YouSaid · the spoken record

Adam Tooze

lines on the record: 76
first: 2020-05-06
most recent: 2020-05-06
sittings or episodes: 1
sources: podcast

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“Government money in 1914 don't do much worse than people who lent the American government money during World War I. Then, of course, the parity with the dollar has, you know, the aim of the game is to restore it to its pre-war level. And that is judged by the political elite of the 1920s in Britain to be the key criterion. Keynes is adducing, as it were, well, in fact, if you cared about unemployment, then of course you would have a lower exchange rate, which everyone can agree with. It just wasn't the priority. Because the other domestic priority of the group that is governing Britain in the 1920s is to restore class balance. And in the aftermath of World War I, apart from the flu, the thing that was going on that was really on everyone's mind is the most dramatic period of class struggle in European history, in Western European history, it's the last moment of genuine revolutionary possibility in most countries. And Britain in particular faced a huge upsurge of labour militancy. And the restoration of the gold standard is part of a strategy of”
2020-05-06 · Conversations with Tyler · Adam Tooze on our Financial Past and Future · IDENTIFIED FROM THE TRANSCRIPT · source
“Think you cannot dissociate the conditions of successful international law in the 1920s from politics. I mean, the question can't be posed from the position, the vantage point of some sort of abstract technocratic ideal. It has to be posed from the policy of what's doable and who are the people with power who are likely to do the things that you're asking about. And that's in a sense for me the problem also with some of Keynes's critique of the gold standard restoration is that he's just refusing what is evidently the rationale behind the position, say, of the British government, which returns the gold at the pre-war parity. And the purpose of doing that is clearly to secure the high rating and the high standing of British sovereign debt. And that is the priority of the people making that decision. Kane says it's not optimal for employment. He's right. A lower exchange rate for the pound would have been better. But if your aim of the game is basically to ensure that people who lent the British”
2020-05-06 · Conversations with Tyler · Adam Tooze on our Financial Past and Future · IDENTIFIED FROM THE TRANSCRIPT · source
“The fragment that emerges that is he can place in the public realm, but he despite the personal caricature of Wilson that he delivers in the book, which is, of course, very damning, he doesn't in fact go very far in his criticism of the US administration at that moment. So he's playing political games in the”
2020-05-06 · Conversations with Tyler · Adam Tooze on our Financial Past and Future · IDENTIFIED FROM THE TRANSCRIPT · source
“Absolutely critical that market economies have unspoken fundamental political preconditions, which in the aftermath of a massive war have been disrupted. And what you do not want to do is to port, if you like, the bitterness and the antagonism of politicized intergovernmental debt into the post-war period. Or if you're going to do that, you need to build a very, very solid framework around it. But to imagine as the decision makers in the 20s did that you could combine a rapid return to essentially a sort of Edwardian free market model of capital flows and entangle that with politicized public. That was a tragic mistake. What he's not saying in the economic consequences of the peace is what he said in many memos before he published that book, which is that America is key to the entire problem. And he was rejected at Versailles and he knew that the basic anchor of the reasonableness of his position had been shot down and removed by the Wilson administration. And so the book itself is, as it were, the kind of”
2020-05-06 · Conversations with Tyler · Adam Tooze on our Financial Past and Future · IDENTIFIED FROM THE TRANSCRIPT · source
“Absolutely, but the evidence of the 1920s is that with the right framework, the Weimar Republic was in fact perfectly capable of bearing a reasonable burden of reparations, 2 to 3% were doable. The fact of the matter is the German political class had no interest in accepting that responsibility and was quite determined to do a variety of different things to escape that burden. And there is no doubt at all that the front-loading of the demands, which is very understandable from the point of view of the financial needs of the French in particular, caused a huge bottleneck, if you like, early on in the history of the Weimar Republic when it was most fragile. And that's, as it were, the moment when I think the critique is most, is most valid. And that's why for me, really, the hidden agenda of the economic consequences of the peace is an appeal to the Brits, but a bubble to the Americans for large-scale debt concessions on which one can only agree with Keynes that this was in fact”
2020-05-06 · Conversations with Tyler · Adam Tooze on our Financial Past and Future · IDENTIFIED FROM THE TRANSCRIPT · source
“No, I think I'm a confirmed liberal Keynesian in my broad politics and my understanding of politics and the way expertise ought to relate to it and the operations of modern democracy, I think his political writings in essays and persuasion are brilliant. But I regard the economic consequences of the peace as a disastrous book because it essentially enhanced and gave arguments to the German nationalists who doesn't mean”
2020-05-06 · Conversations with Tyler · Adam Tooze on our Financial Past and Future · IDENTIFIED FROM THE TRANSCRIPT · source
“Unemployment problem, growth below population growth for a long time, just been downrated to junk for its sovereign bonds. Rand has suffered a huge collapse. And it's our neighbor and tens of millions of people living in the United States, obviously directly, their lives are directly entangled with Mexico. I think that would be very high on my list if somebody in Treasury is monitoring that situation very closely.”
2020-05-06 · Conversations with Tyler · Adam Tooze on our Financial Past and Future · IDENTIFIED FROM THE TRANSCRIPT · source
“And oil prices and the degree of foreign ownership of their sovereign debt, even if it's denominated in their local currency and the degree of their dependence on foreign borrowing in dollars and potential macro prudential hazards, the balance sheets have really big quasi-state-owned companies, PEMEX will be the absolutely classic one in Mexico, Petrabass and Brazil, ESCOM are the electricity utility in South Africa where you could see a kind of doom loop spiral between the credibility of sovereign debt and the imbalance in the private balance sheet. If you use all of those different criteria, you can pick out a series of relatively vulnerable countries. And South Africa, I think, is top of most people's lists. Terrible health risks because of the large 7 million plus people living with HIV who we imagine are probably extremely vulnerable to COVID-19, longstanding huge”
2020-05-06 · Conversations with Tyler · Adam Tooze on our Financial Past and Future · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I mean, I think this is an absolutely crucial issue because I've been having an absolutely fascinating conversation online with Brad Setzer, the Council of Foreign Relations that I'm sure you must have interviewed. And if you haven't, you should, and everyone who listens to this program should follow Brad and follow the money his blog at the CFR on Twitter. And he's coined this phrase saying there's not one emerging market crisis. There are several. Because there's a range of different pressures which are acting on them. I mean, starting with their relative exposure to the medical crisis, which we mustn't forget is the fundamental driver here.”
2020-05-06 · Conversations with Tyler · Adam Tooze on our Financial Past and Future · IDENTIFIED FROM THE TRANSCRIPT · source
“Difficult for me to see the scenario in which we head towards spiraling inflation of the type you're talking about. Of course, it's an endogenous process. It's much more attractive to join a trade union when you actually need to defend your wages against nominal price shocks. So that might be a mechanism that would work. I find it difficult to imagine that being something that happens in the 2021 and 2022.”
2020-05-06 · Conversations with Tyler · Adam Tooze on our Financial Past and Future · IDENTIFIED FROM THE TRANSCRIPT · source
“It seems to me that you would need the mechanics of a wage price spiral and indexation of various types to be actually operating. And we stripped most of that out in a highly conflictual way, really, from the Volcker shock onwards, if not before, to the late 1980s. And in the absence of that,”
2020-05-06 · Conversations with Tyler · Adam Tooze on our Financial Past and Future · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I mean, these are very speculative scenarios that we're talking about. We, of course, in the advanced world. But it's the speculative world. Absolutely. But the advance of the economies have not experienced those kind of inflation rates for a long time. And that's part of what defines them as advanced economies, right? There's a real circularity in the way in which we classify the economies of the world. Eric Lodigan has a great piece where he says what defines an emerging market is that it has the kind of inflation dynamics you just outlined, in other words, prices actually do respond to monetary shocks and that has a social underpinning. And I think for me, one of the reasons I'm skeptical about a strong inflation scenario is it's not obvious to me that we have, as it were, the sociological guts that would, I don't mean like bravery, I mean in the sense the underpinnings of a wage price spiral, which I think would be crucial to drive the kind of inflation that you're talking about if we were to be in 15-20%.”
2020-05-06 · Conversations with Tyler · Adam Tooze on our Financial Past and Future · IDENTIFIED FROM THE TRANSCRIPT · source
“We have dealt with the sort of debt burden that we're running up right now. If you look at the history of the 50s and 60s, rapid nominal GDP growth, of which a fraction was inflation, was a key element in the formula for managing post-World War II debt.”
2020-05-06 · Conversations with Tyler · Adam Tooze on our Financial Past and Future · IDENTIFIED FROM THE TRANSCRIPT · source
“Sometimes call Yeah, and you would anticipate, you know, if you were kind of, if you had a sort of a shred of monetarists in your body, you would expect at some point for there to be a price response. I mean, in the short run, the sort of secular stagnation scenario seems a little more plausible because you, you know, from a kind of Keynesian aggregate demand perspective, you would expect households to respond to this kind of shock with a higher savings rate. And you would expect, and we've seen quite substantial deleveraging after 2008 in the American household sector. And you would expect business confidence to be shot and lower levels of investment. That wouldn't suggest a general macroeconomic circumstance which would lead to inflation. On the other hand, the monetization is massive. Frankly, I mean, if we could have inflation of four or five percent in many ways, that would solve a lot of our problems because it would act as an act as a tax on nominal assets. And it's one of the ways historically in which”
2020-05-06 · Conversations with Tyler · Adam Tooze on our Financial Past and Future · IDENTIFIED FROM THE TRANSCRIPT · source
“Be a safety function being performed by government debt markets, which must be reassuring. If that were to become destabilized, it would indeed set off warning lights flashing, I think.”
2020-05-06 · Conversations with Tyler · Adam Tooze on our Financial Past and Future · IDENTIFIED FROM THE TRANSCRIPT · source
“That was, I think, very much on the minds of the central banks in the critical weeks in March. Huge fluctuations in price and their gaps in the market where you would normally expect treasuries with different terms to have a smooth curve of pricing. I know that the Bank of England around the 18th of March was extremely concerned about, if you like, just gaps in the market for UK guilts where you would expect a smooth yield curve. And that was no longer something they were seeing. They were seeing irregularity. The government debt market is one of clearly one of the foundations of financial stability. So far overall, once we came out of those two really dangerous weeks in the second and third week of March, perhaps not surprisingly given the scale of asset purchases by the central banks, the normal set of relationships between equity markets and bond markets seems to have been restored.”
2020-05-06 · Conversations with Tyler · Adam Tooze on our Financial Past and Future · IDENTIFIED FROM THE TRANSCRIPT · source
“Exactly. And I mean, Neil Kashkari came out in the FT, I think, yesterday calling for a big capital raise on the part of the banking system to provide them with more shock-absorbing capacity. Whether that hits the big banks this time or whether the neuralgic issue will be the mortgage lenders who are in the front line of that shock or the people who are exposed to various types of consumer credit, I think that's a key issue. It's not obvious to me right now that the balance sheets are the really the core group of systemically important largest US banks are vulnerable to anywhere near the same extent as they were in 08 anyway. But absolutely you're right. If this turns into a protracted, extended real economic recession, if this is a very slow recovery, then feeding up from the bottom by way of households and companies inabilities to service debt, you would expect that kind of shock to develop.”
2020-05-06 · Conversations with Tyler · Adam Tooze on our Financial Past and Future · IDENTIFIED FROM THE TRANSCRIPT · source
“Isn't a bank centered financial crisis? This is, as Robin Wiggledworth put it in the Financial Times, he was quoting somebody he'd interviewed, that this was a financial market crisis. So it's affecting lots of different markets for credit rather than the balance sheets of individual banks. I think in 2008, we would have known we're extremely concerned about Citigroup. That might have been the mantra by December. This time around, I think the risk is more diffuse.”
2020-05-06 · Conversations with Tyler · Adam Tooze on our Financial Past and Future · IDENTIFIED FROM THE TRANSCRIPT · source
“I think the question that is probably on most people's minds is the weekends. I'm not sure that I have. It's a great, very pointed question. Is there a single statistic? In 08, the problem in the end was what are called the weak hands. So where the risks were concentrated, where the losses were concentrated, where the leverage was, and where therefore a run would be very, very damaging. And I think that's really, in terms of managing the financial crisis as opposed to the real economic recession, which is coming our way, that's probably the thing that Jay Powell and central bankers in Europe as well are most worried about. Are there actors out there that could be forced into various types of fire sale, which would then destabilize asset prices? And I think necessarily there's one number this time around. One of the things I think they're dealing with is that”
2020-05-06 · Conversations with Tyler · Adam Tooze on our Financial Past and Future · IDENTIFIED FROM THE TRANSCRIPT · source
“Estimated in the West, we were distracted by a variety of other issues at that point. But China went through a really dangerous looking foreign exchange run in 1516, lost about a trillion dollars worth of reserves, which is large even for the Chinese to absorb. And that's another model of what a shock might look like, a financial shock. Mercifully being spared that so far this time around, it would be very bad news for the emerging market economies, which are closely coupled to China.”
2020-05-06 · Conversations with Tyler · Adam Tooze on our Financial Past and Future · IDENTIFIED FROM THE TRANSCRIPT · source
“The real estate sector is one obvious one, and some of the hugely highly leveraged Chinese development companies, Evergrandy, is I think most people's favorite as the weakest link in the Chinese real estate development sector, I think our ballpark $100 billion in foreign exchange borrowing on its balance sheet. So an extremely fragile actor, whether it's systemic in the Chinese context is a different question, whether the collapse in that firm by itself would have a large enough ripple effect is an open question. The shadow banking system in general in China, I think, is a huge worry. So these are the banks which operate outside the mortgage lenders of various types, but also various types of lenders that support local government. And then I think there is the rather horrifying experience of 2015, 2016, which is easily underestimated.”
2020-05-06 · Conversations with Tyler · Adam Tooze on our Financial Past and Future · IDENTIFIED FROM THE TRANSCRIPT · source
“Exactly. And so that, given that even in the Chinese case, we're saying something closer to a swoosh than a V, the prospects in the West, I think are, as I think you were suggesting, quite poor. It's just unclear to me how, as you were saying, densely packed urban service sector, face-to-face-based economy of a city like New York, how it comes back under a regime of periodic lockdowns and managed social distancing. This is just a huge experiment that we're running.”
2020-05-06 · Conversations with Tyler · Adam Tooze on our Financial Past and Future · IDENTIFIED FROM THE TRANSCRIPT · source
“Of the comparisons which treat China as a national aggregate and then say, well, that's our future because even allowing for the exaggerations of the regime's propaganda there, they do seem to have contained the pandemic there in one particular province. So we have to be quite careful about making comparisons with the US or Europe where we've had multiple Wuhan style outbreaks.”
2020-05-06 · Conversations with Tyler · Adam Tooze on our Financial Past and Future · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, and also, I mean, it's very difficult to disentangle the different effects here because when you're talking about the era of the famous Spanish flu, we're talking about the aftermath of World War I, which is a huge shock in both supply and demand side. So there's huge pent-up inflationary pressure on the demand side and massive disruption on the supply side from the demobilization. It's also a period of revolution in much of Europe, which causes huge disruption as well. So if there was a V-shaped recovery there, it was a V-shaped that was, you know, it was recovering from many different forces. Then, of course, there's the savage deflation of 1920, 21, which also hits the global economy in the aftermath of the war and the flu. This time round, I'm definitely in the kind of swoosh camp modified swoosh. I don't frankly have a strong set of priors about what a recovery from a collective simultaneous shutdown of this scale looks like. And I am quite”
2020-05-06 · Conversations with Tyler · Adam Tooze on our Financial Past and Future · IDENTIFIED FROM THE TRANSCRIPT · source
“As far as I'm aware, and of course, this has taken us all aback and has caused us to reflect on what we might have missed in the historical record. I don't remember it arising anywhere as an option. And we know the consequences were, of course, dramatic in terms of the loss of life, and particularly in what was then the imperial world, the colonies, so-called in Africa and India. So, I mean, we're much more affluent than by an extraordinary. I mean, it's very difficult to exaggerate. I mean, order of magnitude, broadly speaking, in terms of per capita income. And we've chosen a very high cost route for dealing with the epidemic this time.”
2020-05-06 · Conversations with Tyler · Adam Tooze on our Financial Past and Future · IDENTIFIED FROM THE TRANSCRIPT · source
“An interesting question, it's an interesting way of putting the question. What's been striking about the 2020 pandemic is that we have chosen an extraordinarily high cost route. I mean, we have chosen a comprehensive lockdown as the default strategy for dealing with this. And as far as I'm aware, no one attempted anything remotely like that in response to Spanish flu at the local level. There were efforts city by city, but there was no comprehensive national lockdowns. In fact, if you study the economic history record, the archive of that period, the policy decision making and say the Weimar Republic, which I've spent some time on, or the minutes of the Versailles peace conference, the flu belly figures, I mean, it figures in the sense that occasionally a prominent person will get sick famously President Wilson, but the idea, I think, of a kind of comprehensive lockdown as part of a public health response.”
2020-05-06 · Conversations with Tyler · Adam Tooze on our Financial Past and Future · IDENTIFIED FROM THE TRANSCRIPT · source