22
  Speaker 1: mechanically rules base because then you would get into trouble
• 37:26
  Speaker 1: by tightening policy or loosening policy to mechanically, and so
• 37:31
  Speaker 1: that was our contribution was to come up with this
• 37:33
  Speaker 1: alternative framework, or rather adapt the the alternative framework others
• 37:38
  Speaker 1: have been experimenting with for the FED, and talk about
• 37:42
  Speaker 1: what we had learned. Huh. So I want to talk
• 37:44
  Speaker 1: a little bit about the fed's independence and challenges to that.
• 37:49
  Speaker 1: But before we get there, you raised the issue of
• 37:53
  Speaker 1: the gold standard, which seems so anachronistic. I just have
• 37:58
  Speaker 1: to ask what would happen if the US ever went
• 38:03
  Speaker 1: back on a gold standard. Within very short time, you
• 38:08
  Speaker 1: would have two things. You would have money flying out
• 38:14
  Speaker 1: of the US because people would want to cash out
• 38:17
  Speaker 1: the currency. It's like an exchange rate peg. You have
• 38:21
  Speaker 1: people betting against the ability to maintain it. So think
• 38:24
  Speaker 1: of and George Soros's famous bet against the British pound.
• 38:29
  Speaker 1: And you would start having greater fluctuations in the real
• 38:32
  Speaker 1: economy because you would be determining monetary policy by arbitrarily
• 38:38
  Speaker 1: the amount of gold showing up in the world essentially,
• 38:41
  Speaker 1: and they would not be flexible in reaction to the realities.
• 38:47
  Speaker 1: Um so it would look more like the late nineteenth
• 38:49
  Speaker 1: century when the US was subject to capital flight in
• 38:52
  Speaker 1: the US was subject to sharp fluctuations and real activity
• 38:57
  Speaker 1: driven by monetary policy, regular recession, regular depressions until the FED,
• 39:03
  Speaker 1: at least arguably until the FED came around in the twenties.
• 39:06
  Speaker 1: And and again, the FED wasn't the miracle worker was
• 39:09
  Speaker 1: more Again asymmetric was about getting the FED, getting the
• 39:12
  Speaker 1: money supply out of being the cause of problems. It
• 39:15
  Speaker 1: wasn't about this. So it's fixing everything and making everything wonderful.
• 39:19
  Speaker 1: But that's those those two aspects of the nineteenth century
• 39:22
  Speaker 1: would be back, and that would be a definite step
• 39:25
  Speaker 1: backwards for the US. So let's talk a little bit
• 39:27
  Speaker 1: about FED independence. This particular president has been very aggressive
• 39:33
  Speaker 1: in jaw boning the FED chair publicly. I know that
• 39:38
  Speaker 1: went on behind closed doors in the past, But how
• 39:42
  Speaker 1: independent is the Federal Reserve and how much has it
• 39:45
  Speaker 1: changed during this administration. So my doctoral dissertation, which is
• 39:52
  Speaker 1: now twice six twenty seven years ago um was on
• 39:57
  Speaker 1: this very topic. And what I argue was independence of
• 40:02
  Speaker 1: the FED or any central bank depends on having a
• 40:05
  Speaker 1: political constituency that supports it, and that sort of like
• 40:10
  Speaker 1: the Supreme Court. You can't go vastly away from public
• 40:14
  Speaker 1: opinion because in the end they'll change the institution. So
• 40:18
  Speaker 1: independence is something that has to be managed and measured.
• 40:24
  Speaker 1: And I think that J. Powell, Chair, current Chair of
• 40:30
  Speaker 1: the Federal Reserve, has done a terrific job of navigating
• 40:34
  Speaker 1: the public threats from President Trump and others. And you
• 40:40
  Speaker 1: can see this in the way that Congress has supported
• 40:43
  Speaker 1: the measures they've taken. That they did something which I
• 40:47
  Speaker 1: think proved to be absolutely right, the provision of liquidity
• 40:51
  Speaker 1: and cross national swap lines at the start of the
• 40:54
  Speaker 1: pandemic economic effects in March April, and they didn't get
• 40:59
  Speaker 1: attacked by cos and they had to account for themselves
• 41:03
  Speaker 1: to Congress as they should. But you know, there were
• 41:05
  Speaker 1: people including Ben bernanke Let alone me, who were very
• 41:09
  Speaker 1: worried that we would need those swap lines in the
• 41:11
  Speaker 1: next crisis and who had conversa attack. But J. Pale
• 41:15
  Speaker 1: had made enough, vested enough credibility and communication to do
• 41:20
  Speaker 1: that safely. And similarly on the monetary policy measures now
• 41:25
  Speaker 1: and the changes that Chair Clarata Chair Powell, Vice Chair Clarata,
• 41:30
  Speaker 1: Governor Brainer and others pushed in the mandate of the
• 41:35
  Speaker 1: Fed or rather they shouldn't say the mandate the strategic
• 41:38
  Speaker 1: framework of the FED to be less preempt upon inflation
• 41:41
  Speaker 1: more concerned with unemployment. So I think the independence of
• 41:45
  Speaker 1: the FED has been quite fine um in recent years.
• 41:51
  Speaker 1: But it's taken a lot of work, and not just
• 41:54
  Speaker 1: pr work, but genuine engagement with the public and with Congress.
• 41:59
  Speaker 1: And I give them a lot of at it. I
• 42:00
  Speaker 1: always said to people who were wondering about things, that
• 42:05
  Speaker 1: you know, the the FETE isn't really scared of the President.
• 42:08
  Speaker 1: The FETE is scared of Congress, because Congress can change
• 42:11
  Speaker 1: the Federal Reserve Act at any time. What do you
• 42:14
  Speaker 1: make of a book like in the Fed by Ron
• 42:17
  Speaker 1: Paul when something like that comes out, what's the response
• 42:20
  Speaker 1: within the institution to what is clearly a congressional threat. Well,
• 42:26
  Speaker 1: this is in the same spirit that Michigan, bernanke Laubach
• 42:30
  Speaker 1: and I were writing about inflation targeting plus years ago,
• 42:35
  Speaker 1: that you try to be responsive but in a way
• 42:39
  Speaker 1: that is substantive and honest and not over promising and
• 42:44
  Speaker 1: not denying, but also not pretending that people should believe
• 42:51
  Speaker 1: the lies told about your institution. And so it's interesting,
• 42:54
  Speaker 1: I mean a year ago August I was at the
• 42:57
  Speaker 1: FIT Sanuel Jackson Hole conference when that was when right
• 43:01
  Speaker 1: after Chair pal speech, President Trump tweeted that basically the
• 43:06
  Speaker 1: chair the FED was as much of an enemy as
• 43:08
  Speaker 1: a Chinese general, which you know, was looney tunes and
• 43:12
  Speaker 1: was horrible. And you could see Chair Pale and then
• 43:16
  Speaker 1: the other FED officials being quite chicken by this. But
• 43:18
  Speaker 1: then over time, you know, he tweet tomp just throughout
• 43:22
  Speaker 1: so many tweets about so many things, including the FED,
• 43:26
  Speaker 1: it just became noise. And they were right to just
• 43:28
  Speaker 1: sort of I don't want to say rise above it.
• 43:30
  Speaker 1: You can't rise above it, but to withstand it and
• 43:33
  Speaker 1: not overreact. Yeah, if if only the President was able
• 43:37
  Speaker 1: to put his own FED chairman into place. Maybe. Oh wait,
• 43:41
  Speaker 1: wasn't Jerome Pale a Trump appointee. I don't understand. He
• 43:45
  Speaker 1: seems to constantly be appointing people who he is against.
• 43:50
  Speaker 1: I'm a little perplexed by that. Sigh. The ironies are great. So,
• 43:58
  Speaker 1: so let's talk a little bit about how the FED
• 44:02
  Speaker 1: acted during the Great Financial Crisis. It seemed that Congress
• 44:07
  Speaker 1: was a little bit a wall. What what sort of
• 44:10
  Speaker 1: rating would you give the Fed for what they did
• 44:14
  Speaker 1: let's call it oh eight oh nine, And I think
• 44:17
  Speaker 1: the FED under Britian key, but with everyone involved, did
• 44:21
  Speaker 1: a very good job in two thousand nine into two
• 44:25
  Speaker 1: thousand ten. I think there's a lot of room for
• 44:28
  Speaker 1: criticism of the FED from two thousand five to what
• 44:33
  Speaker 1: about the decade before that? Let me have you roll
• 44:36
  Speaker 1: further back. We see green Span kind of ironically, and
• 44:40
  Speaker 1: I ran less government involvement, acolyte. He seemed to have
• 44:45
  Speaker 1: his hands on that tiller pretty regularly, um, trying to
• 44:50
  Speaker 1: guide the economy. What what rating would you give the
• 44:53
  Speaker 1: FED in the nine nineties, And again, forgive my bias, No, no,
• 44:59
  Speaker 1: it's fine. And I think this is a discussion that
• 45:01
  Speaker 1: has to be had. I just thought emphasize two thousand
• 45:06
  Speaker 1: the FED saved the world in many ways. The question
• 45:09
  Speaker 1: is how much of the world needing saving was due
• 45:11
  Speaker 1: to past actions of the FED. And as I was
• 45:14
  Speaker 1: saying in earlier part of our conversation, very I think
• 45:17
  Speaker 1: you have to make a distinction between monetary policy and
• 45:20
  Speaker 1: regulation and supervision of the financial system. And Greenspan actually
• 45:25
  Speaker 1: was quite good at monetary policy, and his activism was smart,
• 45:30
  Speaker 1: I mean, and but he was a he was totally
• 45:37
  Speaker 1: in rand on regulation as as Mike as My late
• 45:41
  Speaker 1: colleague Mike Musa, a former Youth Chicago professor, once said,
• 45:45
  Speaker 1: you know, you don't want a conscientious objector as the
• 45:48
  Speaker 1: commandant of the Marine Corps. You don't want Alan Greenspan
• 45:52
  Speaker 1: as the as the lead regulator supervisor in the US
• 45:55
  Speaker 1: financial system, you know. And I thought that was brilliant.
• 45:59
  Speaker 1: And so you go back and there were just so
• 46:02
  Speaker 1: many lapses and intentional decisions on regulation and supervision that
• 46:08
  Speaker 1: were poor that got us to the fragility in the
• 46:12
  Speaker 1: situation we were in. I don't think the monetary policy
• 46:16
  Speaker 1: was perfect, but I think was damn good. But it
• 46:18
  Speaker 1: was totally undercut by the Lace Affair approach to regulation
• 46:22
  Speaker 1: and supervision. So you're talking my book now, I'm right
• 46:25
  Speaker 1: there with you. Although arguably I could make a case
• 46:30
  Speaker 1: that Greenspans rate cuts in the OH one recession and
• 46:36
  Speaker 1: then what he did following the nine eleven attacks, it
• 46:40
  Speaker 1: filled the room with gas for the eight or nine spark,
• 46:44
  Speaker 1: because just look at what happened with inflation and any
• 46:47
  Speaker 1: asset priced in either dollars or affected by low rates.
• 46:51
  Speaker 1: I guess so, But you know, to me, the I mean,
• 46:55
  Speaker 1: there's there's something to that. I think it's more oxygen
• 46:58
  Speaker 1: than fuel. If if there's no one to one with,
• 47:02
  Speaker 1: was how much the monetary policy loosened versus how much
• 47:06
  Speaker 1: as a price inflation you got. That's just not there
• 47:08
  Speaker 1: in the data. But there is a fact which I
• 47:11
  Speaker 1: was pointing out at the time that if you if
• 47:13
  Speaker 1: you run a loose regulatory policy, then there is at
• 47:16
  Speaker 1: least the possibility of this kind of explosion conflagration, and
• 47:20
  Speaker 1: and so to me, you know, it was about the
• 47:25
  Speaker 1: low standards and mortgage lending. It was about the low
• 47:28
  Speaker 1: standards of leverage. It was about the low standards of
• 47:32
  Speaker 1: supervision of non banks. It was about the encouragement of
• 47:37
  Speaker 1: banks to get into all kinds of businesses they shouldn't
• 47:40
  Speaker 1: have been in. I don't mean glass Steagle, I mean
• 47:42
  Speaker 1: various types of very speculatory, speculative thing. So, I mean
• 47:47
  Speaker 1: we can debate that, but uh, you know, I I
• 47:50
  Speaker 1: don't put a huge thing on on the huge weight
• 47:53
  Speaker 1: on the monetary policies in the early two thousand's, But
• 47:57
  Speaker 1: I'm not going to debate it as long as you
• 47:59
  Speaker 1: are on the same book, Mary that they blew it
• 48:01
  Speaker 1: on supervision and right, I could live with that. So
• 48:04
  Speaker 1: I have a slide in one of the presentations I
• 48:07
  Speaker 1: give where it's just a series of media headlines every
• 48:11
  Speaker 1: single year for like twelve years the FED is out
• 48:14
  Speaker 1: of AMMO. And clearly they have not been out of AMMO.
• 48:18
  Speaker 1: But here you are in Is that closer to reality
• 48:23
  Speaker 1: today than it was back in two thousand nine or
• 48:26
  Speaker 1: or eleven or fifteen. Will the FED ever run out
• 48:31
  Speaker 1: of AMMO? Depends what you're trying to shoot and and
• 48:35
  Speaker 1: this is why I don't like the AMMA thing. Beyond
• 48:37
  Speaker 1: the sort of much ismo of you know, old white
• 48:40
  Speaker 1: academic guys like me talking about bazookas, which is kind
• 48:43
  Speaker 1: of absurd. Um, it's really about the tool for the job. So,
• 48:49
  Speaker 1: if the job is fighting a deflationary shock, if the
• 48:53
  Speaker 1: job is a lock up in financial markets, if the
• 48:55
  Speaker 1: job is a panic producing widening spreads, if the job
• 49:00
  Speaker 1: is a sudden withdrawal of liquidity by the by the
• 49:03
  Speaker 1: banking system or the household sector, the FED has infinite demo.
• 49:06
  Speaker 1: It can do what it needs to stave that off.
• 49:10
  Speaker 1: This is what I meant by asymmetry. If the FED
• 49:13
  Speaker 1: is job is to try to reflate the economy, create
• 49:18
  Speaker 1: ongoing growth and recovery. It's not screwing up is necessary,
• 49:25
  Speaker 1: but it's not sufficient. It's, as Kines would say, pushing
• 49:28
  Speaker 1: on a string. Again, there's so many analogies. It just
• 49:31
  Speaker 1: think of the FED as a defensive specialist, not a
• 49:35
  Speaker 1: shooting guard. Right. So if it's got the wrong kind
• 49:38
  Speaker 1: of shock, it can handle it. But you don't want
• 49:42
  Speaker 1: them making the three point shot because they're not going
• 49:45
  Speaker 1: to make it. So let's address that the bigger threat
• 49:49
  Speaker 1: over the past decade arguably has not been inflation, but deflation.
• 49:55
  Speaker 1: What are the possibilities that we might see negative rates
• 50:00
  Speaker 1: continue to expand the around the world. Might we see
• 50:03
  Speaker 1: them here in the US? And what tools does the
• 50:07
  Speaker 1: FED have to combat them? I viewed the decline in
• 50:14
  Speaker 1: long term rates as something beyond the fence control largely
• 50:18
  Speaker 1: and is driven by real factors. Geta Gobinev. The Chief
• 50:23
  Speaker 1: Economy I MF just recently had an up d in
• 50:25
  Speaker 1: the Financial Times talking about how unprecedentedly global negative rates
• 50:32
  Speaker 1: negative at least nominal rates are on government debt and
• 50:35
  Speaker 1: Larry Summers again to give them credit for for envisioning
• 50:39
  Speaker 1: the secure stagnation. You know we're in when I've been
• 50:42
  Speaker 1: writing my peers and colleges raining but this for several years.
• 50:45
  Speaker 1: Now that that you're in you're in a fundamentally different
• 50:48
  Speaker 1: environment that the real rate to return on capital is well,
• 50:52
  Speaker 1: the risk appetite is low, the inflationary pressures are well.
• 50:57
  Speaker 1: On top of that is the fact that ultimately, and
• 51:02
  Speaker 1: this is my point of who and it used to
• 51:05
  Speaker 1: call me a throwback for thinking this, but now people
• 51:08
  Speaker 1: are coming around, is that you can't have sustained inflation
• 51:12
  Speaker 1: and a rich democracy unless you have sustained wage growth
• 51:15
  Speaker 1: just doesn't happen. And this is kind of where Chaire
• 51:19
  Speaker 1: Powell and others on the Federal Market Committee have been
• 51:21
  Speaker 1: talking for the last year or two and and we
• 51:24
  Speaker 1: were just starting to maybe get to the point there
• 51:26
  Speaker 1: was going to be some wage inflation before the pandemic hit.
• 51:31
  Speaker 1: And you mentioned Danny Plashmard. Danny and I were out
• 51:34
  Speaker 1: there in two thousand fourteen with a few other people
• 51:37
  Speaker 1: screaming that the Fed had vastly underestimated the amount of
• 51:40
  Speaker 1: labor market flack, that they were worried about inflation way
• 51:43
  Speaker 1: too soon. Um. But the other piece of this is
• 51:46
  Speaker 1: I've done a lot of work in Japan. Everybody should
• 51:48
  Speaker 1: be looking at what happened in Japan over the last
• 51:50
  Speaker 1: twenty five years as relevant for what's happening in the
• 51:53
  Speaker 1: rest of the world now. You know, because wages don't
• 51:57
  Speaker 1: tend to fall, you get unemployment instead, and because normal
• 52:02
  Speaker 1: prices are are sticky and eCOM speak, people don't tend
• 52:05
  Speaker 1: to cut prices that much, although they do more now
• 52:08
  Speaker 1: in the Internet age, and they used to. Deflation is
• 52:11
  Speaker 1: less of a threat than we thought it was. You know,
• 52:12
  Speaker 1: if you go back to stuff I was writing twenty
• 52:14
  Speaker 1: years ago, Chrobman, BERNANKEI others, we were very, very worried
• 52:18
  Speaker 1: that deflation would be a downward negative spiral and would
• 52:22
  Speaker 1: accelerate and wouldn't make matters much worse. And what Japan
• 52:25
  Speaker 1: has shown us is now deflation is kind of a
• 52:28
  Speaker 1: sticky mess. You get into it, it's hard to get out.
• 52:31
  Speaker 1: It's an ongoing drag on you. But it doesn't tend
• 52:34
  Speaker 1: to spiral out of control. So upshot, I don't think
• 52:39
  Speaker 1: we need to worry too much about deflation because it's
• 52:43
  Speaker 1: not as bad as we once thought it was and
• 52:44
  Speaker 1: it's not that likely. But I do think we need
• 52:47
  Speaker 1: to worry about the underlying problems of the global economy,
• 52:51
  Speaker 1: that we're in a low interest rate, low yield, low
• 52:54
  Speaker 1: risk appetite world, that there isn't the next technological advance,
• 52:58
  Speaker 1: the next big thing in in in Mike lewis speaking,
• 53:01
  Speaker 1: so look at look at the causes, not the effects.
• 53:06
  Speaker 1: So I have to ask you an obvious question. If
• 53:09
  Speaker 1: the incoming president were to nominate you to a seat
• 53:12
  Speaker 1: on the Federal Reserve Board, is that is that something
• 53:15
  Speaker 1: you would accept? What would you do in that role?
• 53:19
  Speaker 1: I think it's very unlikely they would, because even though
• 53:22
  Speaker 1: I am fully qualified, they, the Democratic majority in Congress
• 53:27
  Speaker 1: and the Buying campaign have both said with good reason
• 53:32
  Speaker 1: that the FED needs to rebalance the number of women
• 53:34
  Speaker 1: and people of color in important positions. And there's plenty
• 53:38
  Speaker 1: of good women and people of color it can be
• 53:40
  Speaker 1: appointed before I would be. But if I was offered
• 53:43
  Speaker 1: the opportunity to serve an policy and a senior role,
• 53:48
  Speaker 1: I am very much sentimentally and believe I can make
• 53:51
  Speaker 1: a contribution as a central banker. I love my current
• 53:55
  Speaker 1: job running the Peterson Institute. It's a great thing for me,
• 53:58
  Speaker 1: and I hope we do some good the world. But
• 54:01
  Speaker 1: if it turned out that there was reason for me
• 54:04
  Speaker 1: to enter public service, I would do it. So I
• 54:07
  Speaker 1: have to ask you a question that lately I've been
• 54:10
  Speaker 1: sneaking into a lot of people. What are your thoughts
• 54:13
  Speaker 1: on blockchain and crypto. I'm a a little bit of
• 54:17
  Speaker 1: a skeptic. It sort of seems like a solution in
• 54:20
  Speaker 1: search of a problem. But what does blockchain mean to
• 54:24
  Speaker 1: the international monetary system? Might this ever become mainstreams as
• 54:31
  Speaker 1: part of our economic global currency? You know, I think
• 54:37
  Speaker 1: there's a saying talk about central banking. There's this there's
• 54:39
  Speaker 1: a reference in central banking to what's called the plumbing um,
• 54:43
  Speaker 1: which is the the payment system things that have to work,
• 54:48
  Speaker 1: but which are sort of clunky, big, not very glamorous
• 54:51
  Speaker 1: underlying things. And though blockchain and particular bitcoin and some
• 54:56
  Speaker 1: of the other cybercurrency aspects have been promoted as sex
• 55:00
  Speaker 1: hot fintech, they're really plumbing. They're they're really They're really
• 55:03
  Speaker 1: just a better, a better gauge of pipe that doesn't
• 55:07
  Speaker 1: tend to get clocked up very much. So I think
• 55:11
  Speaker 1: we are going to over the next few years, seem
• 55:13
  Speaker 1: much more use of it. And I think it's frankly
• 55:14
  Speaker 1: not going to matter very much all right, I know
• 55:17
  Speaker 1: I only have you for a limited amount of time,
• 55:21
  Speaker 1: So let's jump to our favorite questions. We ask these
• 55:25
  Speaker 1: of all our guests, and let's start out with streaming.
• 55:28
  Speaker 1: Give us some of your favorite Netflix or Amazon videos
• 55:33
  Speaker 1: that you might be entertaining yourself with during this pandemic
• 55:38
  Speaker 1: Work from home era, Yeah, the pandemic work from home era?
• 55:42
  Speaker 1: And just how horrible the world is? My wife and
• 55:46
  Speaker 1: I find we we we can't watch anything serious, so
• 55:49
  Speaker 1: we're very stereotypical. We've watched a bunch of all the
• 55:52
  Speaker 1: seasons of Great British Bake off of our Great British
• 55:55
  Speaker 1: Baking shows, it's called In the US, we started watching
• 55:58
  Speaker 1: The Crown and as a former residence of the United Kingdom,
• 56:02
  Speaker 1: that also has extra fun. We decided bizarrely to start
• 56:07
  Speaker 1: rewatching Colombo from the beginning. Um, that's not art, but
• 56:15
  Speaker 1: it's it's it's kind of comforting, and it's better for
• 56:19
  Speaker 1: us than the Hallmark Christmas movies, let's put it that way. Um.
• 56:23
  Speaker 1: You know, so I don't really have anything that fabulous
• 56:26
  Speaker 1: to recommend to people. In terms of podcasts, we listened
• 56:29
  Speaker 1: to a lot of food and wine podcasts. We listened
• 56:32
  Speaker 1: to visible we listen. I listened to yours. Um. There's
• 56:37
  Speaker 1: a podcast called the History of English, meaning the history
• 56:40
  Speaker 1: of the English language, not the English people, which is
• 56:43
  Speaker 1: totally geeky and quite fun. Um. Anyway, nothing nothing, terribly
• 56:48
  Speaker 1: would tray to to suggest to your audience that they
• 56:51
  Speaker 1: haven't heard of. So usually when people give me a
• 56:55
  Speaker 1: run of things they're watching, I can come up with
• 56:57
  Speaker 1: something they might enjoy. I just started streaming earlier last
• 57:03
  Speaker 1: month a show I completely missed the first time around
• 57:07
  Speaker 1: that I'm trying to figure if you would like it? Madmen?
• 57:11
  Speaker 1: Have have you seen any of it? Okay, yeah, so
• 57:14
  Speaker 1: we skipped it the first time around, and it's me.
• 57:17
  Speaker 1: It's a few episodes. It's so visually gorgeous, so I'm tempted,
• 57:21
  Speaker 1: but it's also just so uncomfortable, right. I mean, it's
• 57:27
  Speaker 1: portraying the reality, which is useful, but again, don't see that.
• 57:33
  Speaker 1: So that was the question. I've asked some people. I'm
• 57:37
  Speaker 1: I have a couple of years on you, but not many.
• 57:39
  Speaker 1: But I've been asking people who are ten and twenty
• 57:42
  Speaker 1: years older than me, how hyperbolic is this? How exaggerated
• 57:45
  Speaker 1: is it for television? And the consensus seems to be No,
• 57:49
  Speaker 1: that's a pretty accurate portrayal, which is just shocking to me. No,
• 57:54
  Speaker 1: and that's what I've heard. And of course then there's
• 57:55
  Speaker 1: the occasionally mentioned but obviously they are racism that it's
• 58:00
  Speaker 1: this is totally white group of people basically, and so
• 58:05
  Speaker 1: you know, it's one of these things where I give
• 58:06
  Speaker 1: them credit. They're portraying the reality accurately, and it's incredibly uncomfortable.
• 58:11
  Speaker 1: So I'm gonna check out that History of English. It
• 58:14
  Speaker 1: sounds interesting. Tell us about some of your early mentors
• 58:18
  Speaker 1: who helped to shape your career. Well, I've mentioned already
• 58:22
  Speaker 1: as we went along two of the people who were
• 58:25
  Speaker 1: most important to my career Ben Freedman of Harvard and
• 58:28
  Speaker 1: Rick Michigan of the Federal Reserve when I dealt with
• 58:30
  Speaker 1: him in Columbia, both of whom sort of took me
• 58:33
  Speaker 1: as I am somebody who's not as mathematically facile, technical
• 58:38
  Speaker 1: and much more real world than most good economics PhDs,
• 58:43
  Speaker 1: and gave me opportunities encouragement that sort of go my
• 58:46
  Speaker 1: political economy policy oriented route. The other two really key
• 58:52
  Speaker 1: mentors for me are one Fred Bergston, who was, as
• 58:56
  Speaker 1: I mentioned, my predecessor, and the fallco founder with p.
• 58:59
  Speaker 1: Peterson of the Insto for International Economics now Paterson Notes
• 59:02
  Speaker 1: to Do and from the time I got to p
• 59:05
  Speaker 1: I A in Fred taught me about reaching a policy audience,
• 59:11
  Speaker 1: reaching a public and also gave me the opportunity to
• 59:14
  Speaker 1: develop to think about running think tanks and what's involved
• 59:17
  Speaker 1: with the personnelis. And the through line between Ben and
• 59:23
  Speaker 1: Rick and Fred was that they all were real world,
• 59:26
  Speaker 1: not in since we weren't all academics writing books and articles,
• 59:30
  Speaker 1: but real world in the sense of the stuff we
• 59:32
  Speaker 1: did had to have some implications for the real world
• 59:34
  Speaker 1: and had to be checked against the real world. And
• 59:37
  Speaker 1: so my final mentors, really, frankly were my parents. My
• 59:40
  Speaker 1: mother and father, Harold and a pos And were both physicists.
• 59:44
  Speaker 1: They were both civil servants in the US UM, my
• 59:47
  Speaker 1: father for the Year Force, my mother for the Smithsonian
• 59:50
  Speaker 1: and UM. As a result, I was brought up to
• 59:54
  Speaker 1: know always how difficult it was to know something, how
• 59:58
  Speaker 1: important was to check things erically, how cool it was
• 1:00:02
  Speaker 1: when you did really understand something, and also, perhaps surprisingly
• 1:00:07
  Speaker 1: to have a very broad set of interest um my parents.
• 1:00:12
  Speaker 1: The other big lesson for my parents, which was less
• 1:00:14
  Speaker 1: about mentoring and more about my values. In addition to
• 1:00:16
  Speaker 1: the sort of attempt at scientific objectivity although I wasn't
• 1:00:20
  Speaker 1: a physicist, is that they had very very tough lives.
• 1:00:25
  Speaker 1: They were children of immigrants and grew up in poverty,
• 1:00:27
  Speaker 1: both of them, and very narrow misses from having life
• 1:00:32
  Speaker 1: and career go very askew. And so that made me
• 1:00:35
  Speaker 1: very aware, even though I was brought up my infinitely
• 1:00:38
  Speaker 1: better off than they were. UM that you know, you
• 1:00:42
  Speaker 1: had to be very aware of the tacit knowledge of
• 1:00:49
  Speaker 1: navigating places, of navigating institutions, and navigating relationships. And not
• 1:00:54
  Speaker 1: that I've done it perfectly by any means, but I
• 1:00:56
  Speaker 1: was very aware of that from a young age. UM,
• 1:01:00
  Speaker 1: and so right now quite unsuccessfully, but I'm trying to
• 1:01:03
  Speaker 1: pay it forward, both in terms of the individuals the
• 1:01:07
  Speaker 1: younger people at the Peters Institute who I tried to help,
• 1:01:09
  Speaker 1: and more generally working with other think tanks. We're trying
• 1:01:13
  Speaker 1: to create something so that people of minority backgrounds, people
• 1:01:17
  Speaker 1: of less privileged backgrounds can be taught some of this
• 1:01:20
  Speaker 1: tacit knowledge, so we can have more people of diverse
• 1:01:23
  Speaker 1: backgrounds succeeding in the policy research profession. Quite interesting, So
• 1:01:30
  Speaker 1: we've both mentioned a couple of books. Let's talk about
• 1:01:33
  Speaker 1: what you're reading. Tell us some of your favorite books,
• 1:01:37
  Speaker 1: and tell us what you might be reading currently. UM.
• 1:01:40
  Speaker 1: So similarly to on the Netflix, Amazon TV watching, I
• 1:01:46
  Speaker 1: must admit I am terrible about having done attention span
• 1:01:50
  Speaker 1: to read serious stuff right now. Frankly so, I'm sending
• 1:01:53
  Speaker 1: a lot of time reading The New Yorker, the New
• 1:01:54
  Speaker 1: York Review of Books, UM, courts, various, The Atlantic, UM,
• 1:02:03
  Speaker 1: and not that much in book links. But when I
• 1:02:06
  Speaker 1: think about some of my favorite books of recent years,
• 1:02:11
  Speaker 1: I mean you mentioned Lords of Finance, which I think
• 1:02:14
  Speaker 1: was superb. I think the the Robert Gordon book The
• 1:02:19
  Speaker 1: Rise and Fall of American Growth was incredibly important. I
• 1:02:23
  Speaker 1: think some of Krugman's earlier collections of essays, but going
• 1:02:28
  Speaker 1: back to one of his earliest the The Age of
• 1:02:30
  Speaker 1: Diminished Expectations was ahead of its time. It wasn't right
• 1:02:34
  Speaker 1: for the period it was, but it's right now. UM.
• 1:02:38
  Speaker 1: I really try to read a lot of history and
• 1:02:42
  Speaker 1: and I've become addicted to UM. There's this Oxford very
• 1:02:47
  Speaker 1: short introduction series which let's turned academic summarize what's going
• 1:02:52
  Speaker 1: on in a field. And I've been using that as
• 1:02:55
  Speaker 1: my crime notes. And and I'll give a shout out
• 1:02:58
  Speaker 1: to Adam Two's n M I U I. I didn't
• 1:03:00
  Speaker 1: absolutely adore his book Crash, but his previous book The Deluge,
• 1:03:04
  Speaker 1: about the US role or and the internetal economy around
• 1:03:08
  Speaker 1: World War One and after, I thought was terrific and
• 1:03:12
  Speaker 1: very important perspective on what's going on in the world today.
• 1:03:18
  Speaker 1: You're reading list, especially in the magazines, sounds shockingly similar
• 1:03:23
  Speaker 1: to mine. Um. I don't preselect people who only agree
• 1:03:27
  Speaker 1: with me, but by by coincidence, and in fact, I
• 1:03:32
  Speaker 1: try and seek out people who will who I will
• 1:03:35
  Speaker 1: disagree with, but by coincidence, your your periodical reading list
• 1:03:40
  Speaker 1: is very similar to mine. And I think a lot
• 1:03:42
  Speaker 1: of people do not understand that we are in a
• 1:03:46
  Speaker 1: golden age of long form journalism. The reportage that has
• 1:03:51
  Speaker 1: been taking place has just been the New york I mean,
• 1:03:55
  Speaker 1: I know some people don't love the tone of The
• 1:03:57
  Speaker 1: Atlantic or The New Yorker, but but the reporting has
• 1:04:00
  Speaker 1: just been spectacular. I I completely agree with you, And
• 1:04:04
  Speaker 1: again I didn't come into this knowing that you and
• 1:04:06
  Speaker 1: I with a line. I just figured I listened to you,
• 1:04:09
  Speaker 1: and I think you're smart and it's a long gladly
• 1:04:11
  Speaker 1: aligned Um. But in terms of you know, I think
• 1:04:15
  Speaker 1: David Remnick and his team at the New Yorker I've
• 1:04:16
  Speaker 1: been killing it forever. I think Jeffrey Goldberg and what
• 1:04:19
  Speaker 1: The Atlantic has done, particularly since Trump has been outstanding.
• 1:04:24
  Speaker 1: I think New York Review of Books, after some turmoil,
• 1:04:27
  Speaker 1: UM has gotten back to being an incredibly good source.
• 1:04:30
  Speaker 1: But yeah, that those are those are some. But then
• 1:04:32
  Speaker 1: there's all this wonderful stuff that gets aggregated now, you know,
• 1:04:37
  Speaker 1: and you wonder about the business model, how how can
• 1:04:39
  Speaker 1: how can these things be sustained? I mean there are
• 1:04:41
  Speaker 1: people also in the newspapers. I mean my friend Peter
• 1:04:44
  Speaker 1: Goodman at the New York Times New Yor went also
• 1:04:47
  Speaker 1: with the New York Times. Um, you know, there's a
• 1:04:50
  Speaker 1: there's a laundry list of people in in you know,
• 1:04:53
  Speaker 1: David Lynch and others at that and Heather Long at
• 1:04:56
  Speaker 1: the at the Washington Post. Less long form usually, you know,
• 1:04:59
  Speaker 1: it is a good to atre journalism. There's also a
• 1:05:02
  Speaker 1: bunch of cowardly things going on by editorials editorial writers,
• 1:05:07
  Speaker 1: but the stuff that's real, individual essays and reporting, there's
• 1:05:10
  Speaker 1: a wealth of worthwhile things to read. Now, no doubt,
• 1:05:14
  Speaker 1: So what sort of The other thing I have to
• 1:05:16
  Speaker 1: plug is The Guardian. The Guardian. I read The Guardian
• 1:05:19
  Speaker 1: every day and I don't agree with all of it,
• 1:05:22
  Speaker 1: but it is fantastic, both reporting and essays Guardians and
• 1:05:27
  Speaker 1: I think a lot of people don't realize that how
• 1:05:29
  Speaker 1: unique their financial structure is. They have an endowment that
• 1:05:34
  Speaker 1: essentially supports them to some degree. They haven't been under
• 1:05:38
  Speaker 1: the same pressure as a lot of other reporters or
• 1:05:43
  Speaker 1: newspapers that I'm curious if that sort of structure might
• 1:05:47
  Speaker 1: catch on in the future. I agree with you, and
• 1:05:50
  Speaker 1: you know, you look at Bloomberg and you look at
• 1:05:53
  Speaker 1: Washington Post, and both of those have not quite the
• 1:05:56
  Speaker 1: same structure, but have philanthropically mind it, mega billionaire backers
• 1:06:03
  Speaker 1: up pockets who want the journalism to be high quality
• 1:06:08
  Speaker 1: and all. And I think that's amazing and clearly the
• 1:06:10
  Speaker 1: Sulzburgers to some degree, I've had that same model in
• 1:06:13
  Speaker 1: mind for The Times, um. But yeah, the Guardian, I
• 1:06:17
  Speaker 1: think is a potential model going forward. And they're not
• 1:06:21
  Speaker 1: totally they don't have a multi billion dollar backing, but
• 1:06:24
  Speaker 1: they've managed to sustain quality to The Times is one
• 1:06:28
  Speaker 1: of the few lucky winners in this political environment. There
• 1:06:33
  Speaker 1: their subscription seems to have gone through the roof of
• 1:06:35
  Speaker 1: the past four years. Well, I mean this goes back
• 1:06:37
  Speaker 1: to to sound like an economism, and this goes back
• 1:06:40
  Speaker 1: to a very fundamental point that Paul Krugman in the
• 1:06:43
  Speaker 1: Different Forms of Others raised twenty years ago, which is
• 1:06:47
  Speaker 1: one of the effects of the Internet, of globalization of
• 1:06:51
  Speaker 1: technology especially is that we're living in a world of superstars,
• 1:06:55
  Speaker 1: that the market is global, and so when you are
• 1:06:59
  Speaker 1: taught up in your field, you get outsized rewards, and
• 1:07:02
  Speaker 1: then you also get network effects, and you also start
• 1:07:06
  Speaker 1: deterring and losing the local And this is true in
• 1:07:09
  Speaker 1: journalism as well as in other fields and and business.
• 1:07:13
  Speaker 1: And what's been very sad, and there's a lot of
• 1:07:15
  Speaker 1: documentation about this is we've seen there's a very good
• 1:07:19
  Speaker 1: NBAUR working paper on this from within the last year.
• 1:07:22
  Speaker 1: I think, on um, you know, where you lose local newspapers,
• 1:07:27
  Speaker 1: you see corruption go up, you see voter misinformation go up.
• 1:07:31
  Speaker 1: So I totally respect that these these bastions of independence
• 1:07:36
  Speaker 1: and quality like The Post, the Watching Post, New York Times,
• 1:07:40
  Speaker 1: the Guardian, the Financial Times, the Economist, and basically boomer
• 1:07:45
  Speaker 1: are doing wonderful things, but we also need some kind
• 1:07:50
  Speaker 1: of philanthropic model or something to provide local reporting, the whole,
• 1:07:54
  Speaker 1: the whole governments and business accountable. So I know there's
• 1:07:57
  Speaker 1: a recent book, Winners Take All, but previously and I
• 1:08:01
  Speaker 1: want to say, Cornell is a professor who wrote a
• 1:08:03
  Speaker 1: book called The Winner Take All Society that discusses exactly
• 1:08:08
  Speaker 1: what you're referring to, which is that that long tail
• 1:08:13
  Speaker 1: fat head very much Robert Frank who actually, yeah, I apologize,
• 1:08:18
  Speaker 1: I should have thought mentioned that book, Yes, exactly makes
• 1:08:20
  Speaker 1: that argument. Yeah, absolutely so, So let's talk about recent
• 1:08:25
  Speaker 1: college grads. If if someone came out of college and
• 1:08:29
  Speaker 1: was asking you for advice on a career in economics
• 1:08:35
  Speaker 1: or monetary policy, or or going on a think tank,
• 1:08:39
  Speaker 1: what sort of advice would you give them? I mean,
• 1:08:41
  Speaker 1: going to a think tank. You is a very bizarre,
• 1:08:45
  Speaker 1: specialized little nature, right, it's it's it's it's a lovely
• 1:08:49
  Speaker 1: nature for those of those who like it, But it's
• 1:08:52
  Speaker 1: generally not, even though I sort of went to work
• 1:08:55
  Speaker 1: with that mind issarily not something you should plan for.
• 1:08:57
  Speaker 1: Not because it's like you shouldn't plan for play in
• 1:09:00
  Speaker 1: the NBA that's not There are more think things and
• 1:09:02
  Speaker 1: more jobs now than there's ever been, but just that
• 1:09:05
  Speaker 1: it's still a weird niche profession. If your goal is
• 1:09:10
  Speaker 1: to use economic analysis to make the world a better
• 1:09:13
  Speaker 1: play and particularly to affect public policy, then there is
• 1:09:17
  Speaker 1: a broad said of of ways you can do it.
• 1:09:21
  Speaker 1: And for young people, the first and to me most
• 1:09:24
  Speaker 1: important thing is focus on learning how to think about data.
• 1:09:31
  Speaker 1: And I don't mean necessarily roch Jetty and you know
• 1:09:34
  Speaker 1: the epitome of data science nowadays. I don't necessarily me
• 1:09:37
  Speaker 1: being very technical, but being empirical minded and of course
• 1:09:41
  Speaker 1: some technical skill to go with that is helpful. UM.
• 1:09:45
  Speaker 1: And and learning just how messy it is to gather
• 1:09:49
  Speaker 1: and deal with the world data. And I would also
• 1:09:53
  Speaker 1: encourage young people to I mean it's trite, but but
• 1:09:57
  Speaker 1: to work on the written and oral communication. UM. What
• 1:10:02
  Speaker 1: the problem is with written in oral communication among young
• 1:10:05
  Speaker 1: people now is very different than what it was when
• 1:10:08
  Speaker 1: I first started was in a position to be hiring
• 1:10:10
  Speaker 1: people ten twenty years ago. Then the problem was people
• 1:10:14
  Speaker 1: being too pro licks to to to profligate with words,
• 1:10:19
  Speaker 1: to confusing, unwilling to take a stand. Now the problem
• 1:10:23
  Speaker 1: is teaching people how to make a longer form argument,
• 1:10:27
  Speaker 1: but both ways you got to do that. And then
• 1:10:31
  Speaker 1: the final thing, which is my fundamental belief in my
• 1:10:34
  Speaker 1: career um is be internationally minded. Not necessarily that you
• 1:10:40
  Speaker 1: need to work on international policy, but that the way
• 1:10:45
  Speaker 1: things are in your home country, including the US, are
• 1:10:47
  Speaker 1: not necessarily the way things are done around the world,
• 1:10:49
  Speaker 1: and they're not necessarily the best way. And that sounds
• 1:10:52
  Speaker 1: incredibly obvious, probably to you and the people listen to
• 1:10:55
  Speaker 1: your podcast very but you know, the extent we're seeing
• 1:11:00
  Speaker 1: it now in the U s elections and the US politics,
• 1:11:03
  Speaker 1: just the extent to which people have no concept of
• 1:11:06
  Speaker 1: how the US compares and and acts compared to others,
• 1:11:11
  Speaker 1: and with the ways in which it's similar to others
• 1:11:13
  Speaker 1: in the ways in which it's different. So I think
• 1:11:16
  Speaker 1: that's really important. Yeah, I couldn't agree more that no
• 1:11:19
  Speaker 1: one country has monopoly on good ideas, and we certainly
• 1:11:23
  Speaker 1: should borrow freely. Our final question, what do you know
• 1:11:27
  Speaker 1: about the world of economics, international relations, politics today that
• 1:11:32
  Speaker 1: you wish you knew twenty five or so years ago
• 1:11:35
  Speaker 1: when your career was just ramping up. You were kind
• 1:11:39
  Speaker 1: of to send you a list of questions and this
• 1:11:40
  Speaker 1: one was the hardest one actually for me to think
• 1:11:44
  Speaker 1: about ahead of time. Um, I don't know why, because
• 1:11:47
  Speaker 1: it's the perfectly reasonable question. I guess, I guess the
• 1:11:50
  Speaker 1: the The main thing that I wish I had known
• 1:11:55
  Speaker 1: twenty years ago, twenty five years ago that I didn't
• 1:12:00
  Speaker 1: is just, frankly, to be more woke that how much,
• 1:12:05
  Speaker 1: despite my my liberalism and fancy education and attempted objectivity,
• 1:12:12
  Speaker 1: I had overlooked a lot of the fundamental injustices in
• 1:12:15
  Speaker 1: the world. And I had overlooked a lot of our history.
• 1:12:19
  Speaker 1: And I am very ashamed to this day of how
• 1:12:24
  Speaker 1: late I was to waking up to some of them.
• 1:12:27
  Speaker 1: That's really interesting. You know, we're recording this on election day,
• 1:12:32
  Speaker 1: so we don't know what the outcome is. But arguably
• 1:12:37
  Speaker 1: the reaction of much of the public to not just
• 1:12:42
  Speaker 1: the racial injustice and the you know, the killing of
• 1:12:46
  Speaker 1: unarmed African American males or or anyone for that matter,
• 1:12:50
  Speaker 1: but the police response to peaceful protests, I think a
• 1:12:56
  Speaker 1: lot of people who were not quote unquote woke, we're
• 1:12:59
  Speaker 1: very much shocked by that behavior. It's not what you
• 1:13:05
  Speaker 1: think of when you think of as America, at least
• 1:13:08
  Speaker 1: in privileged, wealthy, white society. It's not what you think exactly.
• 1:13:12
  Speaker 1: And I'm just so ashamed of that. I remember. I mean,
• 1:13:16
  Speaker 1: obviously it matters much more to save innocent people's lives
• 1:13:19
  Speaker 1: than what I'm ashamed or not ashamed, but I am
• 1:13:21
  Speaker 1: ashamed of it. I I I remember one of the
• 1:13:25
  Speaker 1: first times I went abroad, which was in I went
• 1:13:30
  Speaker 1: to conference or economic students in Italy. Is our conference
• 1:13:35
  Speaker 1: got me there anyway, and I remember talking with somebody
• 1:13:39
  Speaker 1: was from Spain, and this person was saying, to me,
• 1:13:41
  Speaker 1: you Americans think you're so free. When I was there,
• 1:13:44
  Speaker 1: the state police are walking around like the fascist we
• 1:13:46
  Speaker 1: used to have and doing this and that. And I
• 1:13:49
  Speaker 1: remember being horrified at that he could say such a thing,
• 1:13:52
  Speaker 1: And how could I think, how could he think that?
• 1:13:54
  Speaker 1: He must be totally wrong, and you know, and I
• 1:13:58
  Speaker 1: had always made the comfortable assumption, Yeah, if you're black
• 1:14:02
  Speaker 1: or even Jewish, you don't want to be driving alone
• 1:14:04
  Speaker 1: in Alabama. Sure, but you know, over time, it's all
• 1:14:08
  Speaker 1: going away, you know. And that was obviously totally oblivious
• 1:14:12
  Speaker 1: to the reality of life for for particularly blackmails, but
• 1:14:16
  Speaker 1: all kinds of people in the US, and the behavior
• 1:14:19
  Speaker 1: of police and it's just, you know, we don't know,
• 1:14:24
  Speaker 1: As you just said, it's election a we don't know
• 1:14:26
  Speaker 1: what's going to happen. But I hope whoever wins week,
• 1:14:30
  Speaker 1: we we have to try to be more just to
• 1:14:34
  Speaker 1: not kill innocent people. It shouldn't be that hard, right
• 1:14:37
  Speaker 1: newslash we shouldn't kill innocent people. Let me alight, it
• 1:14:41
  Speaker 1: sounds fatuous, I'd like I'd like to start with that. Well, well,
• 1:14:45
  Speaker 1: I will tell you, as much as people have been
• 1:14:51
  Speaker 1: critical of the current president, I give him points for
• 1:14:56
  Speaker 1: at least accidentally revealing how much the underlying structure of
• 1:15:03
  Speaker 1: the United States has been under stress in a variety
• 1:15:08
  Speaker 1: of ways. I like you, you know, I grew up
• 1:15:13
  Speaker 1: a pretty or at least the last twenty years, fairly
• 1:15:16
  Speaker 1: privileged life. I assume that that had gotten much better
• 1:15:23
  Speaker 1: than it was, and if anything, we've learned over the
• 1:15:27
  Speaker 1: past few years that it's much worse than many Americans assume.
• 1:15:32
  Speaker 1: And I think people are starting to realize that. Yeah,
• 1:15:36
  Speaker 1: and that again, I mean, this is this is where
• 1:15:40
  Speaker 1: you know, it's important, hugely important, and I'm grateful for
• 1:15:43
  Speaker 1: this opportunity Mary to talk economic policy and these things
• 1:15:46
  Speaker 1: matter greatly. But you know, there's a lot of stuff
• 1:15:49
  Speaker 1: that that economics is not the motivation. Economics is only
• 1:15:55
  Speaker 1: a small part of the impact that we have to face,
• 1:15:58
  Speaker 1: and it's not it's not because you know, you had
• 1:16:01
  Speaker 1: Lisa Cook on recently, who I think is terrific and
• 1:16:04
  Speaker 1: she actually worked with me at New York FED a
• 1:16:06
  Speaker 1: long time ago, you know, and you can frame it
• 1:16:09
  Speaker 1: in terms of as she does sometimes in terms of
• 1:16:12
  Speaker 1: the lost potential and in addition to the injustice. But
• 1:16:16
  Speaker 1: ultimately it's got to be about the injustice, not about
• 1:16:21
  Speaker 1: just economically. It would be nice. Thanks Adam for being
• 1:16:25
  Speaker 1: so generous with your time. We have been speaking with
• 1:16:28
  Speaker 1: Adam Posing, President of the Peterson Institute for International Economics.
• 1:16:33
  Speaker 1: If you enjoy this conversation, well look up an Inch
• 1:16:36
  Speaker 1: or down an Inch on Apple iTunes and you could
• 1:16:39
  Speaker 1: see any of the previous three hundred and fifty such
• 1:16:43
  Speaker 1: conversations we've recorded over the past six years. We love
• 1:16:47
  Speaker 1: your comments, feedback and suggestions right to us at m
• 1:16:52
  Speaker 1: IB podcast at Bloomberg dot net. Be sure to check
• 1:16:55
  Speaker 1: out my weekly column that's at Bloomberg dot com slash Opinion.
• 1:16:59
  Speaker 1: Sign up for our daily reads at Ridholtz dot com.
• 1:17:03
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• 1:17:06
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• 1:17:09
  Speaker 1: not thank the crack staff that helps put these conversations
• 1:17:12
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• 1:17:18
  Speaker 1: is my audio engineer. Attica val Brund is our project manager.
• 1:17:22
  Speaker 1: Michael Batnick is my head of research. I'm Barry Riholts.
• 1:17:26
  Speaker 1: You've been listening to Masters in Business on Bloomberg Radio.