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Barry Eichengreen

lines on the record: 66
first: 2023-12-04
most recent: 2023-12-04
sittings or episodes: 1
sources: podcast

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“Well, I actually have a paper that is coming in a Korean journal. They commissioned me to think about China's economic slowdown, its causes, and whether that slowdown is mainly rooted in economics or in politics, whether the slowing growth of the Chinese economy is unavoidable, or whether it is due to policy mistakes that they have inflicted on themselves. So I've just given you four explanations for the slowing growth of the Chinese economy, and I think there is some merit to all of them. So it is called the Korean Development Institute, Journal of Economics, one of the big think tanks in South Korea. Look for me there.”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“Big commercial banks app if you are resident in China, if you're a Chinese citizen, or if last year you were visiting the Olympics there. And that means you can't really use it for cross-border transactions because you can't pay a non-resident with it. And because of the capital controls that we talked about before, that situation is not going to change anytime soon. So there may come a point where a big economy like China has opened its financial markets to the rest of the world and its central bank digital currency begins to circulate globally and make a significant dent in dollar dominance. But I think the Fed has quite a number of years to contemplate that possibility before it has to do anything.”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“Well, Sweden issues a central bank digital currency, they're probably the country that has studied the possibility most extensively. The number of Swedish krona out there are simply going to be too small to make much of a difference for the dollar in the globe. Big dog here, excuse the phrase, is China, a big economy that has begun to move down the road of issuing a CBDC that has piloted it in a growing number of Chinese cities. At the moment and for the foreseeable future, you have to be resident in China in order to hold and use it. So you can only download the ECNY app, either the central banks or one of the”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“This is something where if another country, China, Sweden, adopts it, and the US doesn't, the US might fall behind in the same way, like if the world's number one military power, if it doesn't adopt this new military technology, other countries will become more powerful. Is it the kind of thing where even if the Federal Reserve doesn't want to adopt it, it will have to in order to stay dollar dominant?”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“Tying in our earlier discussion, having this global payments rail really convenient. Some might call it the dollar system, right? It's something that we are already using, but just to our advantage, of course.”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“Electronic CNY or China's own CBDC which it's piloting at home a concern in the minds of many people has to do with privacy and confidentiality of ones transactions. So I think there is skepticism in the US Congress about the US central bank digital currency partly on social engineering, privacy, confidentiality grounds would the Fed be tracking everybody's transactions if you want to do a small value transaction anonymously you just use cash. Would that option go away? I think the Fed and other central banks contemplating the equivalent have made pretty clear that they will continue to issue cash alongside a CBDC. But those are the kind of concerns that our congress people in their wisdom profess.”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“I think the argument is all about ease and convenience and low cost of payments, that there are people when they want, if they're working in the US and they want to remit money to Mexico. Historically, they've had to pay a big chunk, like 7% on a small transaction to Western Union. And if we had a retail CBDC that could be used both in the US and Mexico Or if the Mexican peso CBDC and the US dollar CBDC both ran on the same blockchain, We could exchange one for the other at basically zero cost. So that would be the argument for and arguments against have to do with privacy. which is a concern here when we talk about shyness.”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“At 2%, and people who are disadvantaged, let's give them a risk free rate of 10% and they kind of remediate that inequality, wealth inequality. I'm not saying that's a bad thing, but it certainly would be a big step and that would definitely not be a central bank independent. So I guess what would the advantages be other than social engineering? And then what are your thoughts on that sort of social engineering potential?”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“So those two versions wholesale CBDC, where basically the Federal Reserve with some new technology extend a, correct me if I'm wrong, or if this is an inappropriate analogy, but extends the reserve system where US commercial banks have assets that are the liabilities of the Federal Reserve that now pay interest. And by the way, Professor, I learned this all from Joseph. But so they extend that system to many more private entities, including foreign commercial banks so that exchanging money on that network is much easier. And then the version two is everyone can do that. And it's like a Venmo that is created by the Federal Reserve. So I guess in that second scenario, what are the advantages other than what some people would call social engineering, which can be a good thing, it can be a bad thing, but let's say the Federal Reserve decides or the government decides, you know, Bill Gates, he's got a lot of money. Let's have his risk-free interest.”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“stands behind them, and that will only be the case if it issues a CBDC that can be used for these purposes. So I've just given you the argument for and the argument against. The argument against is that we can leave this to the private sector and other maybe government-backed digital initiatives that don't involve a CBDC. And argument four is Cunliffe's argument about finality. guaranteed payments that only with the latter will there be real confidence and widespread adoption. So it's up to you to make up your minds.”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“around and issue it to you. That's the wholesale version. Do we need to add that to the ongoing development of new digital rails for payments? I think the case for that is much less clear. So the argument that some central bankers make at the end of November as we're recording, we're approaching the end of November, John Cunliff is retiring as the deputy governor of the Bank of England in charge of payments. And he's also the retiring chair of the Bank for International Settlements Committee on Cross-Border Payments. We've been talking about And that the central bank guarantees them”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“Ripple a company in San Francisco is experimenting with technologies to move money across borders. Arguments for those private sector initiatives are strong as well. Do central banks need to issue their own digital token, which would reside in a central bank app or wallet on your smartphone or maybe on your commercial bank app, on your wallet, the central bank would issue the digital token only to your commercial bank, which would issue it to you. So I've just described a retail CBDC where the central bank puts the token directly in your wallet and a wholesale CBDC where the central bank issues the token or the digital dollars to commercial banks.”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“I would draw a strong distinction between New digital rails for transactions both domestically and across borders and central bank digital currencies. So I think the case for investing in those new digital rails is really, really strong that In India the universal payments interface where everybody can transfer money to every other individual using a basic cell phone. Digital technology provided by the government, that's really strong. And having fed now basically a 24-7 instant payment system in the United States, that's strong, you know, proprietary system run by the Federal Reserve. The argument for that is strong too. And across borders, Western Union is experimenting with blockchain.”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“I can't claim to be an expert either, but I know Professor has done really good work studying the CBDC use case in other countries, India, for example, and looking across the world, it seems like many countries are thinking about rolling out a CBDC, and that could be in many forms. It could be someone, for example, holding an account with the government or holding an account indirectly, say through a commercial bank who then holds an account, some kind of special account at the government. So there's many different types of CBDCs, and they seem to be a lot of countries interested in it. For looking at the US though, does such a technology, such a tool make sense for us?”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“So no guarantees, but I think central banks are in a stronger position today in the US and globally than they were half a century ago.”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“Secondly, I think the ideology, the theory, the evidence for the advantages of central bank independence is stronger now than it was previously. So there have been a couple of decades, three decades of intensive research by academics and central bank economists on the behavior of more and less independent central banks and how that behavior affects economic outcomes. And it has shown pretty Very convincingly in my view that central bank independence has advantages so not only central bankers but treasury officials and a significant number of politicians know that theory know that evidence appreciate the case and that renders them more reluctant today than they would have been 40 years ago in the time of Nixon to”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“So Joseph, you're right that central bank independence in this country has not been a constant. It's waxed and waned the episode I like to recall is in the early 1970s when Richard Nixon's plumbers, the same people who were behind the Watergate break in, planted stories in the Washington Post about how the Fed chair was asking for a raise and they were able to, you know, Of kind of discredit him personally in ways that forced him to give in to pressure from the White House to keep interest rates low. Why is this time different? I would give you two answers to that. Number one, evidence that if Fed independence could survive four years of Donald Trumpet can survive anything.”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“Significant hesitancy to comment on these things, whereas in the past, let's say Chair Volcker was very open about things like that. It doesn't seem like they have, I guess, a very strong political standing, at least enough to push up push against the Congress and to perhaps raise interest rates and cause a recession in the event that we have to do that. So why do you think Fed independence will be something that remains even if in economic times stay go poorly after all? It's been easy that so far unemployment remains really low, multi-decade low still.”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“I just have just one question about the view that about the Fed ultimately being able to remain independent and push against fiscal profligacy. When I look through the history of the Fed, it seems like monetary policy independence is something that comes and goes during the Second World War, for example. The Fed's job was to fund the government. And when I look at politics today, it seems like the Fed chair has problems pointing out that Spending too much money by Congress is not good. It seems like there's a.”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“necessarily given the circumstances, and there is a debate at the moment about whether the Fed deserves credit, all of the credit or the majority of the credit for bringing inflation back down from the high single digits to where it is now around two and a half or three percent. And again, my view is that the majority of the credit probably goes to the Fed. Supply chains loosened up, the pandemic receded, other good things contributed to the decline of inflation, but it was first and foremost the reaction. So I think that MMT prediction, that inflation would remain low was contradicted by what happened with inflation in 2021. And the idea that the Fed couldn't do anything about it was contradicted by what happened to inflation in 2023.”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“Right, so I'm not a monetarist either, but it seems pretty clear to me that inflation took off starting in twenty twenty one because the Fed was behind the curve, that the Fed had not raised interest rates, it was inadvertently for other reasons, following the advice of modern monetary theory. Inflation was not supposed to react to that, but lo and behold, it did. It reacted with a vengeance. And then the Fed responded too late, but aggressively.”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“You for that. So, I think you're absolutely right that modern monetary theory, like many new fangled theories, it can be hard to pin down what exactly is the text, what is the interpretation. And I've definitely had that experience too of thinking I understood it. And then there's a new school and which is MMT. But I think to the point that MMT would say interest rates rose because of the Federal Reserve and the Federal Reserve is part of the government. So why couldn't the money stay free forever and the Fed keep interest rates at zero on the short end, which the Fed can do if it wants to? And then the long end, you might even have, much less control, but it even could even do something like yield curve control, which the Bank of Japan is currently engaged in.”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“And through that channel tend to discourage it. But it did channel the view that more deficit spending by government would at some point translate into those higher interest rates. And evidence from the last two years has really put paid to that thesis.”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“As it did in the early stages of the pandemic without any consequences for higher interest rates and crowding out, and lo and behold, the government continued to spend. We did yet another third gigantic fiscal stimulus in March of 2021. That's not the entire explanation for why inflation took off, but it's a significant part of the explanation. Inflation took off, interest rates rose. Investment has not collapsed, but investment has been constrained. So the infrastructure investment that we had hoped would be stimulated by that package has been relatively weak, relatively limp, because higher interest rates make investment more expensive. So as I understood modern monetary theory it never challenged the notion that higher interest rates make investment more expensive”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“Well, I'm going to try to be polite here. I never understood modern monetary theory insofar as I could understand it. It was not consistent with basic economics, but it tended to be a slippery concept that was defined different ways by different people at different times. And in any case, I think it's been... Discredited by the events of the last couple of years. Modern monetary theorists had argued that the government could continue to spend.”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“Paper and so much debt, the private sector won't be able to finance itself because all the money will go towards funding the government. Could you mount a defense of crowding out and sort of push back on that theory?”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“You're saying mainstream economists, a lot of the economics profession are worried about fiscal dominance. In other words, if the US government runs large budget deficits, the central bank, the Federal Reserve will just go along and might monetize that debt and purchase it. I know in the circles of the Federal Reserve, those words would never be uttered. And they are telling what you said about they're controlling, attempting to control inflation and growth with interest rates and balance sheets. And then if the Federal Reserve doesn't monetize its debt, you'll have higher interest rate because there's a ton of treasury issuance and supply will go up, demand will stay the same. So price down yields up. So I know that a stream of economic thought to which I think Joseph was earlier alluding monetary theory actually rejects quite sternly that theory of crowding out that if the government issues so much”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“means the government is going to have to spend more to service the debt, leaving fewer public sector resources to invest in education, healthcare, national defense, other things that we all value. Higher interest rates are going to put pressure on private sector investment as well, crowding out will result to some extent. And that will mean slower growth of the economy than otherwise. So that's what I see as the risk. That's the argument for Moving the budget toward balance gradually over time, here comes the part that's controversial in the United States by advanced country OECD standards. We are a low-tax economy. And the obvious way of moving the budget toward balance is by raising taxes. So I'm not running for office. I can stake out this unpopular position.”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“And I'm in the minority pretty much, where I think the Fed has demonstrated over the course of the last year, plus that it is really committed to returning inflation to its target of 2%. We're going to have to wait until 2024 to see how successfully and exactly when. But the Fed was faced with the question, are you going to risk a recession in order to bring inflation back down? And it concluded, yes, we will risk a recession in order to bring inflation back down. And I think it would similarly conclude we will risk problems on the fiscal front in order to keep inflation at or very close to its 2% target. So I don't see inflation and dollar depreciation as necessarily being inevitable. or even likely consequences of the fact that we can't get our fiscal house in order think the consequences will be higher interest rates.”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“about whether the Fed is going to feel political pressure. We talked about dollar dominance before, the name for this one is fiscal dominance, that if fiscal policy is too expansionary out of control, will the monetary policymakers feel compelled to buy some of that debt with inflationary consequences in order to help the Treasury and the government with its debt management problem? Or will the Fed conclude to the contrary? This is your, meaning the Congress, the executive, and the treasuries problem, and we will stick to our target of bringing inflation down to two percent come. and we're not going to buy the debt bail you out of your problem. So I think probably a majority of the economics profession is worried about fiscal dominance.”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“Well, I think there is a very large majority in the Congress that recognizes we have a problem. But there is not a majority in the Congress that agree on what we should do about it, so I think the Congress is aware that we have a situation on our hands, but they're not in a position where they can get their hands around that problem. Jack asked about inflation and dollar depreciation, whether that's a consequence of this heavy debt depends on how the Fed reacts. Monetary policy will ultimately determine what happens in terms of inflation and what happens in the medium and longer term in terms of the dollar exchange rates. So there's a debate.”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“So, I don't see, you know, China being in a position to China and the Renminbi being in a position to displace the dollar anytime soon. I don't see the euro area and the euro being able to do that. So I think that forecast of very gradual erosion of dollar dominance remains intact. If we in the United States Engage in severe financial malpractice. Don't raise the debt ceiling, default on the bondholders, do things like that. Don't pass the government a budget, shut down the government for an indefinite period, that could really undermine people's confidence in the dollar. simply because the consequences would be so severe, I think even this Congress would be reluctant to go there at the end of the day.”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“in local and regional governments and their financial vehicles, off balance sheet operations, in other words. So they're not going to throw open their financial markets to the rest of the world. Partly they understand that if they did that, large amounts of Chinese finance would flee the country for abroad because Chinese investors see those problems at home. Chinese investors more broadly want better internationally diversified portfolios and they've been prevented by regulation from investing financially abroad. So the Chinese economy would plummet if they threw their markets open to the rest of the world and that wouldn't be good for confidence.”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“that Europe faced as a result. So maybe what happened in 2020 in response to the pandemic, a once-in-a-lifetime, we hope event was really a one-off and the euro will not be a challenger sooner as opposed to later. What about the Chinese renminbi? The Chinese have deep financial problems at home in the real estate market. In the corporate sector.”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“More liquidity in European financial markets, more high quality AAA rated government bonds available to investors around the world. In 2020, in response to the pandemic, there was an agreement that the European Union, as opposed to the member states, could borrow on the markets and issue what turned out to be eight hundred fifty million billion euros of bonds people asked, is this Europe's Hamiltonian movement where Europe will create an EU treasury capable of issuing high-quality EU bonds on a regular basis? They didn't do that again in response to the energy shock.”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“It really depends on what you mean by dollar hegemony. I tend to prefer the term dollar dominance that the dollar is the dominant international and reserve currency use disproportionately in a wide variety of different cross-border transactions. I would expect that position, that status to remain intact for the foreseeable future because I'm hopeful that US financial management will remain tolerable, tolerably good, and because it is my belief that it will take time. A good deal of time for alternatives to emerge. Will the euro emerge as a full-fledged alternative to the dollar? There has to be more”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“No, I think it's a very good question. The argument for gold is that you want to hold a widely diversified portfolio if you're an investor. and that might include a commodity play or two. So why are central banks as diversified investors holding gold and not aluminum or lithium or whatever? And the answer is history and tradition, that it's respectable for a central bank to hold gold always has been. And therefore a central bank reserve manager can add to his or her reserve portfolio of some gold without anybody raising their eyebrows. But if they added some other non-traditional commodity, people might begin to ask, what is the central bank up to?”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“You just highlight how central banks are now buying gold that's very different from the gold standard or a series of gold standards where fiat currency was had to be converted. There had to be a ratio. And if you didn't couldn't pay up in gold, there was a problem. There's a big difference now. And if there is a big difference, what is the purpose of central banks holding gold? I mean, they expect it to go up. I mean, what's the investment characteristics of that relative to a Thai bought five-year note? And if you have gold, why not hold some aluminum? Why only stop there? I mean, I guess that's somewhat silly question, but I think.”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“have been emerging markets by and large. Also economies like Russia, which you might want to call an emerging market, you might not, but given their special geopolitical circumstances, they don't want to hold bank deposits in the United States, so they hold gold.”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“to enable them to intervene in the market when they have to after the Asian financial crisis, emerging market central banks wanted to bulletproof their economies and financial systems, partly by holding more reserves. So they accumulated a lot of dollars and other currencies, but then they began to think maybe we should accumulate some gold as well as part of our reserve portfolios. So what we've basically seen is advanced country central banks trimming their gold reserves, emerging market central banks, adding to their gold reserves, and the latter tending to outweigh, at least on the margin, the former. So that's what we've seen, the big central banks that have played a leading role in increasing their gold reserve.”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“write so gold was important to central banks in the nineteenth century, and it still had a formal role to play in the Bretton Woods system in the third quarter of the 20th century. After that, advanced country central banks that had inherited a lot of gold from the past began to trim their holdings and try to sell a portion of their gold reserves without tanking the price and inflicting losses on themselves so they would sell gold very gradually and discreetly, but what has changed is that central banks have accumulated a lot of additional reserves. Emerging market markets have been growing faster, so it makes sense as their economies grow and they engage in more trade, their central banks will hold more reserves.”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“A gradually shrinking share of global trade and finance. So I'm happy to recall that prediction. It turned out to be right. The other prediction in the book was that the dollar would very gradually lose ground to the currencies of the other big economies, the euro area and the Chinese renamin B. And that one full disclosure turned out to be wrong, that the dollar mainly has lost market share to these non-traditional reserve currencies. I mentioned them a moment ago. The Korean won is also on the list, the Danish krona and the Norwegian krona are also on the list. And I didn't anticipate that 12 plus years ago. I think it testifies to the development of digital technology that these smaller currencies of smaller economies have become easier to trade, hold.”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, you know, I wrote an earlier book published in 2011 called Exorbitant Privilege, The Rise and Fall of the Dollar. And there were two predictions in that book, one of which was right, that the dollars share would in global reserves and its role in the international monetary system would continue to erode very gradually over time as the US came to account for”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“The euro is the currency of a large economy, but again a bank based as opposed to a securities market based economy, where there are not very many AAA rated government bonds denominated in euros to be held by banks, firms, and governments around the world. There are three euro area sovereigns with AAA ratings only, and most of their bonds are held by Europe's own banks, or the ECB, so the euro denominated liquidity is simply not out there. And the other currencies that are regarded as safe and liquid, interestingly many of them have the name dollar Australian dollar, Canadian dollar, New Zealand dollar, Singapore dollar, what is it about that name? I'm not sure. They contribute a bit to international liquidity, but those countries and currencies are simply too small to pose first order challenge to the US and the Greenback.”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“And the other thing that's important here is that there is no full-fledged rival to the dollar. So the pound sterling lost ground to the dollar first after World War I and then big time after World War II because the United States was a bigger economy, a bigger exporter after World War I, because we developed established our own lender and liquidity provider of last resort in the form of the Fed. In 1914, so there was a full-fledged rival to the pound sterling in the first half of the 20th century. What is the rival to the dollar at the moment one might ask? We talked about the Chinese Renminbi before markets in the Renmin B are not deep in liquid and they're not fully open to the rest of the world.”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“The fact that the US has seen its debt to GDP ratio nearly. Since the period prior to the global financial crisis, and yet dollar dominance and the status of U.S. treasuries as a safe haven have survived, that that safe haven status survived to get a little bit political four years of Donald Trump suggests that dollar dominance is pretty robust, partly because a number of other ingredients of what you called dollar hegemony remain in place. The US is a big economy. It has deepened liquid financial markets open to the rest of the world. It has active liquidity provider backstopping those markets in the case of the Fed. And of course, the fact that our debt is denominated in our own currency all work. In our fav”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“In your Jackson hole paper, you very comprehensively cover how there actually was a deleveraging, as you referenced earlier in the early 2000s, particularly among low-income countries and very highly indebted countries. And over the past, since after the great financial crisis, it really has been the advanced economy. So US, Europe, Japan, that have really stacked on the debt. Although you highlight that just because certain countries that's an emerging market has a lower debt GDP than Japan or the US doesn't mean it's more sustainable because its currency might not be printed in its domestic currency, which it prints. It has could afford the dominant debt. Other reasons there's not a foreign demand for that country's safe, safe assets. So needless to say that the US dollar, we can get American can get away with a lot more and Japan can get away with a lot more than other emerging market countries than let's say have debt that's denominated in another curve.”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“AI is likely to reduce productivity in the very short run. It's forcing me to redo all my exams for my undergraduate courses, eliminate the homework assignments, and replace them with something else. But in the longer run, no doubt I'll figure out how to use it to improve my lectures and so forth. So I think of this as the Uber at San Francisco Airport problem that when Uber first came to SFO, it was much harder to get in and out of the airport because the yellow cabs and the Ubers were snarling the traffic. Nobody knew where to go. Eventually they reorganized the airport and the traffic flow. So they have different parking lots and lanes and it's faster and cheaper to get in and out. So I think in the longer run it'll improve productivity. But in the short run AI will create work for folks like you and me.”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“After we've measured everything else. And that's a reminder to be really careful about how you use and think about those productivity growth numbers because any measurement error in measuring the output and the observable inputs gets loaded into the residual what's left over.”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT
“Well, productivity is the ratio of output inputs. So people measure the inputs in different ways for different purposes, labor productivity is output relative to effective labor input, total factor productivity considers not only labor input, but capital input and so forth. So we can measure the output. We can measure the inputs, how many workers, how much capital and so forth, and what is left over is the contribution of productivity growth to GDP growth. And I think it may also be Robert Solo, who famously said productivity growth is a measure of our ignorance because it's what's left over.”
2023-12-04 · Forward Guidance · Dr. Barry Eichengreen & Joseph Wang on Dollar Dominance, “Problematic” Levels of Government Debt, Modern Monetary Theory (MMT), and Central Bank Digital Currencies · IDENTIFIED FROM THE TRANSCRIPT