20 Episode results for "Global Financial System"

Was the Global Financial System Better Prepared for the Pandemic Than 2008?

Intelligence Squared U.S. Debates

52:16 min | 10 months ago

Was the Global Financial System Better Prepared for the Pandemic Than 2008?

"This is intelligence squared. Us The nation's leading nonpartisan debate series where the world's most influential minds debate the most important questions of our time. And you decide who the day progressive populism unifies and brings us all together. The Republican Party is institutionally demographically stronger than it's been in decades but if religion and belief in God it's such a great force driving moral progress. Hachem it fail so abysmally. Science is very good. But it's hot the equation. You need both the. Us does need to challenge. China's unfair trade practices. Rob Eliza is not a blessed. It's unstable it's equal. It's undemocratic and on sustainable ecologically are winning the battle against famine war pestilence and even death that is thanks to capitalism. Our debate will go in three rounds and then our audience will choose the winner as always if all goes well. Civil discourse will also win. Hey everybody I'm John Donvan. This is intelligence squared. Us welcome to our first ever digital debate. Where the setting? Maybe virtual but the arguments are real and we are seeing all around us right now in kind of economic ice age. This shutdown in human activity ordered an organized by governments to slow the spread of the corona virus. We're also seeing during this ice age of the economy. I'm series of specific industries. That are being stressed. Possibly to the breaking point airlines especially but travel in general big swaths of the food industry especially restaurants professional sports but also all entertainment that dependent on getting together. Numerous people in one place but the industry. We're GONNA take a close look at in. This debate is the one that gets summed up as the global financial system. And that's interesting to us because it was that system back in two thousand and eight that brought us right to the brink of economic collapse. So what about this? Time is the global financial system at risk of seizing up as a result of widespread bankruptcies and unpaid loans and markets bereft of participants or is the global financial system able to withstand. Whatever may come thanks to lessons? Learned and reforms undertaken after the Global Financial Crisis of twelve years ago. Well those questions we think we have the makings of a debate. So that's what we did. We had it. Yes or no to this statement. The global financial system was better prepared for the pandemic then for two thousand eight a quick note. We recorded this on Wednesday April twenty ninth. I was in Washington. Dc My two guests expert debaters. Who have spent years thinking about these issues joined in from New York City and Cambridge Massachusetts as always our debate one in three rounds and then our audience online. This time voted to choose the winner. But you can still weigh in on this one we are taking votes online at. I Q to us dot org that's Iq the number two US dot org right there on the homepage. You'll see our debate against the Global. Financial System was better prepared for the pandemic than two thousand eight. You can vote for against or undecided. If you're tuning in on podcast you can click the Lincoln. Our show notes as well okay. Let's meet our debaters again. The resolution is this. The global financial system was better prepared for the pandemic then for two thousand eight and arguing for that resolution. I want to say hello. I Jason Furman Jason. Welcome to intelligence squared. Us great to be here Jason you've debated with us before and you're one of President Obama's top economic advisers and you served as chairman of the Council of Economic Advisors from two thousand thirteen to seventeen year now at Harvard University. Your professor of the practice of economic policy. And we just WANNA say it's great to have you. We love the way your debate in the way you present an argument so thanks for joining us. It was in person so but this is the best we're going to do and we are pleased to be doing it. Also with Jillian Jillian. Welcome back to intelligence squared. You're the Financial Times the US and chair of the editorial board. We WanNA thank you for joining us and I also want to put another a little bit of background for those. Who didn't attend our previous iteration of this debate back in two thousand nineteen we debated on the resolution. Ten years after the global financial crisis system is safer. We had Jason Furman and the L. Cash Gari Arguing for the resolution arguing against we had scheduled Jillian and Kenneth Rogoff except Jillian. We missed you. That evening during Due to a flight mishap so at the eleventh hour our chairman Rose Rosencrantz. Took your seat and he argued in your place. We're going to hear from him a little bit later in the program. So we're sorry to have missed you. Then as Jason said we're sorry that on personnel but we are delighted to have you here and to have both of you making your cases for the side that you're on in this time of pandemic and let's move onto round one round one. We'll be opening statements. By each debater in turn. They will be four minutes each up speaking I four. The resolution the global financial system was better prepared for the pandemic than it was for. Two thousand. Eight is the former chairman of the Council of Economic Advisors. Jason Firm Jason. Your time begins now. The novel Corona Virus has created a massive human tragedy on a global scale. It's creating an economic tragedy on a global scale. I am very worried. Not just about where the economy is today. Which is a deliberate result of the virus and the policies to contain the virus? But I'm also worried about where the economy will be one two or three years from now on what the recovery will look like. The proposition in this debate though is whether the global financial system was better prepared than it was in two thousand eight. And I'm going to try to convince you that the answer to that is definitely yes. In fact of all the shoes that have dropped that one has not whether this pandemic struck us in twenty twenty or twenty ten or two thousand or Nineteen Ninety. It would have been devastating for the economy. The devastation would have been compounded if it was impossible to respond economically using the main tools. That policymakers have monetary and fiscal policy. And if it spread into a financial crisis which is something we know from. History can be very severe and almost guarantees long-lasting economic pain one of the worries that people had recently is a few months ago was with fiscal policy. Would we have enough space to increase government spending or cut taxes? If there was a crisis some people argued yet. Some people argued. No the answer is now clearly yes. All of the advanced economies have had enough space to do massive amounts of increase spending tax cuts of a scale that has not been seen since World War Two. They've done that with interest rates that today are lower than where they were in two thousand nine. In fact today we're borrowing at negative real rates to finance that fiscal response not the positive real rates. We had them a second concern. Was that we wouldn't have monetary policy and yes. Monetary policy has been constrained because we came into this with lower interest rates. But we learned a lot about how to conduct monetary policy in fighting the last crisis and the Fed was very quick. As was the other central banks around the world. Been Very quick to move to that novel. Set of tools sometimes called quantitative easing that have greatly expanded their balance sheets an ASA result. We haven't seen interest rate spreads a measure of risk in markets rise. Anything like they did in the last crisis and in fact some key interest rates like the interest rates on mortgages have actually come down finally and perhaps most importantly is the banking system. Banks are like the nerve system of an economy. If they start to fail you don't get lending and people's money becomes unsafe and history says that takes about a decade to recover from we put in place much stricter rules on bank capital in the wake of the last crisis and so banks went into this crisis holding larger buffers about fifty about twice as high by one measure fifty percent by another regulators had been doing stress tests regularly to understand. Just what a nightmare scenario would look like for the banking system and so they basically looked at and prepared for a scenario along the lines of what we're seeing now Jason Furman. I'm very sorry but your time is up and now that you have heard Jason's argument for the resolution let's go to our second debater. Who will be arguing against again? The resolution being the global financial system was better prepared for the pandemic than we were in two thousand and eight here to make opening statements Jillian editor at large at the Financial Times. Us what. I'd like to start by saluting. The incredible things policymakers have done in the last few weeks. Which has Jason pointed out a truly phenomenal and in many ways very brave. So well done but and that's way the but we have to ask. Why did policy-makers need to take these extraordinarily extreme measures? It was partly because of the severity of the economic shock but it was also because of something else. We have not learned all the right lessons from the financial crisis or cleaned up the system to put it on a safer footing ahead of the next one. I eat this one what I mean by that. Well let's think about some of the things that caused loft financial crisis debt. You'd think if you've had a debt fueled financial crisis you would then go. `Bout on trying cut debt. Think again in the last decade debt other a portion of global. Gdp has gone from two hundred and eighty percent to three hundred twenty percent. And it's likely to go even higher as a result of the current crisis in fat people. Saying if you go to three hundred and sixty percent so we have way too much debt and that has made the financial system a lot more fragile secondly charlotte banking. The last crisis. Had A big problem in the shadow banking sector. So you'd think that for this crisis they would've actually cleaned up shadow banking sector in the last decade wrong this time round the shadow banking sectors got even bigger and we've already seen the brutal impact of that through things like hedge funds in your way too much leverage in the treasury's market greeting the very nasty. Mike market gyrations in March that regulators had to step in and deal with complexity. You'd think off. The last crisis caused by way too much complexity they would come in and simplify the system and insured. We actually understood how all the new flashy financial innovations actually worked. How they on that no this time round. We not only have a whole bunch of new complex financial innovations which are not well understood. We also have the fact. That electronic trading has taken over the markets to a degree that most regulators and certainly investors and politicians do not understand. What the Rogo traders are doing and that makes markets Jarrett even more dramatically and last not lease contagion. Contagion means that we have a half a world. Where policymakers coordinate really closely now. The good news central bank governors are coordinating closely and as incredible collaboration there but the rest of the G. Twenty the get about it. We've seen an incredible lack of leadership of coordination. So you take those things together and I would argue that. The financial system was less well prepared than it could have been. It should have been and frankly given what we knew about the two eight crisis. It was in many ways. Let well prepared as a system than before. Two thousand eight and lost not lease as two more points. Firstly Jason's said that had been as fantastic stress tests in the system. And that's actually true again. I salute the regulators and people. I came who've pushed the stress tests the problem missile that they've only stress test for the loved war. I e what would happen with the mortgage crisis? What would happen the recession? They weren't looking at things like pandemics. Oh trying to get imaginative about thinking about what could come next and the worst primaeval the thing that really upsets me about the current situation is that because it's been so much debt because interest rates being so rotten Watson Bo. So many people in the system including many mom and pop investors had taken some crazy risks in the search for yield and that's system even more factor when we return. We will hear the debates go head to head. They'll also be taking questions from the audience. I'm John Donvan. This is intelligence squared. Us and we'll be right back. Hey listeners is another show. We think that you might enjoy. It is called the Ted interview and toasted by our friend. Chris Anderson who is the head of Ted? You can listen for ideas on how to work. Through this uncertain time with a sense of responsibility and compassion and even wisdom you'll hear from Hedge Fund share and Philanthropist Ray Dallaglio on what corona virus means for the global economy from author. Preah Parker on how to create meaningful connections while we're all separated and a lot more than that for more dives into what great minds are thinking. Check out the Ted Interview. Wherever you listen. This is intelligence squared us. Now let's get to round two of our debate to go back to the arguments that we heard. The resolution being the global financial system was better prepared for the pandemic than two thousand eight. We've heard both debaters assert that we're in a terrible situation as Jason put it. We're facing a massive human tragedy. We're facing a massive economic tragedy but he argues it on the resolution looking specifically at whether the global financial system is in better shape now than it was in two thousand and eight to handle a situation like this. He says indubitably so because of the reforms put in place because of the development of novel tools he concedes that interest rates are so low that there's not much room for the Fed to use that tool but that quantitative easing as part of the solution. He'd says that the banks are much better capitalized than they were last time around. And that bottom line if we were going through this corona virus thing before two thousand and eight we would be in much worse situation even than we are now and the global financial system would not be holding up as well as it is as he says right now among all of the industries that are in trouble. This is the one where the other shoe has not dropped. Gillian tests has countered that argument. First of all by congratulating the Innovation of financial institutions around world and. Trying to deal with the situation taking notice specially of the use of the quantitative easing tool that. Jason was referring to. But she's saying that the the fact that this tool has be used and use to such an enormous degree Resulting an increase in such itself as an indication that we're actually not better off that we don't really know what's going on for two reasons and that is that a large part of the global financial system is beyond the reach of regulators. I think he said something. In the neighborhood of seventy five percent of the global financial system is not just banking but beyond an unregulated. And all that so much has now done by algorithms and by computers that we really don't even know how well we're doing so that she she would challenge the very idea that we could assert. Were better off so I wanNA take that point to Jason. That Jillian made that because computers are so involved in making the split second trading decisions etc that. We're not really sure where we stand on this. I mean I all. We had an awful lot of algorithms trading a decade ago but more importantly. Why has the Stock Market Down? It's gone down because the present discounted value of corporate earnings have gone down because people are expecting a prolonged economic problem. The broad change in the stock market from February through now is roughly consistent with what you'd expect given that certain industries like airlines hit hard other industries hit less hard and and the like And so it. Broadly looks to me. Like are roughly rational response and it's rational response to a massive massive massive economic shock the largest in the century and nothing can insulate us and insulate markets against a shock. That big Jillian. What's your response to Jason's point that that he sees no sign that the algorithms are doing particularly irrational unpredictable. Things that They're reflecting a rough economic situation. Jason's can be incorrect. They're very good. Fundamental reasons for why markets have collapsed by twenty five thirty percent because guess what the Economic Outlook looks a lot worse. But here's a real issue. You've had this incredible amount of volatility and crazy gyrations much of which is usually the fact that the rise of electronic trading and Rober trading has changed the liquidity provision r. e. How easy. It is to actually try to not. I'm what's worse than that? Is that although you have ultrasophisticated hedge funds who understand what's going on or you hope they understand it. You can bet your dorm Bala that the vast majority returned buses have absolutely no idea. I no hope of understanding what the robots are up to. So if you WANNA create a system where essentially why does the Saudi buys into the stock market and capitalism? You need to have some sense. They understand it raw than seeing. Etf prices will stop prices. Go up by five percent one day down by the next etc etc. So for that reason. It's a very pernicious situation so Jason. There's a question what were regulators doing by allowing reach to stay so long and doesn't that in itself constitute an enormous risk to the system that does not reflect the sense that we're better off than in two thousand after two thousand eight. The main goal of policy prior to the crisis was to have low unemployment and stable inflation and policy makers were quite good on employment. It was quite low. Inflation was still below target. Not Above it. So I don't think monetary policy was too accommodative before this and I think you risk getting overly focused on their gyrations and markets. A lot of which by the way are a month a month and a half in the past and that we're not seeing on a continual basis now because the fed rather than having to invent brand new tools could take out the same tools that invented a decade ago and keep interest rates for treasuries for mortgages for corporate debt in a relatively unstable place. So yes if you look at certain technical features of markets especially in March you'll see all sorts of gyrations you step back and look at the big picture rates remarkably low and stable financial system remarkably stable of course the equity market is. We both agree as down. That reflects an underlying worse reality but the place where regulators can affect things. Credit markets have behave. Broadly speaking Quite well can lie. Mind finishes aspects. What's happened the last decade or twelve years is that ultra low interest rates and quantitative easing. Were initially introduced as a short-term supposedly temporary measure which has become guess what completely permanent and that's had two or three impacts one of them is and it's made it very hard to distinguish good companies from bad in the sense of everyone's being propped up. You have essentially Zombie Markings on companies. Secondly though you have a situation where lots and lots of investors including most pension fund managers a mom and pop investors all the people who we kinda count onto essentially manage our money for the future they have been taking crazy risk increasingly crazy risks because interest rates being so low they'd been forced to look for returns and all kinds of different places and the entire system has slid into a situation where is essentially structurally addicted to know rates before two thousand and H. You had a financial system addicted to private sector debt A bit like somebody being addicted to heroin and then you're the crisis and the central bank stepped in and they win the system of the private sector debt the financial heroin or they rather atoned for the sudden disappearance of that by providing morphine in the form of central bank quantitative easing. That's essentially what it is and what you've seen in the last couple of months is essentially doubling down on that because when corporate bond prices for example started to collapse which means that the cost of borrowing company started to go up central bank do it stepped in and said it would buy corporate bonds and essentially support the market. So essentially. You've had a situation where you've come out of a crisis even more addicted to morphine as are the big question which hangs over the entire system which nobody has not to at the moment is what will happen. That supply of Morphine Central. Bank support ever dries up Jason. Do So jillions this point a couple of times that the fact that we had to see central banks scrambling through March and into April in itself like really scrambling massively unprecedented kind of responses in itself suggest that we're not better off that these are that it's the equivalent of coming up with a new way to put out a fire because the old way didn't work. I just want to get your response to that kind of Bar. That she's setting. The unemployment rate today might be higher than the unemployment rate was in the Great Depression. The economy has never ever ever had the type of negative growth rates that we're going to see in the second quarter of this year. Of course the Fed had to do a huge amount. The people like Jillian who were arguing that this was morphine and addictive and a problem. We're making the argument that what happens if we get into a crisis. We won't have any tools left. We won't be able to do any more of this. We won't be able to respond. I'm not saying Jillian was making all this arguments but a lot of people were saying you know because of everything. The Fed is doing when we get into a real crisis. They won't have any room left to respond. Well they have proven that completely wrong. They have had room to respond and they have responded very effectively taking something that in some ways even worse than the Great Depression so far and made it. So you'd barely even notice what was going on in credit markets. If you weren't watching obsessively Jason I take a point but the reality is instead of peace today or modern peace at extraordinary cost for the future. Because it's come in it's provided off cheap credit or this cheap money which essentially propping up companies which may yet bostitch case. Somebody's GONNA have to pay the price of that and take take losses. There is essentially meant that anyone. Who's a saver? Can't get any return going forward because we've rights ultra-low almost indefinitely. They won't be the normal kind of returns that so many save depend on and it's also doing all this at the potential cost of threatening central banks own credibility because where we are heading now is essentially about the central bank buying government debt directly underwriting operations of the government quite directly and that is something which could end up essentially leaving bank simply as a tool of the government and if at any point people start to doubt the ability of America all the government to pay back that doubt doubt the ability that central banks actually independent enough to keep inflation low. Then you start to see a real financial crisis where people flee the treasury bond market the government interest rates go spiralling up the currency collapses. Any other really nasty mess. That is not theoretical. We've seen that story play out. In other emerging markets. We've not seen happening in America because people trust America right now but where we're heading with. This kind of combination of extreme measures could potentially be towards that kind of picture some way down the road. So so Jason what I hear from Jillian as a framing that somewhat a little bit different from yours. You're seeing so far. The system has held up and Jillian is saying so. Far Isn't enough of an answer. Because this is an unfolding situation and that the seeds are sown for financial global system disaster or breakdown or seize up that. We're we're so not out of this that you shouldn't be calling this better than two thousand eight first of all. Are you asking me? Is the system going to be perfect for the next several years? I'm certainly not going to argue that. If we are in the same economic position we are right now for the next year. We're going to have lots of problems in our financial system. I think that we're in better shape though because we came into this with low unemployment with a somewhat higher inflation rate and had the Central Bank. Not Been doing what it was doing. Over the last decade we would have had economic problems even before. This shock hit us all right. I'd like to move onto some audience questions and We reached out to some of our most engaged audience members and boy. Did they have questions? So we're going to get to them in just a second. But first I wanted to go to a special questionnaire. And that's our our chairman of intelligence squared Robert Rosencrantz who argued as I said earlier in a debate in two thousand and nine thousand nine hundred on whether ten years after the financial crisis. We were better prepared or not. He argued against the resolution at that point. But Bob Welcome to our first Virtual debate pie. John It's a real pleasure to be here in our previous this debate I ORJI. Financial System was less prepared to deal with the crisis that it was back in two thousand and eight and I've actually changed my mind about. Don't change my mind. Is that the principal argument or at least one of the principal arguments that I advanced was the notion that governments are simply going to be less capable of reacting to a crisis I felt that the Executive of the US government was less well staff than it was then. I felt that Congress would have more paralyzed by partisanship. That was done. I felt that. Us Global leadership was substantially diminished. And therefore be very hard to coordinate a global response to a global economic show and I have to admit I've been pleasantly surprised on all of those fronts The government has stepped up with a huge stimulus package some two trillion dollars of free all manner of rescue for vulnerable segments of the economy. The Fed has expanded its balance shoot enormously and there has been a degree of international coordination not conscious at least the major economies of the world of all converged on very similar policies of Very accommodative monetary policy central bags driving interest rates around the world zero making abundant capital available to to keep the market surge liquid. All of that has happened at a time. Pace and a magnitude the far exceeds we saw in await online. So I really feel like the global governmental responsiveness has been far better than I would have done. This question for Jillian Tat. So you've positive that one of the big risk factors in today's world is the amount of debt outstanding. Us government data's now close to one hundred percent of GM pay will be well over one hundred percent of gem As the next year plays out but Japan for example has government jet debt of around two hundred fifty percent of GNP and is is pretty steadily been able to increase GNP on a per capita basis for decades. Now so where is? The evidence of current levels of debt are indeed dangerous. Well we need a likely to be many years. All low affect growth of result of the debt budget and I would suspect that they were supposed to the authority. The time will be what people cool financial repression. That's essentially a concept by people like Tom and Reinhard. The dog is the most effective way to reduce that which was used off world. War Two is engineers situation weapon. Many many years interest rate I had how the low inflation And that essentially means that anyone holding on ends up in much and helping them to pay down the debt so you can do that thoughts. It takes a long time and the reason why Japan female to whether it's high budget and on the thought that it has not being sticky vibrant is because it has a really strong sense of social cohesion and shed pain if we look at the western thoughts on me. I'd say move into world with is absolutely astonishing levels of that we've seen in World War Two. Do they have the social cohesion to actually engineer? A smooth reduction in debt over time all we can have dramatic financial duration. Are we gonNA have fish explosions or even quick debt Julian defaults? None of those lost the cancer that Osgood for the financial system old as it happened. So they could make what. What's your take on the Jason? The jillions arguing that Japan had advantages in being able to bring the debt back down that we GD GNP relative to Indian population that we don't have and therein and again like the disaster in the kind of responses that are happening right now. What's your response to that? Yeah I think the fiscal crisis and the debt crisis is the single most predicted economic crisis. We've had it's been predicted over and over and over again and a lot of the people predicting it said you know. If we have a crisis we won't be able to borrow to get out of it. Well look where interest rates are right. Now Look at our ability to borrow to deal with this. It's quite large so I think people have massively overstated. The evidence for the impact of debt in causing crises massively overstated the evidence for it being a large negative for economic growth. That evidence is barely there. There's no evidence for threshold that you cross over and all of a sudden it becomes a problem. There's a little bit of a contradiction in the argument. Jillian is making because if we had had less of this debt that interest rates would have been even lower. So I think you can't simultaneously condemn the Fed and other central banks for low interest rates and have a policy prescription whose main effect would be that. Interest rates would be a lot lower. I'm John Donvan and this is intelligence squared. Us More questions when we return. It's time to take questions from our audience starting with one sent in by journalist Alison Schrager. Hi Allison my question is for the four side. The financial system was so well prepared. Why does the Corporate Bond Market needs so much liquidity now from the Fed because the United States and the global economy is going through the worst thing? It's gone through in a century and that's what you have central banks for central banks and the lenders of last resort. Governments are the borrowers of last resort. When no one knows how deep this is going to go how long this can last. Even if you had superb credit going into this. It's going to be a bit harder for you to borrow. And so that's why we have lenders of last resort there there for floods. There is a massive flood right now. They're doing what they do in that flood and it's working all right. We have a question now from Caitlyn in Vermont and Caitlyn says it seems. We are more politically polarized than we were in. Two Thousand and eight and the US is not taking global leadership position given the rise of populist economic policies and America I. Can we really say that we were better prepared in twenty twenty for corona virus and? Jillian that that goes to a point that you were beginning to develop in your opening arguments. What I'd like you to take that question on. I wonder this that you get out to the like day. You're GonNa have very harsh quite a bit about how you pay and you can either collectively decide how the pain in the galaxy way short for buying or you can simply fourth week people to take the pain all you revolution for you know wealthy to the pain But it does concern me. That America doesn't have Tarpley a mechanism pool smoothly and fairly spreading pain. That will get buying. It's GonNa be a question that's GonNa hold America for many many years because it's not just about who's going to cope with the potential loss of economic activity today. It's what's GonNa Happen in five years time when people are starting to try and pay down the debt and Jason. Ona TAKE THAT QUESTION. Also to you and also add this layer to it The American first message also is very very likely alienating has been alienating to our traditional allies and even financially important rivals like China and a situation like this where you where you WanNa have some sort of global cooperation. Are we in an era where where we are better off to make the finance global financial system work in a cooperative way? That we in two thousand and eight. Yeah I think the answer to that is is mixed. Frankly in some respects. Were better off. The IMF had two hundred fifty billion dollars of capacity for lending back then now it has one trillion dollars of capacity for lending the one trillion by the way is not enough. I think they're going to get two and a half trillion dollars of requests now. Obviously the United States is not working very cooperatively with the WHO and therein organization. That's more important not just for health but ultimately for the economy as well than the IMF and political polarization has affected the way people even read the facts on the extent of the virus. Dangerous if it's spreading And how it should be responded to so I think political polarization has gotten in the way of our response on the economic side. Not so badly that we didn't move more quickly than we ever have in history to do something larger than we've ever done in history to deal with the economic crisis which was the care. Act The fed I think has been outstandingly professional but certainly I wish we had. You know a more competent. And less polarized and more globally oriented political system. Right now I want to go to one more question and this one comes from Rick in New York and at actually goes to what we've been talking about and rick basically as saying people are saying this is not a time to be worried about deficits our government can just print the money it needs and rick asks when do deficits matter if you call this way. Investors Biotech called. Bully them into doing say whether they go to taught him what they think that you'll country from the truck back to then money and but also what the adults are just off and in the case of that right now it has on having noseda concept and he believes keep putting money and have the fish that although he thinks fast in America they look pretty rubbish everywhere right now. The going forth though is will domestic Beth keep fine backing debt eighth. You end up the situation. Actual question swore Sensu people try and top them by having negative real rate When other countries keep by politics down two point one two or other alternatives say at home then? Chaigneau other costs more traffic? We get. But that's the point. When DEFICIT WITHOUT NAFTA I mean people keep moving the yardstick and predicting just around the corner. Interest rates are going to shoot up and all sorts of problems are going to happen and that keeps not materializing. I think that in part is because what Jillian said is if all countries dead is going up you know who you're gonNA. Who ARE YOU GONNA turn to sets. Are you going to buy and ultimately? What matters for fiscal sustainability? Is that you have an economy to repay that debt and if you don't undertake that de because right now there's a huge liquidity crunch because of a huge economic crisis and if you're not undertaking borrowing to deal with that liquidity crunch you're not. GonNa have an economy left and that's the biggest problem. You could have with fiscal sustainability all right. That concludes round two of our intelligence squared. Us debates so round three closing statements by each debater intern. And we'll start with you. Jason Furman thank you so much. There's all sorts of ways that we were not prepared for this all sorts of ways that we did not respond. Well to what's happened. Almost all of those are on the health side with preparing for a pandemic with having tests ready with doing earlier lockdowns. The part of our system has functioned. Well has been central banks around the world. The fiscal policy of taxes and spending hasn't been perfect. But it's been quite good. Governments had a set of tools that they knew how to use from the last crisis and this time they rolled them out much faster than they did last time at a much scale than they did last time and as a result while we still have a lot of economic damage and I expect us to they have been able to keep it contained because it hasn't blown up the financial system. Also that'll take a lot of things. Jillian pointed to a lot of extraordinary actions that the central bank has taken. You are going to take extraordinary actions in the face of extraordinary almost unprecedented economic crisis. And I'm glad that the global financial system was better prepared to deal with this crisis than we were twelve years ago. Thank you Jason. Furman former chairman of the Council of economic advisors now to make her closing statement against the resolution editor at large at the Financial Times. Us Jillian. I would argue that if he wants to have. What's happening today? Think about that infamous. Maginot lied over fences at the French built after World War. One to trump then a judgment bathing using what happened last time round. We have various right now and in some ways even worse because essentially the authorities have already used up a lot of ammunition seemingly quite need the recent years by keeping interest rates Oprah low and by lacking debts racket up too dramatic levels even in the so-called peacetime even in a big at the same time though they were so busy preparing for the law crisis that they miss some of the problems like they come this time round not just by not focusing on the pandemic but say being so obsessed with mortgage securities. But they fail to see what was happening in the corporates and leverage loan world. So we're now the situation where essentially the central banks are having to double down to storage agree to step into the market to especially many of the markets the point where they are increasingly not necessarily functioning like be markets anymore and without a exit plan in place. I'm seriously concerned about the future. So that's the kind of country seen in the last month put end up being simply a foretaste of what is coming. You can't have medicine be worse than the actual problem is trying to solve. I like the way wave. Medicine shows the system was not helping thought with and is going to make it in the future again. Thank you Jason and Jillian and that concludes round three of our intelligence squared US debate the argumentation is over the arguing over. And now we are asking. You are at home audience to cast your vote to tell us where you stand after hearing both sides arguments that you can one more time go to IQ to us dot org forward slash vote Iq the number two dot org so the debate is over. This debate is over but the financial crisis the global crisis the economic crisis that health crisis certainly is not an as long as we have the two of you who are experts in the global financial system Surely there are places where we think you agree. We heard some of it and we just WANNA open ended up. Finish up this part of the conversation with a little more free form conversation. It's not competitive just to see what your thinking is going on in the in the economy so Jillian you recently wrote a piece in the Financial Times and the title was. How much should it cost to contain a pandemic? Let's start there what. What was the premise of that article? Based try and highlight very interesting. Research Come Out in New Zealand. Where one economists had debt publish? What he thinks is a reasonable amount of spending to contain the condemning butter tip to the number of potential death. He did that by taking the nineteen eighteen pandemic and mocking the president. The was interesting if that's a conversation that very few governments have be willing to have in public for understandable reasons. Because it's very distasteful but actually come out of the best peak if you like and hopefully we all come out the first peak I think about second peaks or returns of the pandemic. It's a question that's going to become increasingly serious. Because unfortunately the cradle between muscle amounts of spending and economic shocks buses. My say if some things that if not just difficult to make but it also picks different generations against each other Jason. I was reading. An interview gave back in early March when things were beginning to unravel in the United States. And somebody asked you what should what should the Fed be doing? What should the the US government be doing and and you basically wrote out a menu of options? Almost all of which they've they've now taken up and you were talking about trillions of dollars even at that time but if we look longer term at at what's happening to the economy right now where were you. Where were you looking to see what the lasting effects of this are going to be? Yeah let me just briefly address. What Jillian said 'cause I completely agree by the way in regulation we all the time. Put a cost on the value of life and we ask this cost. Were that cost not worth it and you need to do that when you have a limited budget when you have constraints. I think so far there actually hasn't been a trade off which is to say steps to help protect lives also will help the economy. China did a more complete shutdown in. Its first quarter than we have done. They had a bigger hit to their economic growth. And I think they're going to have stronger growth in the rest of the year precisely because they shut down their economy to a greater degree. So I think there's sometimes where there's no trade-off between saving lives and saving the economy. That's the place we've been. I think we're heading to a place with a tradeoff in terms of your question. John the thing that is the hardest is to keep a supply side of the economy together. You could make sure people have demand you can write them checks. You can give them unemployment insurance. You can keep the financial system together by using the feds and central banks lender of last resort function. But if somebody gets fired from their job takes awhile to be rehired if they have to be rehired in a different sector than it takes even longer and so of the people who've lost their jobs. How many were furloughed and get called back versus. How many were fired and have to go find a new job? No businesses. How many are temporarily dormant and spring back versus go bankrupt and get liquidated on those are the things that will determine how long and painful the economic slog out of this is sort of the same question to you. What do you see as the the long term impacts of the pandemic if it stopped today and we know that it won't but have long term impacts already been made and if it does go on if we have a slow slow return to More business as usual or if we have a second wave what you see is the long term impacts what could be fatally broken or potentially broken or or need to be have to be remade entirely. What if pandemic has shown is that we are all linked in a global chain of humanity adequate nor the weakest link and it breaks week. No suffer I very much hope that this is going to create a world of greater awareness of our connectivity and I hope that out of a renewed appreciation the need to think about the more vulnerable in society to think about trying to build more sustainable growth to recognizing that science matters to recognize that sometimes people have to had short term sacrifice and accept pain to avoid long time breath that my hope. I fear that what we may be heading for world. Where is also the more constrained whether it'd be more bitter fights how to divide up that pie? If it shrinks where you make it more intergenerational conflict and where the issue of rising debt and slowing growth is going to make all of those choices much harder and the other thing is that if someone who trained rich natural theology before becoming a journalist. People's time horizons have to cumbrae shortened people's geographical vision. Oddly enough have to come very much looking We're living moving towards greater localization vision not globalization and defense offers aces insecurity. I suspect that will not go away anytime soon. So the psychological aspect is going to be very difficult and that could definitely weigh on the economy and growth as well Jason to wrap this up I like the framing that Jillian on this of her hopes and fears. What are your hopes and fears and give us the fears? I so we can end on a hope. I mean the worst three years are that cove nineteen stays with us just a possibility that this is the beginning of more of these diseases emerging which is a possibility and that it encourages bioterrorism. And that's a possibility in terms of the hopes. I hope that we figure out a way to handle this on the health side therapeutic vaccine and the like the faster that happens the more we can contain the damage. I hope we come together in a global manner going forward to deal with infectious diseases but so many of the problems that we face that really do cross borders and don't lend themselves to a national solution and I hope people understand the government for whatever frustrations and bumps in the road along the way played a central role in saving millions of lives and in protecting the economy from something much worse and believe in its efficacy and importance going forward and now it's time to declare a winner remember. It's the side that pulls over the most votes between the first and the second vote that is named our winner we had to vote on this resolution. The global financial system was better prepared for the pandemic than two thousand eight. Let's look at the results before the debate in polling our online audience forty-three percent were four. It thirty one percent were against twenty. Six percent were undecided. So the debater for the resolution. Jason Firm in the first vote was forty three percent. Let's look at the second vote. His second vote he got fifty percent. He pulled up seven points which is now the number to beat. Let's see how Jillian Tech did against the resolution? Her first vote was thirty. One percent her second vote was forty percent she pulled up nine percentage points and that is enough to win Jillian Tet arguing against the resolution has one hour debate. Congratulations to her. And thank you. Also to Jason and thank you for joining us remember the online vote continues at Iq to us dot org so cast your second vote now. This debate was recorded on April. Twenty nine th twenty twenty at home. Intelligence squared is funded by listeners. Like you and by the Rosencrantz Foundation. Also at home. The intelligence squared. Us team Klay Connor. Our CEO Amy Craft is chief of Staff Shale Mara is director of editorial conor Kirkman. Creative Marketing Strategist Jennifer. Zilmer is senior researcher. Mary Dewey and Rob Christiansen our our radio producers. Robert Rosencrantz is our chairman. And I'm your host. John Donvan thank you so much for joining us.

Jillian Jillian Jason Firm Jason Fed Us Jason Furman pandemic John Donvan chairman Financial Times America China pain
Ten Years After the Global Financial Crisis, Is the System Safer?

Intelligence Squared U.S. Debates

52:09 min | 2 years ago

Ten Years After the Global Financial Crisis, Is the System Safer?

"From intelligence squared US. I'm John van before this particular debate. I sat on stage with Gideon rose at eter of foreign affairs. Our partner for this debate on the global financial system and getting an I chatted about this relationship between us and his magazine while we love intelligence squared, and we couldn't think of a better partnership because essentially the best way to think of foreign affairs is as the home version of intelligence squared. It's something you can play by yourself or with friends and family. It's easy. You basically take a policy question that you care about right down your answer, read, your copy of foreign affairs. And then check your answer and vote again, that's how you play at home. What we offer an FA is essentially, very smart serious people honestly, trying to provide constructive answers to important and interesting practical questions and have the kind of debate that should be had in a democracy over important public issues. That's what you do as well. Does that? Just that one wants to read foreign affairs with a willingness to change one's mind. All of our authors are smarter than the editorial staff, and they take very different positions on all the major issues. And so it's a constant education for us. And we hope it is for our readers as well. Our job is to translate the smart people in our pages to translate their words and ideas into ones that everybody can understand just moment on tonight's resolution. We're looking back ten years. Normally we look at the present. We are actually looking at the future. But we're using the ten year old benchmark as our metric in a sense. But why does that topic interest? You particularly well because these days, obviously, not just our domestic and international events related, but security and economics fears are related and a global financial crisis and the turbulence that we saw a decade ago has been an extraordinarily significant factor in weakening, the Liberal International order affecting world politics in various ways, hurting, lots of people and the question of whether we have responded, successfully whether we have made. The system better is something we've been covering in the pages of barn affairs. We're delighted to be partners in a debate by really serious people trying to assess whether the measures that have been taken have been enough or not thanks very much Gideon rose editor of foreign affairs, our partner for this debate. Remember that brink that cliff that we all nearly went over it was called the global financial crisis. The year was two thousand and eight and certainly many many many individuals were hurt by it. The thing that people were predicting and fearing the total meltdown of the global financial system that never came to pass thanks to huge bailouts and also just plain luck after which of course, we pledged to take measures to make sure that we would never come that close to total meltdown again. And in fact, we haven't and why is that is that because we did figure out what sorts of safeguards we need. Are we in fact safer or are we still basically running unluck? Well, we think that has the making. Of debate. So let's have it. I'm John donvan. This is intelligence squared US. We are on the stage at the Cape playhouse in New York City with four eminently qualified debaters who will argue for and against as always our debate will go in three rounds. And if all goes, well, civil discourse will also win. Let's meet our debaters our resolution is this ten years after the global financial crisis. The system is safer here to argue for the resolution. Please welcome Jason Furman. Jason welcome back to intelligence squared. You spent eight years as a top economic adviser to the Obama administration you now at the Harvard Kennedy School, you're also a senior fellow at the Peterson institute for international economics. You have debated with us a few times before. And in fact, you have never lost a debate. So what's your strategy? I try to pick great partners. And that brings us to our next debater the scurry. Neil. In addition to having just been paid the highest compliment, you our president and the CEO of the Federal Reserve Bank of Minneapolis. You were seriously a player in some of the issues, we're going to be discussing tonight, the treasury department, you the man in charge of tarp the troubled asset relief program during the two thousand eight financial crisis. But before all of that, you were an engineer who worked on a telescope. How did that happen? I studied engineering in college and started out my career and aerospace engineer loved it ended up going back to business school. And then that that'd be an economics and banking and finance the team arguing for the resolution ten years after the global financial crisis. The system is safer. We have to debaters arguing against it. Please. I welcome. Kenneth rogoff. Ken, welcome all your professor of public policy and economics at Harvard. You were once a chief economist at the International Monetary Fund, your bestselling author of bunch of books one of them quite relevant. It's title this time. It's different what we trying to say with that title. Well, it's supposed to be ironic because this time isn't different when it comes to financial crises. Thanks very much, Ken Rogoff. And speaking about what's different some of you may recognize the fourth debater and the other member of the team arguing against Robert Rosencrantz. We had a debater on her way had transportation. Issues rubber Rosencrantz happens to be in addition to being the chairman of Delphi capital management, chairman of intelligence, squared US foundation. Our chairman his first time on the stage on very short notice, but has a very long career building expertise in the topics that were debating tonight. So it all works out. Bob, welcome to the stage. Honestly, it's probably a lot easier sitting out there than it is up here. Yes, not much nicer much nicer Robert Rosencrantz and the team arguing against the resolution. So onto the debate we begin with round one round one or opening statements by each debater intern. Speaking I four the resolution ten years after the global financial crisis. The system is safer. Here is Neil coach Ghauri president of the Federal Reserve Bank of minneap. Delice Neil Kashkari. Jason, and I have analyzed this across five different dimensions. And on three of those dimensions to system is safer on two of the dimensions. We're going to demonstrate that the system is the same. I mention the big banks. You all remember the crisis? The big banks were at the center of this crisis. But the biggest banks are safer than they were ten years ago. And we should be honest about that. So the single best thing you can do to make a Bank safe is make sure it has enough capital to protect the taxpayers in case. It makes mistake if you take out a loan to buy a house. The Bank is going to make you put a down payment the more money. You put down the stay for your loan is if you put down thirty percent it saved for then if you put down twenty percents well banks have to put down some money on their own investments, and they have about twice as much capital as they had ten years ago. That means they're safer banks. Also, they borrow money when you deposit money in a Bank, the Bank is borrowing your money, and the more of that money that people can pull out very quickly the risk. Gear the Bank. That's how they find themselves. They're funding themselves longer term. So the money cannot simply be pulled out as quickly as it was ten years ago. And then regulators have a lot of additional tools to deal with banks. If they do get into trouble. So to mention number two what about the non banks what about the rest of the financial system? Mortgage backed securities Wall Street takes a bunch of mortgages, they package them together. They slice them up. And then they sell them all around the world that was one of the key risks in the financial crisis that activity is fallen by about seventy five percent securitisation or if you take money market fund that activity the risky money market funds. Seventy five percent lower than it was ten years ago. You probably heard about people getting loans where no money down. They call them ninja loans. No income no job. No asset you get a mortgage. Right. No more. You can't do that anymore. So if you look outside of the banking sector the rest of the financial system is also safer than it was ten years ago. One we do if a crisis actually happened. So I'm gonna. Talk monetary policy. So I'm president of the Federal Reserve Bank in Minneapolis. I've one of the policymakers who set monetary policy for the nation if there's a recession or if there's a crisis typically with the Federal Reserve will do is it will cut interest rates to try to stimulate the economy interest rates are lower today than they were ten years ago that around two and a half percent for the federal funds rate. People will say, well that means the Federal Reserve has less room to cut than it did ten years ago, and that's true. But we have other tools to also stimulate the economy quantitative easing where the Federal Reserve will go out and buy long-term bonds to try to drive down long term interest rates. If there's a recession we wanna make it cheaper for you to go get a mortgage or for a business to go, get alone. One of the things that the fed has now that we didn't have ten years ago. We have a lot more experience using some of these other tools. The fed did it in the crisis. But they weren't sure if it was going to work ten years later, we have a lot more experience on how to use these other tool so overall on monetary policy where. About even overall. The system is safer thinking he'll coach curry the resolution again ten years after the global financial crisis. The system is safer here to make his opening statement against the motion, Robert Rosencrantz, chairman of Delphi capital management, and the intelligence squared US foundation. The system is extremely opaque and very interdependent to riveted 's over the counter derivatives. There are some ten trillion dollars of over the counter derivatives outstanding the total capital the banking system is about one point two trillion. Banks Mark them, according to models, the models that are inconsistent subject to error. The other thing that creates potential for crisis is when everybody in the market wants to act in the same way at the same time. Things have gotten worse in that dimension spread of algorithm trading. There's so much money computer algorithms that have no human intervention another thing that exotic. Bates. This is the role of rating agencies about forty five percent of investment grade. Bond market is now rated triple b one downgrade, and it's junk and all those holders are forced to sell in unison. If you imagine that the financial system is a car at the crest of a hill. It's gotten out of control a lot of accelerators of trouble are at least as much as they were ten years ago, if not more so let's talk about the brakes the potential for reduced interest rates at a two and a half percent level is not very far to cut another potential break fiscal stimulation will we running about a five percent deficit at the peak of economic expansion far less room for fiscal stimulation now than there was a decade ago. Last time the financial crisis featured a very high degree of cooperation internationally, the central banks of the world. And the regulators really did get their act together coordinated a global response. Well, it seems pretty obvious to me that ability to create global coordination as much much lower. Now, China's a much more important factor in the global equation are relationships, they're broken Europe, and the UK or going their separate ways in a chaotic fashion potential for international cooperation is far less than it was the shock absorber. And the system is liquidity the ability of somebody to come into markets where everybody is going in the opposite direction. Banks used to have that role all the regulation that they're so proud of has actually regulated to a very diminished role as market makers, which means that if there's any event that triggers a wave of selling the shock absorbers in the system the liquidity in the. System has been seriously seriously compromised and any event that triggers coordinated action by market participants is more up now than it was then to create a major crisis. The system is not safer. Thank you. Is the global financial system safer than it was ten years ago. More opening statements coming up on intelligence, squared US. Since nineteen twenty two the magazine foreign affairs has been the leading publication for serious discussion of international politics, foreign affairs, subscribers have full access to essays by expert authors such as Elizabeth Warren and Francis Fukuyama and enjoy benefits that include downloadable audio editions curated reading lists and over ninety five years of archives. You can sign up for a discounted subscription. When you go to WWW dot foreign affairs dot com forward slash FA IQ to and enter the promo code FA IQ two at checkout. That's WWW dot foreign affairs dot com slash FAA Q to and enter the promo code F A I Q two. And a reminder of what's going on. We're halfway through the opening round of this intelligence squared US debate. I'm John donvan. We have four debaters two teams of two fighting it out over this resolution ten years after the global financial crisis. The system is safer. You've heard from the first two debaters and now onto the third arguing for the resolution Jason Furman, former chairman of the council of economic advisers under President Obama, Jason Furman. Take something like derivatives. I'm ten years ago. They were the wild west you could invent them. You could customize them you can just do them between any two people. Are there too many of them are they too risky now? Yeah. But they're much more standardized. Most of them have moved to what's called central clearing houses where all of them go through a place, much more transparent. We used to look really carefully at community banks to make sure they had enough capital. Some of the places we didn't used to look at Lehman Brothers. I don't know if any of you remember that it hasn't been around for a bit. But we'd barely examine day. I g and we're looking at all of those places in the financial system. Now, maybe not enough maybe not as much as we should. But now systemically important institutions get designated as such they fall under the Federal Reserve Neil give you three arguments. I want to now talk about two more. The first is international when I was in the White House. Once we. Got through the worst of our part of the crisis. I spent the last six years of the administration losing far more sleep over. What was happening overseas? The zone crisis China, I'm not losing sleep anymore. Mostly that's because I'm not in the White House anymore. Some of that's a little bit better Europe. A lot of the reforms Neil talked about here of happened there. So their banks are also holding more capital Europe, also regulated its banks each country had separate regulation. But now across the euro zone. There is a single supervisor. They've also created the European stability mechanism seven hundred billion euro in addition to Europe, the IMF has more resources than it had going into the crisis and something we used to worry a lot about and we've forgotten entirely as oil the United States is now the world's biggest oil producer, we produce the majority of the oil, we use something like the types of recessions, we had in one thousand nine hundred seventy three nineteen Seventy-nine aren't on anyone's top worry list. United States has a lot more debt than it had a decade ago. I wish we had less debt. I don't think that debt is going to constrain us in fighting. Crisis in some ways. Our fiscal situation is actually improved expected health spending has gone down the deficit in Medicare has gone down. The measure of how serious or fiscal situation is what your interest rates are like an interest rates now are much lower than they were before the crisis financial markets. Expect them to be more likely to fall then to rise, and that will give us a substantial amount of space to do fiscal stimulus. If we need it. Our banking system is safer are nonfinancial system is safer. Our international system is safer monetary and fiscal policy have just about as much room as they had before the crisis. So overall the system as a whole is safer. Thank you. Thank you. And that motion again, ten years after the global financial crisis. The system is safer and here making his opening statement against the motion Kenneth Rogoff economist and professor at Harvard. Kenneth rogoff. When you have financial crises, the next wars usually pretty different than the last were they don't always come from the same place. It's certainly important to prepare for what happened last time. But I think a really critical element of the system is the leadership is when we had the financial crisis most famously Hank Paulson, Ben Bernanke key. Tim guidance are a very strong team, and they had support President Bush, even though he was a conservative and wanted to have tight budgets. Well, except when he cut taxes he said, he wanted tight budgets, but he got up and said, we're going to something like a four hundred fifty billion dollar stimulus Obama later increase that that was very painful, but the point is they had his support we have excellent central banks now, but you need more than that. When you have a financial crisis. You need the support of the president you needed the support of congress tarp which was. Very important part of dealing with natural crisis. That was really something. Congress struggled through. Mario Draghi's the central Bank was famous. You may have heard this in Europe. We will do whatever it takes. And believe me it will be enough. When he said those words, it was considered absolutely watershed in the European financial crisis. I simply don't think that we have a safe pair of hands at the moment, not just at the highest level. But the team I'm sorry to appeal to this. But it's the world that we actually live in even if we had competent technocrats, I'm not sure they'd be lesson to if you go across the pond, the UK's the other big financial system there like committing suicide right now in the UK, and they're not even facing a real problem. I think it's I think it's clear that you know, in general the problems deeper than just the person's it's something having to do with populism. Our ability to do fiscal policy is limited fiscal policy. He's actually not the sterile thing in a textbook, not just whether you cut taxes, do you raise government spending whose taxes what do you spend on? I don't have the impression even in the United States much less than other countries. We're going to do this in a very nuanced way. That's going to work well as far as monetary policy. Goes the tools are very limited. And we have learned something we have learned that a lot of these creative tools. Don't really work. Very well. I do concede that the banking system narrowly defined is safer, but the financial system is not necessarily safer financial system is a hold. It gets gotten bigger. The IMF reports two hundred trillion dollars in debt and using Bob's analogy of a car on a hill. Your brakes may have gotten better, but you're in a much higher hill than you were in terms of our financial system. Interest rates are very low. But what if they're not what if global interest rates? Went up. We are not tuned to deal with that. At the moment. There's so many things that would blow up if you feel safer about anything right now. You're dreaming. Thank you, Ken Rogoff, and that includes around one of this intelligence graduates debate. Now, we move onto round two and round two is where the debaters address one another directly, and they also take questions from me. And from you our live audience here in New York City. Our resolution is ten years after the global financial crisis. The system is safer. We have heard Neil crush Ghauri and Jason Furman. Make the argument that the biggest banks are safer their capital requirements are higher and encouraging and rational that we have learned things as a result of what happened in two thousand eight in the aftermath how to use tools, then they look overseas and they look at Europe. And they say Europe has learned a lot that we have partners who we can work with you know, what they're doing the team arguing against the motion, Robert Rosencrantz and Ken Rogoff. They say it's not just about the banking system. It's one of the most important arguments that there are several other financial markets. Those markets are getting bigger they are essentially black boxes as they have always been computers running the system that lack of human hand on the. Throttle big banks, which are now forbidden from trading for their own accounts. They say that banks are so intertwined that. If one of them goes the rest of them are right for falling down like dominoes. Do you trust those in charge these days, they ask? And finally, they look at China, and they say the China is a much bigger player and is not such a cooperative partner. What if it starts what if that fire starts, do we have the tools to respond to a global financial crisis? So to the team arguing for the resolution because you lead so strongly with the notion that the banking system is safer. Well, they can see that that that's not the whole story. It's much bigger than that. Neil. You spoke first. So if you could take that on if you look at many elements of the financial system outside of the banks, it's also safer derivatives, many derivatives now go through a house where it's not just in the shadows one Bank to another Bank. But they're centrally located. There's a lot of transparency securitization is way down money markets are much safer than they were fifteen years ago. So you're right, there are still risks out there. But if you look at the whole. Financial system outside of the banking sector on most dimensions. It is substantially safer than it was ten or fifteen years ago. Now, we're not arguing that nothing can go wrong on almost every dimension. It is safer Barbara's and Cranston respond. I think what are opponents are addressing is the last war. Well, if the same crisis unfolded again today, we'd be better equipped to deal with it generals are great at fighting the last war. Nobody predicted the financial crisis last time. And I don't think anybody's predicting or can predict what might trigger next time. It could be a political event that could be something in Iran could be something in China. I don't find very satisfying the argument that we're better at fighting the last war still the failure of one big Bank can bring the system down. We haven't really addressed the interdependence of financial institution. Okay. Let me let Jason Furman jump in on that. So would Bob rose. And Chris I'm hearing him saying no matter where the next crisis comes from the tools that were developed at the last time may not be relevant. Yeah. I mean, we've fought hundreds of wars, and this isn't some random little footnote that's been the source of a lot of the financial crises throughout history, and whatever goes wrong anywhere in the system, far banking system has a lot more resources than it had. I feel better about it. No matter what the problem, your your response to their point that the banking system is now a small part of the overall sector is actually no it's still pretty central its central to the financial system, the banks borrow money, very short term, and they lend it long term and that mismatch can create a problem because you got the it's a wonderful life type Bank run. We've reduced the risk of that in the banking system. But you had that throughout the financial system with lots of institutions, borrowing and things like overnight repo Tri party repo they were putting up. Securities that were terrible and junk, and then that all of that collapsed. All of those parts of the financial systems the way we manufacture derivatives all of that. We've changed quite a lot. We don't know where it's coming next. That's why we're looking in a lot more places now than we were decade ago. Ken Rogoff, another example in addition to what Bob setup the next were cyber war. Cybersecurity is just we just don't know what happens as you put constraints on the banking system the stuff flows. Elsewhere interest rates are very low people are looking for rest. Former Federal Reserve chair Janet Yellen commented on this recently coming in light leverage loans, but very risky stuff without a lot of contingencies or collateral. I don't feel as an outsider that we know everything the banks are doing where they're lending to someone who seems safe hedge fund or something. And then they make a really rich. Risky loan. But implicit in some way, it can come back on the financial systems books are banking system has always been at the center of crises, but our banking systems been tracking. And that's one of the reasons the US came out faster. It's less important to our system. Can we weren't even looking before? No, one was looking at Leeman Fannie, and Freddie could borrow as much as they want. Now, we're looking at them, we may not see everything and Fannie, and Freddie can't borrow all they want see one of the challenges. I have with your argument is that you're basically saying this is an unsolvable problem because the next crisis is going to come from somewhere different. So there's nothing you can do about it. We've taken the smart rational actions looking at the history of the world economy where crises have come from in the past made Putin measures. But to just say, well, we don't know an asteroid might hit us. Well, what are we supposed to do with that? As policymakers we have to make decisions based on data and analysis in history and we've made smart decisions based on that. And the system is clearly safer just saying we haven't defended against an asteroid isn't very. Helpful. But Rosengren that's a fair characterization to make the system safer. You need to have banks that stand on their own two feet with the failure of one big institution. But you already conceded that Capitol Hill was capital helps right apple helps. But once an institution fails, it is absolutely as likely that it's going to drag the system down with it as it was ten years ago. I think the main thing that could make the system safer is if you eliminated two ribs over the counter, derivatives simply ban them of responsiveness in there. If you're worried that a Bank will take the whole system down twice as much capital as they used to have. We had no bankruptcy regime for Leman. Also there's rules. If just you're sort of playing vanilla industrial company goes bankrupt does rules if a small Bank goes bankrupt. We had no way at all of handling Leeman. We have one on paper now goes by the name resolution authority written. Out a living will all of them. What they do again. Do. I think it's going to be perfect. Am I sure it's gonna work exactly in a crisis? No. But boy, do I feel better knowing that we have those rules now to handle the bankruptcy of a large complex financial. Do we think they're going to allow a large Bank to go bankrupt? Because they've also made it hard for the fed to do. The more creative things that it did in order to avoid that. I think the market doesn't believe that they'd be allowed to go under. I think the fed just needs to be a little bit more creative than it did last time. And if it does that it can do everything, and I think the markets more realistic about the banks. Now, Ken Rogoff made an argument that he doesn't think that we're in safe hands these days. He didn't mention anybody by name. Our alliances are frayed. Brexit also a mess, which is serious partner last time. If a crisis were to come today, they're arguing that we don't have the cool heads that would be able to handle it no-cash car. You take that argument on people may forget in the middle of the financial crisis. We had a presidential election in two thousand eight Senator McCain, and then Senator Obama that was hardly political 'harmonious time. I mean, I was sitting in the gallery above the house of representatives. When the house voted down tarp the first time members of congress telling us their phones ringing off the hook ninety nine to one saying don't you dare vote for this. Then the Dow Jones industrial average on seven hundred seventy seven points that afternoon and two days later, they voted for it. Our democracy is deeply flawed imperfect. But in moments of crisis, we tend to come together we came together in two thousand eight I believe in the moment of future crisis. American history has shown that we will come together. And do what's necessary on behalf of the American people. That was what I lived. That was my experience in two thousand eight I think that's true today. Jason, I know you're dying. Talk on this. But hold on let the other side of spun Ken Rogoff, and then I'll come to you. Well, I mean, you have to have guidance on what it is you want to do and that comes from the top. Yes, our democracy, maybe strong. But that doesn't mean that will handle it. Well, we're looking not just at the United States. We have to think about the whole world to I feel safer about European banks the market sure doesn't feel safe about Deutsche Bank whose cells at a fraction of its book value if something were to happen with the euro their banks are very vulnerable. You can have a flood and you build your seawall a little higher. But if you have global warming doesn't necessarily mean you you became safer our financial systems gotten much bigger by measures of total debt total financial assets. Jason you wanted to respond to the personality issue. Yeah. I mean, certainly, I don't turn this into a debate for and against the people President Trump has chosen to a point. But the fact that we had such good people last time and had such a terrible crisis. If I had to choose. Between the best people in the world an Ansel system where you weren't watching most of it where banks were under capitalized where there was a huge bubble where you were making terrible loans where households were going deeper and deeper into debt or system where the rules were a lot better. A lot of those indicators were better and the people weren't quite as good. I think I'd choose the system, especially since those people aren't necessarily there forever. And the system has a greater durability to it. So I would rather have the hand we have now. Plus, the UK government has excellent regulators who are completely focused China. It did a huge fiscal stimulus. It suffer from the crisis much less because they've three trillion dollars in reserves huge amount of control over their Rosencrantz. If what you just heard come to your concerns. No. Because I think they're focused very very narrowly on banks. Yes, they've created a regulatory environment where banks are doing less of what banks typically do we want them to make loans to consumers. So that the consumer can continue to support the economy. We want them to make loans to businesses. So that the businesses can grow. We want them to make markets in securities. So that we can have orderly markets in times of both boom and bust. Well, they've said the banks can't do that. Or they can do much less of it. Does that mean that the system is safer? No, those risks those activities are simply migrating. Elsewhere, we have as big a portfolio in the system of loans than we ever had. It's just that the banks don't hold them. But those loans are at record high relationships to corporate earnings they. They are covenant light now. So that the lenders don't even have the same degree of protection, they had a decade ago, all these risks that yes, they may have pushed out of the banking system are still very much a part of the financial system and could fill against us in ways that were less acquit to deal with now than we were a decade. I'm John donne. Ben, this is intelligence squared US. The debate continues with questions from the audience in just a moment. I'm John donvan. This is intelligence squared US, ten years after the global financial crisis is the system safer now. It's time for questions from the audience. I van greenfield. My question is for professor Roga. Now, I remember when interest rates are in short term seventeen or eighteen percent. What would be the impact of interest rates quadrupling from where they are. Now, I think global inflation adjusted interest rates quadrupled, everything would blow up eve at the United States would have a very hard time Hannah that that doesn't extraordinarily unlikely. If they went up one and a half percent Italy could blow up that's the mother of all risks out in the system, we've had them trending down. That's it's likely they'll go down as up frankly giant financial crisis. Do not happen. Every three years of oh, we're doing some things to engineer that but with deregulation. That's happened, by the way deregulation. This. Just about the rules. It's about who's enforcing the rules. And when you appoint regulators outside the Federal Reserve who sort of not enforcing the rules, not very different than the Environmental Protection Agency. You can get problems. I do want to go to a question. But I'd like you to respond by the chickens are guarding the hen house and more or less. They're saying in some situations. Neil. I mean, I haven't seen any evidence that that's true. I traveled around my regional the time. I meet with banks who are always saying that the regulations are too tough. Again, I want to be tougher on him yet. But so far, we're not hearing banks. They're breathing a sigh of relief you can make that assertion. I just don't see any ended up when you're referring to banks or you're referring to non-bank. No, the whole financial system with banks the questions. What are they doing that? You don't know where they're implicitly guaranteeing things outside their system that could come back. Yeah. I mean, I think we now have these rules that if it institution is systemically important if it could bring the whole system down we're allowed to regulate it. That's not something we had before the Obama administration us. Tool quite actively this administration. I think has used it less actively that makes me nervous. But that again, sort of makes our point that we had zero before the crisis. Now, we have this new tool, and we're using it half as well as I'd like us to use it the next administration could use it even more and even the half we're doing now, and the fact that it's on the books is better than if we didn't have that tool of. Okay. Go to another question when it in the back there Jilin crayon. It sounds like you're saying it's less likely that will have a financial crisis given new systems and forms of oversight that have been put into place. What if there is a crisis? Do you feel that the system can affectively deal with this given the curtain ministration and congress and so on thank you for the question. So that does go to the question of can we put out the fire? If the fire starts, I think we have better tools than we had before I'm worried about our political system too. But somehow he managed to do a massive fiscal stimulus last year when we didn't need one. If we really do need one again, I'll bet we can get around to it. You have central banks that communicate with each other across countries and share resources, the IMF has twice the resources. It had to fight a fire Europe has a brand new seven hundred billion euro to fight it. So I think we have more tools to fight a fire now it'll still burn down some houses, but fewer than it did last time down here. My name is Bob young. And my question is with regard to OTC driven moving onto clearing-houses concentrating the risk within those clearing-houses, particularly when you think about cans point around cyber risk. There's a lot of scrutiny in these new clearing-houses from regulators to look at making sure that they have the resources that they need netting these positions against one another. So that they're reducing the exposure that they themselves take do I think it's perfect. No. But are we better off having these clearing-houses with this transparency than we were ten or fifteen years ago when it was the wild wild? West I think unquestionably. We're better off. I'm not satisfied that we're done. But I feel very confident we made progress in terms of cyber when I look at Tiber. It's an arms race the bad guys are investing in new technology every day. So we're the good guys. My best segment is we're still roughly neutral, the bad guys have made progress to good guys have made progress. The arms race is about where it was ten years ago, though, the tools would probably different for the team arguing against assess where the cyber threat figures into your argument, the risks of cyber war with the financial system being the center of Ed Russia, North Korea ran China being players that the US intelligence worries about a lot. This is this is actually going on all the time behind the scenes suppose it paralyzed some Bank and everybody became panic that deposits are going to get a race or pension funds. Get worried about it. I mean, it could set off just a massive panic and not that easy to fix because the fed can say we'll we'll guarantee deposit, but wait a second. We don't see deposit for you anymore and. To that so much money now is in EPF's that operate on autopilot way. And it's true in spades and equity where so much money now is simply indexed and expressed NET apps that are completely on autopilot. And the world has this allusion that everybody owns a liquid instrument. But when these intermediaries try to find quantity to meet redemptions. That's when the system gets in trouble yet they've made the Bank safe for by not allowing the banks to participate in getting us out of Trump now because gar interest month the point about cyber and these different actors, they're these risks that are unknown. And we haven't protected against the unknown. I agree. We have not protected against the unknown. That's why make the joke that it's like an asteroid hitting us. We haven't protected against the asteroid. We have to take action on things that we can see that we can measure and that we can analyze that's all we can do as policymakers and give. The risk that have hit the global financial system in recorded history. We've taken Putin steps to make the system safer. But can we dream up risks that we haven't thought of sure, but I don't know what you do about it. Let's pick one you've missed the ratings agencies. Just haven't been fixed. They were big players, and what happened in the last financial crisis. If you were a consumer it would be like getting your credit score. They said some of these things we're really safe that weren't these complex rube Goldberg type things that the financial sector rated. They still really have not addressed the problem who pays for these ratings. It's the borrowers pay for the ratings. And so okay. So so asteroid case that Ken is presenting to you. I agree. A lot of financial reform advocates had a list ten things. They wanted fixed. We had that derivatives question before about the clearing houses. A lot of people were advocating for derivatives moving to clearing houses for a long time from the public policy community, the financial institutions didn't like it lobbied against. Got it. And after the crisis, we stopped listening to the financial institutions, and we started listening to the experts we made the system a little bit safer ratings agencies. That's something we commissioned a study in Dodd Frank. And the study was done not much was done on. The other is the regulation of insurance is still done at the state level, not the national level, but those are sort of chew out of the ten things that experts wanted to see fix that weren't addressed. But it's the same as it was ten years ago. So that's an example where it's neutral. It was a problem ten or fifteen years ago. It's still a problem today, but we've made progress in other areas so on the whole system is safer, but continued booming growth in the financial sector. So the systems bigger. We are getting a little repetitive on some of that. We have time for maybe one or two more questions. Okay. Let's go back right down front, sir. Brian all the sub you were talking before about the political will if we were to confront any similar size magnitude financial crisis in the future. I think we've already heard Hank Paulson and Ben Bernanke fretting openly that it's unlikely as successful retrospectively as tarp was it would be politically infeasible, given the fact that it gave rise to the tea party and probably President Trump. What's your level of confidence that we would be able to marshal necessary resources? Obviously, it's it's hard to know for sure I read a lot of American history. And when the more American history that I read the more I realized that political dysfunction is actually the norm we've had a lot of political dysfunction in our nation's history. And I'm not just talking about the civil war other times, and our country has a remarkable capacity. When the country's on the line for people coming. Together and putting their country before their own immediate political interests. And a lot of members of congress who voted for the tar paid for with their seats. They didn't get reelected as result of it. And so I do have a lot of confidence that people do come together and put their country first when the stakes this high until this I'd respond to that question of political will, well, I think you've wave made our point bailing out banks or bailing out financial institutions is never politically popular. It may be the smart policy thing to do. But it's never politically popular. And the fact that people who did vote for it last time a lot of them lost their seats talk about what lessons learned well people in congress have learned we don't want to bail out mancial institutions and the feds powers to do that have actually been truncated by Dodd Frank. I think we have less political will to deal with these kind of Christ. And he's we would Eric witness two days before tarp passed tarp couldn't pass the. The market crashed. And that forced to set of action. I think it's really hard to predict congress. I've been watching it for a while and constantly surprises. Me on the isle. I Milo Fallon with more and more countries such as Brazil or Italy major economies falling into populism. How will that affect the global economy and the system I think it makes it harder to respond certainly in the case of the democracies? I it Meyer Neal's contributions and his deep belief and how powerful our country is. But as Winston Churchill fed Americans always do the right thing after they try everything else first. And I think it might be many years of trying everything else. I in this case Neil, the cyber example of that Ken talk about something. We'd never thought of it just hits us North Korea. Hacksaw our banks if North Korea hacked, all of our banks, you think Republicans and Democrats aren't gonna come together to save our system. Of course, they are. And so the more it's one of these asteroid events, the more likely our political system is going to come together and people are gonna rally because it's something none of us at thought of. And that concludes round two of this intelligence squared US debate where our resolution is ten years after the global financial crisis system is safer. Now, we move onto round three round three are closing statements by each debater intern. Speaking I in the closing around for the resolution, Jason Furman, former chairman of the council of economic advisers under President Obama Neil, and I talked about five different areas. Three of them indisputably safer. Two of them. You could argue either side, I think largely neutral or opponents of tried to say, we're just talking about the banking system of all just talking about the banking system is just talking the main source of crises for hundreds of years for all suck at derivatives money market, mutual funds Fannie, and Freddie throughout the financial system. But I want to step back and talk about one thing that goes beyond this five, argh. The great depression. Unemployment rate went to twenty five percent output fell thirty percent. The global financial crisis was bad. It wasn't nearly as bad as that. The unemployment rate went to ten output fell by five percent in part. It's because we made the system safer. We put in place things like deposit insurance. But we also learned a lot. We learned a lot from the great recession. Again, we didn't learn enough. And the next time we get into this. We're going to act more vigorously on fiscal policy. And if the system isn't safe enough, it's because we need more of what we've done not less. If you have a problem with where we are today, you need to identify how to fix it. Every single one of the fixes is. Let's finish the lists that we didn't get to learn the lessons and with all of that. We are definitely safer today. Thank you Jason firm, and that's the resolution ten years after the global financial crises system is safer here to make his closing statement against the resolution Robert Rosencrantz, chairman of Delphi cap. Title management, chairman intelligence, squared US foundation. I don't ask for your vote because I'm the chairman of intelligence square. I don't ask for your vote because I'm an amateur who got into the ring with professionals notice. I think we made a better case that the world has evolved in ways that is more dangerous. There is more money on autopilot in ETF's in index funds. China is a much bigger player in the global system that it was a decade ago. Algorithm. Trading and algorithms put folios strategies is a much bigger force than it was ten years ago. The migration of risky assets away from bags to other places in the system doesn't make the system safer. It makes the system harder to manage. What about the political will or the political ability to respond will that require a high degree of technical expertise, political coordination, and international coordination that just seems to? Be far less likely today than it was ten years ago. Thank you from prince the resolution again, ten years after the global financial crisis. The system is safer here making his closing statement in support of the motion. Neil coach Khari president of the Federal Reserve Bank of Minneapolis. People often ask me, what was the financial crisis? Like for those of us who were there in the middle of it. And the only way I can describe it is felt like we were an economic war. Every second of every day. What motivated us was trying to avert the great depression scenario that Jason talked about twenty five percent unemployment. Imagine your ATM not working. How do we keep the system together? One more day. I was working seven days a week sleeping in my office at went on month after month after month, and I never ever ever wanna face something like that again for my own sake for the country's sake having been through that personally, we are better off today than we were ten years ago for all the reasons that we talked about the banks the non banks the system is just stronger and say. For then it was I wish going into that crisis that we had the tools and the capital and the systems and the structure that we had today, we didn't have it. So we had to use belt suspenders duct tape, everything we could think of to try to get through that crisis. And we got through it. But we're better off today. Thank you very much. Neil cuss Gari, and our final speaker making his closing statement against the resolution here is Kenneth Rogoff economist and professor at Harvard. There is a wonderful book by not at Maadi at Stanford and Martin Hellwig called the bankers new clothes, and they basically make the argument that you should have banks have much more of their own skin in the game and in response to well there's twice as much equity as there used to be a knots response is twice. Nothing is still nothing. There's very little and another analogy, she uses is okay. We used to have trucks loaded with stuff driving at one hundred miles per hour. Now, there's trucks loaded with more stuff and they're only driving at ninety five miles an hour. But it's not a very safe system. I wish I could tell you that you should sleep better at night. I'm afraid we live and this very uncertain world. And I have to come back to the Trump argument. Simply we don't have a safe pair of hands. I wouldn't feel good in any kind of crisis. Thank you can real go. And that concludes closing statements for this Hilton squared US debate. I know have the results of your vote. Our resolution is this ten years after the global financial crisis. The system is safer. Remember, it's the difference between the first and the second vote determines who is our winner on the first twenty nine percent of you agreed with this resolution. Forty nine percent disagreed and twenty two percent undecided. On the second vote the team arguing for the resolution. Their first vote was twenty nine percent. Their second vote was thirty five percent. They picked up six percentage points. That's the number to beat team arguing against the resolution. Their first vote was forty nine percent. The second vote was fifty seven percent. They pulled up eight percentage points. They just nicked out victory on that team arguing against the resolution. Our congratulations to them. Thank you for me. John donvan and intelligence squared US. We'll see next time. As the results were being counted? We kept chatting on stage. And I asked Neil Kush. Cari, president of the Federal Reserve Bank of Minneapolis. Why last year he voted four times against raising interest rates or the big surprise? We've had is we kept thinking where at maximum employment. Everybody who wants to work are they able to find a job, but then month after month all these Americans are coming off the sidelines. I wanna see evidence that we're actually their wage growth picks up. We've really know that okay. We're finally at maximum placement. And then that leads to inflation. So I'm not opposed to rate hikes ever. But I wanna see evidence at the US economy is finally hitting on all cylinders. Everybody's able to find a job who wants to find a job when that happens. It'll be time for me to then go ahead and raise rates. This intelligence squared US. Debate was recorded live at the Cape playhouse theatre in New York City. Robert Rosencrantz is our chairman Liam Matthau is chief content officer Amy craft is director of operations and production shale merit as manager of at a total operations Aaron Dalton and rob Christians and other radio producers Damon Whitmore's, the audio engineer, and I'm your host John Don van. These debates are made possible by generous contributions from listeners like you. And with support from the Rosencrantz foundation Davide Coulter. Robert Epstein the Christopher w Johnson charitable trust alone. Nemeth and Alan quash. The Giorgio or stream junior foundation, Jerry or stream Kelly Posner Gerston Haber, the Mortimer de sac ler foundation, and Jennifer and Felipe solemnity from intelligence squared US. And me, thanks to all of you next week on January thirty first we're going to be live at the Cape playhouse theatre in New York City taking on the resolution don't bring extinct creatures back to life. This debate will include Stewart brand environmentalist and founder of the whole earth catalog who joins with leading geneticist and founder of the personal genome project. Dr George church, George is currently working to revive the woolly mammoth his opponents think that's not such a great idea. They are Dr Ross MacPhee who is curator of the American. Museum of natural history and Evelyn canary biologist. Dr Lynn Rothschild tickets are still available for this one. So visit I q to US dot org to buy yours or text the letters I q and the number two two seven nine seven nine seven nine and you'll get a linked to buy tickets. Panoply.

Obama Neil Federal Reserve Kenneth rogoff United States president Jason Furman Europe China chairman Jason International Monetary Fund Robert Rosencrantz John donvan
Ep. 139  Smart Contracts & Oracles  insights from Chainlink

Insureblocks

53:06 min | 2 months ago

Ep. 139 Smart Contracts & Oracles insights from Chainlink

"The and low. Hello hello and welcome to insure blocks. Your dedicated podcast to blockchain in industries and institutions. All around the world. I'm lead all scoff your host. In this week's podcast. We will discuss smart contracts and oracle's with special insights from chain link. I'm very pleased to welcome. Sergei nazarov co-founder of chain link. Sergei thank you for joining us today. Could you please give us a quick introduction on yourself. sure sure thanks. Thanks for having me. So i've i've been building smart contracts now for over seven years. We've built them together with some of the largest enterprises and in global technology companies out there. We've gained a good amount of experience. About what smart contracts are useful for an how oracles fit into their proper operation were now working predominantly on oracle's and how oracles fit into smart contracts specifically and and how they basically in combination makes something called universally connected smart contracts which are the smart contracts that essentially are able to interact with the real world in meaningful ways that enterprises generally find more useful. So that's what we're what we're focused on a chain link and it's something you know we've been working on for a number of years now something we've seen already make some of the newer more advanced smart contracts popular in the insurance industry and other industries and so so those are the things. I'm focused on. Now great thank you for that introduction so as it is customary here at incheon blocks. Could you please explain to our listeners. What is blockchain. And how does it work sure. So so blockchain's are actually pretty straightforward in tamper-proof data structures that ended up creating an immutable highly reliable record or recording of smart contracts state or contractual agreement between parties. And the way they do that is through the use of cryptography in various cryptographic primitives and a few interesting connections between the various records. Dad are in a blockchain data structure to pass records. And kind of the use of cryptography to prove that the data and the proof within a blockchain is is actually reflective of what happened. And the fact that you have a system of record and system of executing transactions. That's hyper reliable is actually a very unique innovation in the history of contracts and in the history of how people interact with each other because traditionally what you would have is. You would have multiple parties. The parties all the parties in the transaction keeping their version of history and keeping their version of what happened and that basically means to important things it means that that version of history is their version of history. And maybe it's wrong in maybe it's off and maybe can get corrupted or lost or something can be done to manipulated to their benefactor to the detriment of another party in the agreement. And then the other thing. That's that's important is that it's a version of history that they can't easily present as a reliable proof of what happened to other parties whether that's the counterparty or whether that's regulator or whether that's the larger global market and this inability to prove what's happening in a transaction or prove what the underlying value of an asset or prove what happened in an insurance Kind of agreement or insured outcome is what leads to the big big problems in the global financial system in the insurance industry. For example even the two thousand eight financial crisis was really a problem of proving. That's certain assets were in a certain state and at certain people were in a certain state of solvency. And because everybody had their own version of history and no one had a unified single trustworthy version of history. The markets became this located and disconnected from reality. And so hyper reliable. Form of agreement fundamentally would will will need to rely on hyper reliable method of proving that agreement and proving the transaction state to all the parties. And that's the unique and monumental shift that blockchain's as a data structure generally provide. They provide an ability for both the parties in the transaction. And all the other people observing the transaction to have one single hyper reliable form of history that everyone knows his true and therefore nobody even needs to keep their own copy because the hyper reliable shared form of history is so definitive and highly reliable. That's great no. Thank you very much for that definition. So we're here talking about smart contracts article. But i'd like you know for you to give me i quit. Phoenician of what is a smart contract. it's key properties. And how do they differentiate themselves from traditional contracts and digital agreements. Please sure so. A smart contract is a tamper proof digital agreement and once again we find ourselves looking at the a proposition of hyper reliability and reliability so a smart contract is essentially a digital agreement that is represented on a blockchain or executed using the hyper reliable form of computation. That underpins a blockchain. So not not only do you. Now have a data structure where the data about a transaction or the current status of a transaction is hyper reliable but you also have a place where you can have certain logic or certain conditions that get executed as written in all situations right. Soon's instead of relying on the insurance provider or someone else to compute and to decide what happened in a agreement you now have a hyper reliable system outside the control of any of the people in the in the contract and the hyper liability and the separation from all the parties in the contract makes that type of contract hyper useful and hyper reliable. And this is what what smart contracts are really about. So they're they're kind of named in an attractive way but not exactly accurate. They really should be called tamper-proof digital agreements. Because what they do is they take the paradigm of digital agreements which powers the global trade industry the global financial markets the global content markets through ad networks. All of those powered by digital agreements about financial markets are global trade or go content or in many many many more cases now. The insurance industry's relying on digitisation of their agreements in their obligations to their to their policyholders and others and it takes digital agreement dynamic and it evolves it into a hyper reliable digital agreement and once again just a very simple logical idea here. Is that if you were to engage into a contract and all other things being equal. Would you want a more reliable contract with your counterparties or would you want less reliable contract and the simple logical reality just from basic economic theory. Is that everybody wants reliable contracts. Everybody except the people that want to misuse the contract. Everybody who's actually engaging in contract in good faith wants and wants everybody else to want the hyper liability of an agreement that is guaranteed to be executed as written and that's the unique guarantee that smart contracts provide and the digital agreements fundamentally can provide because they're not based on this type of computation that secures blockchain where smart contracts are secured by blockchain based computations. Which gives them that that hyper liability beyond being just a data structure into the realm of actually defining and executing contractual arrangements between between counterparties. Thank you for that. But i wanna challenge you a bit on that. Because we mentioned the cryptographic side the mathematical guarantee but surely trust in a brand She shouldn't that be sufficient. I think trust in a brand is similar to the dynamic that people engage in more traditional industries where a lot of them are heavily relationship base and those relationship based dynamics they have their place until people get a ten x one hundred x better alternative and at a certain point. Those relationship based dynamics once they can be replaced by definitive guarantees. That something will happen the way it's supposed to happen. That is what the relationship actually does right. The relationship and the brand of of an insurance company of a financial institution of various other entities is basically. They are to assure you of solvency of reputation of reputational loss. The contract is is mishandled or or miss misrepresented or not executed properly but at the end of the day would that is about as a mechanism to guarantee reliability brand. It's it's all there to guarantee reliability and this is why the internet in its ability to guarantee reliability as as far as the internet has been able to prove to people that if i engage in a certain transaction i will get what i expect everywhere that the internet is able to prove that to people people abandon relationships and they abandoned brands and they just go towards the quality that they can get at the best price. And that's really what the internet has done. As far as it's been able to reliably guarantee a relationship between a user and the outcomes. They expect from an internet based agreement. So i think where where everything is going is really twofold on on the one hand you have more and more agreements. In the insurance industry in the global trade industries in the financial industry being made available through the internet being made accessible to people through the through internet systems internet interfaces internet based kind of interactions that users feel are reliable enough such that they don't have a need to speak with a person and in many cases they don't need to necessarily even worry about the logo or the brand. I think the next evolution is actually an evolution. Where if brands such as wildcard or or others begin to falter if people start to see that the guarantee of a brand doesn't mean that they are safe and their relationship with a certain type of contractual agreement for example through some global financial issues or some debt cycle issues or some other set of questions that lead people to wonder of their relationship with an insurer. Financial institution is what they thought it was. And i think those types of reckoning are are coming based on the way the global financial system and decks that cycle is evolving then people questioning whether the brand and the reputation of a brand actually guarantees them the outcomes. They think it guarantees them will will only serve to drive them towards the mathematically guaranteed internet based alternatives that give them guarantees not based on conversations with other people but based on firm mathematically guaranteed outcomes and and i think that's the unique thing i think people need to understand that internet based agreements. Even though they use the internet they are providing a guarantee that an entity somewhere will follow through on a on an agreement that's presented and kind of arrived at an agreed on and maintained through internet pipes and internet protocols. But what a smart contract does is a smart contract forces that agreement to function a certain way regardless of the entity that you have made it with so you you are able to abstract away. The risk that an entity won't be solvent or that an entity won't follow through or that an entity somewhere isn't going to fall to follow through on the commitments in the agreement. Such that not only is the agreement now accessible to you through the internet but you can actually verify that the agreement will execute. The wade was promised to you regardless of whatever some entity decides to do and if that's the level of reliability you're now able to achieve from a digital agreement from a tamper proof agreement slash smart contract than the value that a brand presents in creating that same guarantee is deeply deeply lessened because no. I don't fundamentally care about a brand. I care about the reliability that i have in my agreement about a certain category of economic activity and if i can get that in a better format through technology than just like the internet eight up brick and mortar in the very same way more advanced contracts will eat up the contractual relationships. That brands have a certain advantage in right now because their brand allows them to deliver reliability. That advantage thanks to this technology is is already in many cases going away in gone in other cases going to be going away and blow only be accelerated as people see that certain brands might not be a solvent or might not be as reliable as they thought. Exactly exactly know that. That was a very clear explanation. Thank you for that. So we touched on smart contracts on like to touch on. Oracle's what are what role do oracle's play in ensuring that cryptographic guarantee of smart contract had that we've been talking about so like all infrastructure. The blockchain based world's infrastructure is kind of evolving and. I think that's the way to view. The interaction between smart contracts oracle's so smart contracts are the representation of a contractual agreement in a blockchain based data structure. So they're represent their the digital agreement paradigm in a hyper reliable form because they're now operating on a blockchain but in order to achieve that hyper reliability. They're purposefully limited in their interaction with the outside world so the only thing that smart contracts out of the box despite be can do despite being called smart this is where the semantics of smart contracts are a little bit misleading. We're not super clear. Even though they're called smart contracts they cannot actually connect to an external system so the only thing that a smart contract can no is the data. That's within a blockchain based system and the only data that's inherently within a blockchain based system is really two pieces of data. It's the generation existence movement ownership of tokens. That's an out of the box functionality. And then there's private key signatures which are essentially the signing of transaction by a private key by by a key that user or system controls and these are the two main pieces of data that live within blockchain's and these two main pieces of data have now combined in interesting ways in many useful ways to do things like create tokens and this is why the ecosystem. The blockchain ecosystem has so far involved to be about tokens. It's because out of the box. Would you can do with. The blockchain is make a token move it around sign off on its movement somewhere else do a multi signatures so that multiple people can sign in and movement or maybe use it to vote and to represent your decision in certain matters. Now because blockchain's don't have any connection to the outside world which basically means that a blockchain and smart contract cannot connect to an api. It cannot connect a data feet. Because if you were to do that you would break the security of those systems. You would compromise our hyper reliability because the way that you secure blockchain. Basically rely relies on independent miners and those independent miners won't be able to agree on a value. The will be manipulated. And they'll actually have external connectivity to systems that can make them insecure and make the whole system failed so blockchain's are hyper liable. Walled garden for contractual state and for contractual definitions that is completely disconnected from the outside world and would oracles are are the kind of gateway for the outside world oracle's and specifically decentralized oracles are the technology that provides data to smart contracts. What that basically means is that with a functioning oracle you go from having two types of data that a smart contract can be about essentially private keys and tokens to the thousands and millions of different data points in different types of data in the real world. So you basically see a massive expansion in what smart contracts can be written about once you provided proof. If the only thing you can provide proof about is a token movement or a private key signature. Then that's what our industry has really been about for the last. You know for the previous three years before this for years before this and now over the last year. With the appearance of oracle's you're seeing things like decentralized finance decentralized insurance appear because the data the world's data about whether about various events that a smart contract needs to know once that data is available to a smart contract. That's the point that which you can write something about that. Category of outcomes and so oracle's is what we do. We chain link provide the most widely used the centralized oracle mechanism the most widely used a centralized oracle network that essentially provides data into into these smart contracts but at the same time does it in a highly validated highly reliable form so that the data meets the high reliability standards of the contracts. Because what you're really doing. When you're making the more advanced smart contracts that enterprises find useful is. You're combining the smart contract capability with the oracle capability and that combination is something that should both expand what you can do. It should expand the different categories of contracts. You can do things with and right things about but you need to maintain the reliability of that agreement as a whole and that's really what chain link is is kind of known for its for providing data that's validated and essentially proven to reflect reality and instead reflection of reality at a highly reliable level that can then be used by smart contracts to generate an end to end hyper reliable digital agreement. Right at universally connected. Smart contract is smart contract. That's connected to the real. World is hyper reliable. and is hyper reliable. End to end from the data that controls the contract to the contract's execution on chain to the contract's execution of a payment outcome somewhere else. You basically are seeking a highly reliable end to end direction and those are actually the agreements that enterprises are interested in. They're interested in. Not just tokens not just private key signatures. But how do i make a crop insurance smart contract where i know that if i pay out a billion dollar policy it's paid out correctly because the data paying it out is proven to be accurate in the system deciding on whether to act on. That data is proven to be hyper reliable. And that's really the next stage of this infrastructures evolution and that's the next stage of evolution that i think is particularly applicable to enterprises brilliant brilliant. And you mentioned the word hyper reliability. A number of times. How did you ensure this. Level of high of hyper liability so this is approached in the same way. That smart contracts are made hyper reliable. And so this requires some some general context about how blockchain's achieve hyper reliability and how smart contracts as she fights reliability essentially it boils down to the verification of outcomes or of transactional events or of real world events in the case of an oracle multiple times while multiple times by multiple independent agents probably independent computing systems basically proving and confirming that the same thing happened whether it's confirming that a transaction is accepted as being reflective of the world history like blockchain or whether in the case of an oracle of proving that an event somewhere happened because multiple data sources were used and multiple independent computing systems and which are often in our industry called nodes multiple nodes verified. That something happened. So you have this hyper redundancy. You have this hyper kind of checking by multiple independent computing systems also known as nodes in many cases and in tandem with that. You have cryptographic proof so you have proof that for example data came from a certain source and the combination of data came from a source to dad. Data reflects reality from multiple. Sources are allows you to arrive at a hyper reliable. Widely validated picture of the world right. So what. what blockchain's do they get. Many nodes to confirm that a piece of data is correct and that a transaction is executed and confirmed and that it has finality and and immutable guarantee of being proven to have happened by many notes and in the case of bitcoin theory. I'm this is thousands of notes and with oracle's you take the same logic you say. Hey i want what's called decentralized computation. I want decentralized computation not to prove whether a piece of data was accepted according to a protocol or whether a transaction was confirmed by multiple nodes. But i want to centralize computation to create definitive truth. I want to centralize computation to using to through. Multiple independent nodes tens of independent nodes of hundreds of independent nodes to prove to me that the weather is no rain for one month in this specific geographic location and once a few data sources and a few independent computing systems. That i can predefine when making the smart contract. Prove to me that the weather is in a certain state or that. The price of an asset is in a certain state or that the location of a good is in a certain state. That's when i achieved the hyper reliability of knowing that something has happened in the real world. And that's when i can automate the execution of my system and my relationship with that event in a highly efficient way because i have proof that something happened. I have a system. That's guaranteed to execute against that proof correctly and that is that is the real promise of the combination of oracle's and smart contracts that you can prove that something happened and that there's a system that based on that proof can now act and that that proved plus that action is now in a hyper reliable state where no matter the size of the counterparties even if there's one really big counterparty and really small counterparty everybody is treated fairly according to how the agreement is written and not according to whatever decide to do. And that's that's the really big massive shift that you see when you combine smart contracts and oracle's is that you take the blockchain hyper liability dynamic beyond tokens and private keys which are very useful. And they've seeded a lot of into the ecosystem and does i really view as kind of the e mea e e mail initially email. Kind of dynamics did you on the internet and you expand it to the world of contracts. That require proof about events. And so oracle's do that through this. Decentralized computation. the same way that blockchain's used decentralize computation to properly secure their data structure and to secure smart contracts. Not great great. No not very clear. Thank you for that. And i especially liked your point. You know how this can change in under the power dynamics between large and small players. My my next question to you is in your opinion. What will drive adoption of smart contracts in insurance industry and enterprises in general. I think the insurance industry seems to have a certain kind of fast follower strategy. There there are a number of people that i seemed insurance. Industry who have a certain carved out niche and they have the relevant approvals to continue in that nation to have one or two or three competitors and they've reached a kind of equilibrium between them and their competitors in that market. And everybody's kind of to a certain degree content to continue in that equilibrium. And i can understand out. That's fine. I mean i understand amex that that lead to that type of Dynamic situation and i understand buried entry to being an insurance provider and reinsurer and so on. I think what's going to be happening now or would we already see happening. Is just like fintechs. Made their way into the global financial system and they began to eat away at different parts of the catalog of offerings from various banks and other financial institutions. We're now seeing a growing tide of ensure tax that are using technology to generate many cases better or at the very least equivalent but easier to access insurance products. Now these ensure tech's are not going away. They are in fact going to be appearing in greater and greater and greater numbers and they are in fact going to be collaborating with the fintechs and with the financial financial system in general to utilize the best technologies and the best dynamics in their favor. Now would that would that essentially means for the this is kind of the underpinning force that i think will drive adoption of smart contracts in the insurance industry. So what i think is going to happen. Is that either smaller more innovative. Insurers are going to launch new hyper reliable insurance policies that can driven by data as parametric insurance yes and parametric insurance is quite simply much much better in the smart contract. Format is smart. Contracts are the format in which parametric insurance actually delivers on. Its on its guarantees because the promise of parametric insurance is that. I am guaranteeing to you that once the data shows something you will get paid as policyholder and that guarantee depends on two things depends on the data showing something it depends on the insurance company executing transaction to follow through on the policy. And that's what smart contracts smart contracts together with oracle's enable parametric insurance that proves something happened and guarantees the policyholder a certain outcome while enabling insurance providers to eliminate claims management as long as the financial product as long as the insurance agreement is properly architecture. So what. I what i think is going to happen. What we've already seen happening with some of our users is we have ensured tech users grade users like our bowl and crop insurance ethos can and many others that are essentially combining oracle's and smart contracts to make innovative new insurance products that actually enable them to go into geographies where they don't even need a legal relationship with users they can just have a relationship with users on the basis of technology and the users can trust that policy. Not because there's a big brand and logo there but because the technology is so hyper reliable in its guarantees that insurance policy will be acted upon immediately when insured event occurs. And so what. I what i think is going to happen. And what is it. What is already actually happening and will accelerate is that ensure tax are building out. More and more easily consumable hyper reliable insurance products. They are turning more and more to blockchain. Smart contract is a competitive advantage to guarantee that hyper liability to their users and that will allow them to generate more and more adoption larger insurers will will essentially according to their fast follower strategy. Seek to build their own systems in in that vein quickly. Whether they'll be able to do that depends on their technological readiness to do that. It'll depend how connected. They are to various blockchain systems. It'll depend on their capacity to adapt in a technological sense in this in this context. And then i think the second extremely powerful thing that'll happen is that certain insurance cash flows will become securitized right and i think the first people that are going do that are going to be unbelievably successful unbelievably successful. And i i. I have my questions about whether that will be the traditional insurance versus ensure. Tech's i think the real home run here is you may kuyper reliable insurance products that can be adopted by users. Globally without having to rely on a logo you take the candid. Guaranteed cash flows in the proven cash flows from those insurance products. And you turn them into securitized. Token is that's whether you do that in the traditional financial world or whether you do that. In the decentralized financial markets is now an interesting option people have access to and essentially create a path for creating properly made insurance that is then monetize d- through sale to the larger global marketplace which is consistently seeking diversification consistently seeking cash flows and revenues that it can turn into assets that can be purchased and ruled into various diversified buckets of of of holdings by asset managers and others. You've already seen this happen. With invoices and a huge kind of refactoring industry around global global invoices for for trade and trade finance. I think the same thing's going to happen with insurance industry. I think ensure tax are gonna lead the charge and a few insurance providers are going to be fast followers and the rest are going to. You be forced to catch up. And i think a lot of this is going to be underpinned by blockchain's and smart contracts as the hyper reliable format through which you both provide better insurance products but also very importantly the format through which you prove to the market that the insurance cash flows which you are which you are providing the market access to is superior form of essentially asset-backed security at this point still doesn't exist in mass which is something i can't understand why the global insurance industry hasn't done this as quickly as it could have. Maybe there's something. I'm missing there. It's very possible. But i think in any case. It's a very obvious collection of forces here. Where users want more reliable insurance products their entire geographies that insurance products don't exist in because people can't provide them through the local legal system while they can provide them through technologically enforce smart contracts. And that's something. I'm personally unbelievably excited about. I see i thrilled that. We have any kind of part in enabling farmers and various other kind of small business owners to have access to things like crop insurance through the combination of our oracle's and smart contracts. That's something i'm personally extremely proud of in enabling because it literally takes people that didn't have an insurance product which is actually insurance. Actually a great thing because it enables people to pursue their economic destiny and and to withstand various negative events. And so i think that's probably the third thing that i'm that i think we're gonna see over. A number of years is emerging markets. Having access to insurance products that they would wouldn't have access to otherwise. Because they're now presented in this hyper reliable form that the user knows will pay them out the insurance premium based on something like the weather proven from an oracle and that breeds breeds a whole new level of. Trust as we've seen on fortunately. The insurance industry's trust. Level has been hit with covid nineteen due to disputes around how you know the policies were implemented you mentioned the ether s. You know we. We had him on our show as we had also. Abc network the other intertect leading the charge as you would say is next. Mutual which is has really been revolutionizing the industry to to a high degree. What i'd like to find out from yourself is chain link itself you know. Can you tell us a little bit more about it and its value to enterprises. What role does it play for. Smart contracts and articles being at adopted by enterprises. And also you know. How do you help in insurance incumbents you know to become those fast followers. I think there's there's there's a few key decisions that people need to think through when they approach smart contracts and blockchain's and oracle's generally. I think the first key decision is do they want to be a issuer. Or do they want to be a participant if you want to be an issue or if you want to be somebody who issues or generates or creates smart contracts. You essentially make new financial product new insurance products new global trade relationships through smart contracts. You are the party. That's driving that innovation. You're the party that's building the contract. You're essentially making a new technologically enforced form of the agreements. You have expertise in now. That's the decision to be an issuer in language that we have to be a creator of smart contracts is an important decision that every organization needs to make on its own against its own priorities. Its own timelines. Its own strategic initiatives. Its own its own kind of dimensions. What i've found is that many organizations enterprises specifically initially are excited about being issuers or creators of smart contracts but essentially arrive at a place where they realized that they will be be cannibalizing portion of their existing business and that they will be in engaging in an endeavour were they have to blaze industry after figure out once people through a few come to this conclusion. There's a definitive decision to be made in the definitive decisions. Do i want to be involved in evolving into the organization that reinvents my industry. They're they're they're companies like this insurance landscape like progressive and others some of which were the first to use telematics state to use data within car systems. Right after i think ninety seven most cars have telematics capabilities. And that means you can get driving data from them right and and that people were able to say. Hey you know. I'm going to take your driving data and i'm gonna use it in my actuarial tables and i'm gonna manage risk this way. I'm gonna give you better premiums this way. That's an innovative. Thing and insurance companies and enterprises in general. Just need to make the decision. Am i going to be an issue. Creator of contracts where i'm going to be a participant if you decide to be an issuer creator of contracts and this also is true for the insure tax and the fintechs and basically everybody other than the crypto startups. That decide to approach a problem from crypto. First points of view who in many cases. I think we're going to get acquired or we're going to build the protocols that ensure tax fintechs and actually the big insurance companies ended up adopting instead of rebuilding themselves. Because that's actually that's actually amick. I see everybody talks about. Are they going to be the beautiful enterprise system but then two three years later. They're adopting the thing that's been hammered out in the open source community and saying you know this thing is really well made i. It's clearly thought like three steps ahead because it's been being used on production and i think i'm gonna go with that so i think i think after you make a decision. Am i going to be an issue or creator of contracts versus a participant if you decide to be a creator an issuer you. You don't need to create a blockchain team. You need to generate an internal competency around how to reinvent certain categories of agreements. You obviously need to go to market strategy to enable users to understand what the hell's going on why this is better wides competitive. And i'm seeing people that i've seeing ensure tax like our bowl. Do that very very heavily. Next mutual is another good example. There another one of our users four for oracle's and i'm seeing people reinvent insurance because they've decided i am going to be the contract creator. I am going to drive this. And i'm going to make these contracts and put them in front of users and gained adoption based on this unique capability. If you if you decide to do that you're going to need Contract developers you're to need smart contract developers ubani or to connect to data. And you're actually going to need to probably be doing this. On multiple different chains to service various geographies in various users. And that sense what chain link can enable you to do is to get the data that you need into those contracts invalidated form. Which is the form they needed in into contracts which you issue and chain link can actually connect your internal systems to those contracts as well so chain link if you become an issue or a creditable to two key things for you it will you to architect out contracts that are properly connected with proof external proof events and that is going to be literally fifty percent of the challenge. You're going to need to solve. You're going to need to define. What the proof is you need to get connected to sources and you need to validate that. Something actually happened. The second thing link will do for issues and contract creators is it will actually be the abstraction layer that enables their existing system to interact with various blockchain's and for multinational insurance providers and various other enterprises. This is going to be particularly important. Because they're going to find themselves in a situation where they want to issue and they want to create contracts and various platforms but their choice is going to be. Do i get five blockchain teams to learn five different platforms or do i want integration with an abstraction layer like chain link that allows my existing systems to interact with the five environments. I want to be in this year plus five environments next year plus the ten next year right so chain chain like actually does enterprises which is now just become more understood is that it enables them to interact with multiple blockchain environments using their existing infrastructure their existing api is their existing user flows and their existing middle office and back office processes that they've trained thousands of people on now if if you're a participant and you don't want to issue a contract in that case you are going to still need to interact with contracts if you're a participant you're going to find yourself in a position similar to the position that people experienced when email came about is that everybody's gonna be start asking you. Do you have an email this to you. Let's email about it and that point the people who didn't want to become a sheers and didn't wanna move quickly They don't have a choice. They're going to have to participate in the environment. That has the contractual agreement that their counterparty wants their counterparty. Comes to them and says i. I wanna do a contract this way. Nobody's gonna tell them now. And you consistently see this. In the adoption of email in the adoption of e signature. Nobody wants to say. Oh you sent me a very well. Well formatted thing that works. Great for you and all i have to do is is adopted. Technology kind of quickly and just hit a button and our agreement is done for a few billion dollars. Nobody in their right mind. Enterprise world is going to say you know we don't really liked blockchain's and we're not really gonna do that. Just like nobody in their right mind would say you know. I don't really believe in email. So i think you should send me a letter because i like paper. And you know. I like i like the tactile. Feel of using a pen. So i think in that participant category with chain link will offer people is once again that abstraction layer that unable to basically eat sign. Interact with agree to confirm their relationship to multiple smart contracts on multiple different chains because chain link essentially acts as hyper reliable abstraction layer between blockchain's data and that data can be data that proves something to an insurance contract or it can be data from a back end that is essentially a signature or an agreement to a contract on a blockchain. And i think the thing that people need to realize as an enterprise is that while they might think that they're only choices are to adopt a single chain or that in this horrible position of having to adopt five blockchain's a year and they have to just bite the bullet and just adopt fifty blockchain's that actually isn't the case. What would they can do. Is they can become blockchain enabled through an abstraction layer like chain link that is essentially another onion layer. that's wrapped around their existing. Api's and their existing user flows their existing soap and rest than xml and various message types to trigger and agree to and utilize smart contracts as new transactional environment from their existing systems. And so i once again the real choices are you an issuer or are you a participant and this is a decision. We've helped me. Many people make the decision. We talked through with many people and insurance industry. Various other industries like global trade and trade finance. So if it's a decision people are considering. We're glad to talk to them. Glad to clarify with the pros and cons are and you know in any case. I think oracle's are going to be playing a critical role in whichever whichever direction they choose to go exactly exactly now for our final question. How do you think the current state of the world and global markets will affect the rate of adoption of smart contracts. So i think there's a fast case and there's a slow case so the slow case is the one where gradually our industry gross at this point. Our industry the block chain crypto currency. Kind of smart contract industry has grown well past five hundred billion well and it's continuing to grow rapidly and at this point there's enough value in that industry and there's enough cash flows in that industry. And there's enough users in that industry such that an insurer tech are bowl or a decentralized financial product like synthetics avai- can be successful in our industry alone and what that means is that there. Is this critical beachhead of success that will allow the industry to grow with allow technology to improve will provide funding and resources and smart people to that ensure tax like our bowl and nexus mutual anyth- risk. Who are in these in this in this ecosystem to grow and continually improve. So it's not. It's completely not not the case that this is going to go away or something like that. I think at this point though the well-capitalized well-staffed ensure tax that are using blockchain. Technology are getting better and better at a rapid rate. There's a large enough market. A large user base a large enough understanding by the by the by even the global financial market to make them successful without any monumental shifts in sentiment and with. That's actually going to do is it's gonna drive more startups more competition. More entities to come in and continue to innovate and so the speed of innovation is going to accelerate and all the little building blocks that different people building. Our industry in the blockchain industry are going to get reused and built upon and the rate of acceleration in the rate of adoption the rate of innovation and and new capabilities is going to be akin to the to the internet and it's a massively fast evolution from the year. Two thousand onward. So this location is you can be successful in our industry alone. People are successful in our industry alone and and that means they're going to keep generating better and better products better and better consumer experiences better and better guarantees and slowly growing past five hundred billion the second case the fast case is a kind of a scary scenario where the global financial system and the position that the global financial system has put everyone in in relation to the debt cycle and in relation to inflation is going to become rapidly apparent and when these types of things happen it is painful. It is an unfortunate painful. Set of circumstances where essentially here's institutions are awake violently shaken awake by the true nature of their relationship with the global financial system risk their counter-parties the solvency of their counterparties the reliability of the contractual agreements that they've entered into with their counterparties and basically the psychological predictability the pre the the mental stability the predictability of the world starts to come into question. Which is what happened in two thousand eight now in in this case in the current world. I think that that is on track to happen. I think it's going to be quite large. And i think for smart contracts and blockchain's is going to call into question those brands and those guarantees that they say they have. And i think people are going to realize that a brand or a claim is not is not mathematically guaranteed outcome it is not a crypto. Graphically assured event bright. Now people. don't think about that just like in two thousand people didn't think about how two thousand seven people didn't think about how does the mortgage into shoe or how does how does all the to. All these asset-backed securities actually get value. How do we figure it out who actually owns what those aren't questions. People have when everything's going swimmingly. Great everybody's happy for the music to keep playing and everything to continue human nature right. It's it's not. it's just the way humans are built. But i think we're going to swing to the other side of dependent pendulum and i think we're going to be unfortunately in a situation where a lot of places that people thought were solvent and thought were reliable and thought were going to follow through on their contractual guarantees to them. They're gonna find out that they're not and there's gonna be a kind of in my opinion. A mad dash to safety and that mad dash to safety is going to be about. What is my counterparty risk. where can i achieve reliability. How on earth can i transact in a way. That isn't just somebody telling me. They have a nice logo that it's going to be okay. And i think the answer is going to firmly blockchain's and smart contracts because no other form of doing a transaction that i know of can guarantee to people that the transaction will be followed through on as they expect the point. The point at which people need that mental stability because they've lost it from the traditional world is the point at which over the course of one or two years it's going to become obvious that blockchain's and smart contracts are the obvious way for people to engage in their transactions. Because if you don't do that it's it's just blatantly clear that you're you're you're taking risks that you shouldn't be taking but that just hasn't become clear to people yet so i think the case is a is a bit scary but i think it'll. It'll drive that type of adoption depending and it's going to be related to how intense that that realization is and it's also going to be probably industry specific because some industries are going to have that realization more than others. I think it's a fascinating because was advantage and the repercussions of cove. It has hit enterprises around the world. And they've come to realize how they've had to accelerate their digital transformation away from a pr message an actual strategy that they have to it that whether it's blockchain smart contracts is going to become something that they had to take seriously For for them to for their parties with whom they work with and just for the general markets in which they operated. I'm going to thank you very much for for all the insights you shared with us and for introducing us to chain link. I'm afraid we're out of time. So this wraps up this. Intra blocks podcast. We've we've we've enjoyed his episode if you like what you've heard this weekend please. Don't forget to subscribe to our podcast. review on on june's sergei teams. That we have a podcast was chain link. You know once a year we had the pleasure on the sixth of jan to have your colleague. John aida johann. I eat on our show. And i would love to invite you back towards the end with twenty twenty one to here but the progress you're making any educating the enterprises on those appear processes and guarantees and trust that comes solutions like chain link and lucky to have you back on the show on track out on your progress. Great thank you. Thank you for having me. Always a pleasure to chat with. You have a great day and thanks again.

oracle blockchain blockchain Sergei nazarov incheon blocks Sergei Abc network wade Oracle fifty percent John aida johann jan
Robinhood stops the games

Equity

13:15 min | Last month

Robinhood stops the games

"Hey everybody alex equity team we're going to skip are normal ad because there's so much going on this week but if you need to access extra crunch use the code equity all right. Let's go hello and welcome back to equity wrenches. Venture capital focus pockets where we unpacked the numbers behind the headlines. This is an equity shot. We've decided to do is take all of the game. Stop robin hood. Stock market brouhaha s. But in one bucket for you and then we're going to regular show later but in case you just wanted to hear about the stock market. I have danny crichton with me. Danny i take it. You're in a great mood. I am in a very caustic mood right now because of the stock market also. Because you're awake can met you. We also had natasha mosque. Arenas how are you doing. I'm feeling a lot of fields yesterday. The story wasn't a completely different place in this morning. So i feel like we're all going to be catching up. Live which will be fun. I think yeah so if you're a little bit behind the stock market has been a little crazy lately and we had begun to ask trading apps what they were going to do about it and then this morning starting to do something about it so guys. Where should we start. How back should we go to get. People caught up on the saga. That is the last few days. I think we can start a decade ago. So i think i mean let me do. A quick historical rap break even occupy wall street. You ever want people to to speak. Who are angry about the global financial system angry about hedge funds who are sucking out. All the money out of the economy didn't go anywhere but a lot of those people actually migrated online into communities on red at like wall street bets and others and tried to beat the system for what it is basically the most cynical view of the way the stock market works today. And say how can we use it cynicism to actually make money so you saw that with wall street pets. You saw. That was zero. Hedge is a bunch of other accounts and groups and brands etc market. In the last week they nailed one company. Stop and i think that's the story. We're talking about today to give a little more context around that the wall street bets has been around for a long time. And if you've been a stock market observer it's been part of your diet of consumption not to endorse the words they use or what they say or their ideas is just gonna place. You had to read to keep up what people were thinking about. In regards to trading this is powered by robin hood and other zero cost trading applications that may trading easier more game like ubiquitous and open to the masses. Then someone notice a thing. Which is that game. Stop was shorted over. One hundred percent which means that people had bet a lot against it to the point in which there wasn't enough shares to kind of cover their wager. That's enough information. Don't need to go deeper than that. And so what. The individual traders decided to do was begin to buy the stock now game. Stop not a great company. Really read through the numbers. So why would you buy the stock simply because other people had made such strong bets that will go down that if he pushed the share price up they'll be forced to cover their shorts and by the stock to do so. Maybe pushing the price up again. This has become a political debate between the individual retail investor versus the big money and then it got totally crazy. I mean the tasha. You've seen i presume. A million tweets about this for the last couple of days. A million tweets. Another thing that i've noticed is while it has been position if you read the times yesterday. It has been positioned as the small guy versus the big evil banker. We have seen wall street on the other side joined the retail traders and also get. Its own payday. I mean shimaa put in a good bit of money maybe not for. But he's still putting a lot of money he's donating the profits and proceeds to the barstool fund for small businesses and a lot of people are so there. Is that good story here. But also a lot of bad and nuance and i don't know how we should talk about. So this morning. As i woke up before i had coffee while i was trying to figure out which way my head went a bunch of tweets. Come out saying that robin hood was blocking certain transactions on its platform and yesterday tech reach out to all the from public robin hood and one finance free trade over in the uk and someone who had put up minor speed bumps but there were still letting their users trade these stocks this morning robin hood stop that and block. Certain transactions raise margin requirements. Cancel options i think so. There was a pretty big controversy about that. And that i think is magnified the political narrative here of retail versus the big guys. Why are we being cut off from this. It's start up story. i mean so far. We've talked about the stock market but like at the root of this is a number of fintech companies backed by oceans of venture capital who may trading ubiquitous and free without which danny. I don't think we would have seen the level of retail interest in. Plays like this absolutely and it was crazy to me is if you went back five. Six seven years ago in the startup world there is this wave of startups. Doing what was called social trading. The idea was you could mirror trades. You could look at companies etoro started in this category bunch of others there now. In blockade in stock management general the ton of these companies motif investing was another one. That was like build your own. Etf build your own portfolios chair your trade with others and like they never really took off if you look around the world today. None of the companies in this market survived and yet what ended up happening is you had these social networks reddit. Twitter being the most prominent where that trading in those tips were shared and that became the social layer robinhood who became the infrastructure for actually executing those grades. They just on the same platform that to me was very fascinating. That entire generation of starves basically failed to create the world. We see today totally. I don't think this could have happened any year other than this year. The power of community really has been shown. And i know alex you talked about this in your piece with schieber about alexis. The founder of reddit speaking up being like this is the power of community. This is what happens next. Danny you are screaming. What happened as the stock. The stock is literally collapsing. As we talk it's down fifty six percent right now. Oh my gosh. you're right so it's gone from thirty. I'm watching it thirty percent to forty five percent to fifty six percent. I don't think yahoo finance this more than once every two minutes but every time it repressions it's down like another fifteen percent so maybe the over by the time the show is over. We've gone down fifty five percent six minutes. This is fun. I mean guys listen. This was the risk of this show. So what you missed was about twenty minutes of us trying to figure out what the hell to do with the story because we put at the top of the main show to be break it out. What happens this is literally as we call breaking news. It's breaking our show before we jumped on the mike though public and other free trade apps that they're not going to restrict this they just put a little warning sign on certain stocks. So we're seeing a split between what different fintech slash neo trading from doing. What's going to be fun to see what impact this has on user flow. Because i think we've all seen in the last hour or so. The number of reviews coming in for robin hood on android pretty negative people are pretty pissed about this and the most of them are talking about the political like why eight hundred predict hedge funds cetera to be clear. We're not endorsing viewpoint. But that is certainly the narrative that users have in their anger against some of these changes that are happening. Two things one. I'm so happy. We are not in robin hood snacks as position as a competitor. Podcast because i need to hear how they're addressing number two bringing back the conversation. We saw a few weeks ago when trump was banned from a lot of the platforms. We're seeing the decentralisation conversation pop right back up we want decentralized read it we want a better robin hood. We want our power to not be in the hands of these companies anymore and so that's another wave of response. Were seeing another thing to keep in. Mind is the inherent tension between the business models of these companies and what they're kind of forced to decide on when it comes to allowing or not allowing certain things robinhood makes lots of money from payment for order flow. Which is routing your trade do certain market-makers and they get paid for that. That's how they offer zero cost trading. Your traits are kind of thing they sell. And if you go through their disclosures you'll note that they don't make a lot of money from trades on dick stocks stockton the s&p five hundred. They make a little bit more money on stocks. That are a bit more exotic and they make a lot more. Money portrayed on options so robin hood here this morning by making the choice that did isn't just putting up a virtue signal or whatever. They're limiting their own revenues by doing this. So the choice they made was pretty hard. They must have really felt like we have to do this. Or something worse is going to happen. Then the blowback they must have known was coming breaking news. Recording this show at eleven seventeen am eastern it. Looks like the markets have frozen game stop due to the crash that circuited. The markets are no longer open for trading. Which you know again talking about robin hood. It's like they did this themselves. And then just a couple of hours now. The markets are kind of catching up to me. A lot of this isn't disciplinary right. Like the startups are actually way ahead of regulators. The markets themselves and figuring out. What's going on and they're responding to those changes based on the user's on their platforms like robin hood has better than anyone about what's going on in terms of order flow. I mean that's literally their business but how users are what they're tracking their prices are honestly like they have better information than almost any other organization to respond to the actions and take proactive measures in order to protect the market. So it'll be interesting to see how regulators and others sort to learn this and figure out how to handle that new power where you guys think. Robin hood goes from hair. We saw alex lieberman who is the co founder of morning brew tweet. That robin hood is officially a case. Study in the fragility of brand. It took them seven years to build up confidence in their platform. It took them one day to switch from by the people to against the people. Here's my thought about that. The people who signed robin hood to buy three shares of ford aren't gonna leave but they also don't make any money robinhood hood. The bulk of their money comes from options trading order flow and those are the people pissed off today. Those are the people that have confidence and their service. Honestly i mean i. I don't want to get too far ahead of this and into wrong in. Have robin hood calling me. But i mean. I think it's pretty bad for their brand. I think this is not a great moment. I think you know when you offer people with less financial acumen options and other more exotic trades so that they can around and find out and then they around and find out and then you could buy finding out. It's not good for anybody. I mean i don't know what to do with this. It's one of those situations like if you give children matches. And they burn their hair and you take away. The matches and the child cries was happy. Ultimately the goal of market is to allocate capital. I think one of the questions here is what point you know. We've opened this week. Democratize at anyone can trade anything. People are options trading faster than ever. At what point do regulators have to get into the market and say look now. People are buying stuff now the market. You know. we're looking at the price now. Down sixty four percent. This is fun. This is going from thirty percent of sixty four percents just the time. We've recorded the timing of this show that we can't recorded and actually turn around fast enough. This is this is what we're doing a clubhouse later on alex later on so this is the minute to do the club. But but i do think there's a big question of like clearly something was very wrong in the market and markets are not supposed to be volatile. They're not supposed to go up and down. People are supposed to put in their entire fortunes and lose their retirement savings of thirty years in two minutes. It's just not designed for that. So i do think that there's something wrong with the market that needs to be fixed and that is i wanted to bring up because this story is super broad. This is not a story just about fintech startups. This is not just a story about the stock market. It's a story. About how individuals can use those fintech startups to have oversized access to dangerous trades in the market and to put this in perspective. A musician that. I super respect. I love their band. I listened to all their records. I'm enormous dork for this musical group. This person was dna me yesterday about these trades asking if he should jump ben because his friend had. That's how far this has gone. When my world looping back into my world strange and so. I'll just say it unless you're really really smart. Maybe watched dump a investment advice but journalists aren't allowed to invest in stocks for better today. I'm so glad we're not able to other perspective that actually the margins a great newsletter by ranjan. Royan kendrick right. There's a reason we haven't heard from game stop. This is a real company with real employees and when the stock comes crashing down people will be hurt because of it. Jobs live excetera. Let's not forget the robin hood to install bulletproof windows. This summer there have been deaths because of robinhood. There's been a lot of very serious damage. Made the very fun. Parts of the story are definitely getting played up for understandable reasons. But i don't think enough people are talking about the perspective of what happens next and that's a really scary. It's a very unstable time in the last few weeks. We've tested major institutions with the capitol hill riots. Just what two weeks ago. Three weeks ago testing our democracy testing our political institutions and now in this crisis and it was so much going on in the markets. Now we're testing. The nyse securities regulations the ability of our financial system to withhold and withstand massive groups of people sometimes working extraordinarily effectively and or deleteriously to the market. So to me. It's like it's the test and the hopeful message that i have is. I think we will meet the test much as the way we met. I think the capitol hill's riots. Which is we can come back bounce back better. We will see better imputations of place. My guess is the. Sec will investigate some of the stuff. We're seeing some populations of that already and we're gonna find all the people who were faking their trades and doing stuff on the market and the markets will resilient afterwards but it goes to show the power of online community and non sarcastic way because the capital riots insurrections sedition was planned on various social platforms. Where like minded people can get together. This is not that different. Listen that's the equity shot. We're gonna drop it. Their stuff's going to keep happening. Please read. I think it's techcrunch. Dot com is that where he worked for lots more about this. Now we're gonna pause and then go talk about everything else by.

robin hood danny crichton natasha mosque shimaa Danny schieber reddit Hedge alex lieberman alex alexis danny
Is currency the next front in the U.S.-China trade war?

The Heat

19:24 min | 1 year ago

Is currency the next front in the U.S.-China trade war?

"If we follow this through to the bitter end non we're talking potentially about two countries going to war with their currencies and the most pessimistic outcome of that could be a global recession essentially the value of the dollar potentially plunging or going to the roof inflation. All of these things would would impact consumers on the ground. Even if you've got no interest in financial markets steel soybeans motorcycles and seafood all physical tangible jubal items the average person can relate to but there's another front in the u. s. china trade. That's a little harder to understand. Even for people with economics degrees. We're talking today about the currency. Market disruption in the currency market has the potential to upend the global economy in ways that can be devastating for everyone so i'm on ninety and welcome to the heat podcast understanding the currency market and how it directly affects. You can be a pretty daunting task today. We're joined by c._g. Owned fairclough cluff. He's been covering every angle of the u. S. china trade war since it began in great to have you again always good to be here on and yet. Let me first of all start with a question for you. If i may d remember where you were september two thousand eight when lehman brothers the american investment bank collapsed. Yes i do the reason. This is sort of like the j._f._k. Movement we went for global economics not moment where that investment bank collapsed almost brought down the whole global financial system and we had to understand terms like credit default swaps trying brian understand why one investment bank at a domino effect on the other and then got worse we we only had that almost global financial crisis collapsed. I should say within a sovereign debt crisis with countries like greece and portugal nine and needing bailing out then we had to understand things like bond yields suddenly only all these obscure terms from the financial pages. If you like when people still read newspapers suddenly started to dominate the front pages these really abstract concepts that left a lot of people wondering how on earth this could possibly affect them and yet we were supposed to know things like bond yields why greece had run into trouble barring too much money and so on very abstract. The reason i mentioned all that is because when we have this currency crisis blow up last week that was the first thing i thought of suddenly these really really abstract sort of ideas now dominating the headlines and people being expected to try and understand how in the midst of a trade conflict where where we're talking about things that have fairly tangible leaks things like tariffs on iphones or soybeans commodities and so on at least that you can sort of understand yeah you see my amateur view the owners that when currency prices change it affects the price of my vacation at that is tangible absolutely on yeah yeah i i make i make no assumptions about what you might spend your money on vacation but any kind of treat you might want or even the cost of your flight and so on you're absolutely right that is that is tangible and a here. We're talking about the value of china's yuan against the dollar. The reason i mentioned this about is abstract tunes is it's actually crucial and fundamental in this and it's if you like the new front in this whole global trade conflict the u._s. President donald trump has been weaponising trade. If you buy launching a trade war against china we've seen billions of dollars placed on taras billions of dollars of taras placed on chinese imports china's retaliating at where it counts because it imports so much less on the united states but we're initiative trade war now. We're talking potentially about currency being another weapon in this whole thing. Oh and let's talk currency. China's yuan dropped to its lowest level. Oh against the dollar last week that led to the united states accusing china of being a currency manipulator so break this down for us. Why did this happen in the first place china's u._n. Did drop a dramatic drop as you mentioned. There hasn't hasn't been as low for eleven years or so now. China blame this on market forces and here's a very quick primer crime. We're talking about fixed versus floating currencies and i'll try and son this it for you. In thirty seconds many many of the world's major currencies the dollar the euro the japanese yen a what's called floating currencies it means they're allowed to move up and down against each other in the international exchange markets china's u._n. Is a little bit different. It's not not quite a floating currency not quite a fixed currency and that's because china's government allows it to flow within this narrow band is packed supposedly against the dollar all that so there is some movement the government does sometimes intervene to try and keep it within this band so that it can trade. I wanna say effectively against other currencies n._c.'s but it happened it plunged at it sent financial markets into a spin and put these abstract terms like currency wars and so on back onto the front pages to let's break this down. <hes> the currency drops it dropped below seven you onto the dollar. Why should people be worried about that. How does it affect their pockets because if we follow this through to the bitter end non we're talking potentially about two countries going to war with their currencies and the most pessimistic outcome of that could would be a global recession essentially because we've got to <hes> will two largest economies basically trying to undercut each other with their currencies and that can lead to a whole raft unintended consequences the value of the dollar potentially plunging or going through the roof inflation all of these things would impact consumers on the ground and even if you've got no interest in financial markets you would feel it if suddenly inflation starts to run away we've seen multiple examples of how inflation can cripple countries. Look argentina look at zimbabwe. These are extreme examples and i'm not trying to suggest the u._s. Is anywhere near that yet but which talking about rutland the very foundations of the global financial system and that is never a good thing as we saw in two thousand eight so the united states calls china accuses china of being currency manipulator. What's the significance of that. What does that mean. The short answer is. It doesn't actually mean an awful lot. The reason for that is we're in the midst of this historic trade will web president trump is putting taxes and threatening to tax the entire volume in pretty much of chinese imports into the united states so we're already got a trade battle between these two countries in theory if your label concurrent currency manipulator under u._s. law at congress at the government would take action against china to apply some kind of punishment. That might be more taras. You might laugh. And how many more tariffs can you have. Which is why why this is kind of theoretical really. Nobody's really sure what it will lead to pa because we're already in the midst of an extremely damaging trade battle between these two countries so we have one of those strange situations where the united states has retaliated. I retired the irony shouldn't be lost than anybody on and we have a president at donald trump trump who is very much against multilateral institutions. He doesn't like the world trade. Organization doesn't really have that much time for the international monetary fund and yet when he was accusing accusing china of manipulating. It's currency and deliberately devaluing the u._n. He wanted to go to the i._m._f. To get the i._m._f. On board to essentially try and punish china somehow and this is where it does get very very complicated so what kind of instruments or tools does the government have to protect its currency from dropping value. All it wants to let that value drop. What can i do. This is where we might get in danger of getting a little abstract but i'm going to try to real world examples. Central central banks would intervene for example now here in the united states. We have the center about the u._s. Federal reserve that can intervene to change interest rates. Interest rates have an impact on the value of currency so for example <hes> the the u._s. <hes> central bank might raise interest rates that could make the stronger more attractive to investors it might intervene gene low interest rates lower the value of the dallas. They can do these things they can sort of pull on these levers. If you like in different parts of the economy to try to fact different different outcomes such as value of the currency china does that too it does by its own acknowledgment. Intervene has intervened. There are instances going back several a years where has stepped in but the conventional wisdom and the view of organizations like international monetary fund is that china has actually stepped in at times to keep the value from going down. I own an trying to keep it stable. Essentially we hear all these terms. If you're just a simple investing the united states someone relying on a 4._0._1._k. Which is the u._s. Arrest retirement plan. Should we notice well. I'm a simple invested with 4._0._1._k. Plan on an. I'm not nervous at first up. Don't worry don't even look at your 4._0._1._k. If you don't follow financial markets if you're not somebody that relies on the what's called day trading looking at the at the fine movements of the market every we day the short answer is no. You shouldn't be unduly nervous. If you have what's called a diversified portfolio that might include some government bonds as well as stocks fox. Government bonds quite simply a promise to pay you back if you're invested in the u._s. Government that is a promise from the biggest most powerful economy in the united states that it will pay back your investment when you want it back all right. If we're going to get even more complicated we have this other term that we hear about very often. Those are bonds bones. How do they fit into the trade war that we're talking about and the currency dispute between china and the united states while bond is simply like an. I imagine we have the bank of on. I'm <hes> owen making my pods. I might go to you on and say. Can you lend me one hundred dollars. Please and i i would give you a bond that simply my promise to pay you back. Could a later date. You can have corporate bonds companies. Do this all the time you can buy bonds coca cola and some of the biggest most famous names in the world. You can also buy bonds in government. It's essentially lending money me too these big corporations your lending money and you can an governments do that all the time as well a government bonds simply an ir you to a consumer like us to pay the money back and this is where we started to get into the realms with interest with interest of course and you can trade those two traded. There's obviously a huge enormous market for bonds out there. This is where we're starting got into talk about. The foundations of the global economy and this is why it started this. I was mentioning the y. Been thinking so much about two thousand and eight this moments in this in the global economy. We thought the whole house of cards might come down. I'm not suggesting where anywhere near that yet but when we start to talk about these abstract turns in the foundations of the global economy. That's when you have to really starts to look into it. The reason for that is that bonds have a huge impact on currency and so on the value of the dollar. A very quick primer on that is that china's government is the biggest holder of u._s. Treasuries china if it wanted to because suddenly decide to sell all of those settle that debt imagine if that happened the u._s. has been living. If you like on credit did it for years now. It's borrowing costs. Keep going up and up. It's broken. It's debt ceiling multiple times under the trump administration. Imagine if china suddenly decided why did it really wanted to pull a tablecloth with all the cutlery and glassware throw it all up into the air. It could do that by selling u._s. Bonds but that that would have an impact on china why because china is the world's factory needs somewhere to send all those manufactured goods that it makes an america is the biggest client for foia last week. There was a rush by investors to buy into gold futures and government bonds that we've been talking about these about typically safe havens during times of market market volatility market uncertainty. How much is the trade war driving that uncertainty. We've seen just in the last week on financial markets. They were going up and down down on week now. It's true that this yuan devaluation lasted only really the fallout that was twenty four forty hours but investors will start to think whereas this trade war headed and if they're starting to worry about that and worrying that maybe these two countries will start a battle with their currencies you're getting into the realms of if not the unknown and certainly something much bigger and much less tangible at than tariffs on products and that's what worries people what are the unintended consequences a currency dispute. There is one of the development one of the complication for you own and that way it gets even more complicated. The people's bank of china says it's close to issuing what what it calls a crypto currency i mean we've heard of bitcoin and things like that those cryptocurrencies what is a cryptocurrency. It's just imagine as an alternative form of value. Do you imagine if you said to me. You're wearing a tie on and imagine you said oh and i'm going to start using ties. Instead of dollars is to pay you. That is an alternative form of currency. They're sort of independent of at traditional currency they operate without without the involvement of central banks but as you rightly pointed out china's central bank wants to issue once we're at this stage now where they're sort of becoming more official if he likes as forms of currency now china wanted to issue a crypto currency is a form of diversification if lots of the people in the world trading <hes> trading this kind of currency z. buying things with it investing with them. Why shouldn't a central bank wants to get involved with this. The problem where it gets complicated is we don't really understand the value of it because as we can't talk about the value of currencies competitive dollars for example because a cryptocurrency will be largely dependent on trust. Isn't it willing-buyer-willing-seller. I willing seller and this is we're gonna exchange this instrument. I guess it is and <hes> this is how i get my good. That's right. It's based on trust. Now you remember when bitcoin went through the roof of the the price of bitcoin was it something like nineteen thousand dollars we had a boom and bust with bitcoin that is not a stable currency imagine that was happening with the pound with japanese opinion or the euro or the dollar people would rather frightened. It's an alternative form of currency <hes> that can essentially <hes> diversify your portfolio a full governments but we're really in the realms of the unknown as to how it fits into the international financial system can ordinary people own cryptocurrencies assure sure you can you can invest in bitcoin and you can buy a house. You can buy a call. You can buy things now. This largely depends again on. Does the chinese government wants to use this crypto currency as a a form of currency to to buy those things with that's really up to the chinese government to decide how far it wants to integrate that currency into everyday purchases or all right. Let's get back to the traditional currents the yuan and the dollar. If this currency war this dispute continues <hes> would affect. I guess the global economy for sure and again not scam manga. I talk about the foundations of the global economy. I talked about the global financial system. The problem with currency battles on is that it's kind of like playing with fire. You can get burned really quickly. I think it was the west wing aaron. Sorkin west wing web president design bought talked about pulling on different levers to to try and keep a global economy ticking along this is what communists wanted to pulling a little bit on each league to try and keep things going when you stop playing with currencies either devaluing doing allowing a currency to depreciate because there is a difference that one is a direct intervention. One is allowing market forces to do it for you. Too can also unintended consequences. Rampant inflation could be one of the match and if the value of the dollar spikes and the value of the u._n. Plunges somebody's gonna lose out very very very very badly so this could get even worse. One view has been an eye increasingly here. Many economists saying this this trade will we are now in it. It's a state of sort of semi permanent economic warfare between china and the united states some investors will be signs of price that in if you like pricing in means they'll assume simply the looking at stocks bonds and so on and pricing their value dependent on their view of this whole conflict going on on on mike this last <hes> years and years it's possible under the trump administration but it just becomes a sort of permanent fixture of the economic landscape and yes you should be worried about that because ultimately ultimately everybody loses out so far. We've had tariffs and currency battles. What's next owen. If this conflict continues could get even worse in theory of because it could and it's it should be a concern that donald trump last week said he wasn't ready for a trade deal. I remember at the beginning of this year. It was january when the trade negotiation started with china and he thought that there will be a trade deal within a month now he's saying there might not be one even with these. Two sides poised to resume the negotiations in september so to recap. We've got tariffs. We've got we're going to have potentially tariffs on just about the entire volume of china's exports the united states it would be impossible for consumers to escape that in some form prices are being passed on to consumers in the form of of higher prices. I should say all the cost of those tariffs being passed on to consumers in the form of higher prices. This is where you start to worry about the foundation of the global economy and forgive me if that sounds abstract but these two countries could do real damage to each other at china china can do damage to the united states by essentially selling the amounts of data holds bonds. We've been talking about the many people that's almost unimaginable because the consequences of that would be extremely difficult to fathom but you're essentially rocking the very foundations of the global financial system to countries that are heavily dependent upon each other. We saw back in two thousand and eight what happens when you rock the foundations of the global financial system at tens of thousands of people here in the united states alone lost their jobs at the ripples of that went across the world for years right and i guess the big challenge for you as a business journalist doesn economics journalists who makes this understandable to ordinary listeners and viewers and readers is their mortgage going to cost more. They're gonna pay more for the house that they just bought or is. The car going to cost more that they've just bought. All is my vacation smart. Yeah that's important too yeah. So what's the important lesson for us. In this my big takeaway from all of this is if you understand personal finance well you will understand these macroeconomic these big abstract global economy shaking concepts too because much of this is the kind of commonsense instance that you would apply to personal savings at your retirement plan and so on in short everybody should be taught personal finance on some level and if you don't have a grasp with personal finance on your own savings isn't that what's that your parents tell you you know borrow spent within your means all these lessons all of these old fashioned commonsense commonsense lessons should apply here and if that's as good grounding as you can have firmly standing these wider issues about trade about currency alternative currencies jason. Thanks so much for being this. I've been talking to c._g._t. And correspondent. I love who's been covering the u._s. China trade war since it began. The heat is produced by c._g. In america executive produce tier of h i'll senior producer john gilmore produces jeff stain holly shepherd mario shaw and mirvish cone. Our digital producer has josh what ballo and how director of digital development is michael sugary once again. I'm on ninety. Thanks for listening.

china united states China donald trump u. s. china china china bank of china president fairclough cluff america greece lehman
TIP256: Raoul Pal - Global Financial Concerns (Business Podcast)

We Study Billionaires - The Investors Podcast

35:45 min | 1 year ago

TIP256: Raoul Pal - Global Financial Concerns (Business Podcast)

"You're listening to t. I p boy oh boy. It's exciting to bring you this week's episode because our guest raoul powell is quickly becoming one of the most renowned global macro voices in the world rowell's the founder of real vision tv and we have a doozy of a discussion about the global economy this week one of the unique advantages that raoul and his team have for running this huge financial media company is his access to billion dollar investors and some of the biggest names and finance <hes> during our discussion we talk about the issues in europe central banks pension funds and a whole lot more. This is a discussion that you will not want to miss so without further delay. Here's our interview with row will powell. You're listening to the investors podcast while we study the financial markets and read the books that influenced self self made billionaires the most we keep you informed and prepared for the unexpected this free episode. 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That's ziprecruiter dot com slash. I n. v. e. s. t. o. R s ziprecruiter dot com slash in bastos ziprecruiter the smartest way to hire all right back to the show. Hey everyone welcome to the investors podcast. I'm your host. Preston patient is always accompanied by my co host dig broder sohn and today boy. This conversation is long long overdue. We have the one and only row powell here with us from real vision tv royal. Welcome back to the show. Pump the talk to you. There's going to be back. It's been a long time since i've been on it has been way too long. It has been way too long and so i am really looking forward to this conversation especially because we we are recording this on the sixth of august twenty nineteen. There's just a few things happen in the world right now right just a couple oakland things. It's total blood kale's. This is how insane things are. I'm just pulling a tweet that you sat out probably ten minutes ago. Oh and i wanna talk to you about it. So there's this article that you just referenced that bank of america just wrote and the article suggests that the fed might need the conduct quantitative data using in the fourth quarter of twenty nine thousand nine so i mean we're talking in a couple of months. Considering powell is kinda singing a completely different tune after this last last meeting where they dropped rates twenty five basis points and he kind of implied that it was a one off thing what is going on the fed over tightened and they didn't see the signs because rates are so low so how could that be a problem right well rome because the rate of change of rates who is what makes the difference and it was the largest breaks exchange of interest interest rates in all recorded history so if people have increased debt at the lowes which everybody did every corporate every household everybody it meant suddenly interest payments gone up between thirty and ninety percents ridiculous amounts so that was one thing so the economy it started slowing and then i think you heard it from other guests before in the past. There's a shortage of dollars out. There is a real issue with the funding and that's a day with a couple of things. One is the fact that foreigners have borrowed thirteen trillion dollars trillion reasonable some money and then after that the don't frank rule changes along with the basel three rule changes and rule changes by this he meant it became almost impossible to the global banks to fund themselves in dollars because there was basically separating segregating u._s. u._s. Entities in funding from european states so what set off was of course of events which meant that nobody could get really enough dollars so that becomes a scramble for dollars the becomes relatively easy for let's say though it should bind together. It's dollars but it's hard enough but it becomes even harder for china to get dollars because that's slightly further away from the global financial system system so everybody's got this big panic gang on it's happening in south. Korean culprits is happening in japan. It's happening in china and he's happening in europe. Then than what i saw surveillance is that something technical that happened in the plumbing as well and that was this crazy situation that the treasury had been funding the u._s. government because of the debt ceiling the governor basically past the debt ceiling and so the treasury's basically lending the money okay. They had the reserves for that. They've been drawing down to help on the government. We've now cleared that ceiling finely so the treasury now has to essentially load up in about two hundred fifty billion billion dollars to replace the treasury general accounts in addition. The government is increasing. Its burrowing by another. I don't know two hundred billion dollars on addition to the other two hundred billion dollars of already forecast to this now six hundred billion dollars a new bills that need to get issued over the next four four five months so that's abrasive q._e. q._e. T essentially tightening monetary conditions of something like one point two to one point four trillion dollars olas just when the fed actually supposed to be cutting rates so it means that they lead money out into the market so it looks away winters liquidity from markets so that that means that tightening what are they gonna do well the next thing they're gonna do september. They're gonna have to get fifty and i was explaining to people twitter that you twenty-five only equity yeah see. We told you that you need to cut rights. I'm like you have no idea how about this as the dole is going to rape higher next minute china's devaluate. That's how bad it is but nobody realizes it so now. The situation is like five or six really complicates things of which i doubt on any of them about new reverse repair facilities etc trick central but all the people i've spoken to kinda know the plumbing saying they're all gonna fail so the only way around this is to go straight back to q._a. Now there was then a battle is do begin to zero rates first and then q._a. or do we just start q._e. Somewhere in the middle of this break cutting cycle as well will treasuring the fed do this fast enough to stop the dollar absolutely exploding because if they don't you're going to blow up the world so you've got a really really precarious situation. I think it's gonna be too late today with it. But my guess is if investment banks writing research announce it and people are starting to realize i guess the fed is something realize they're gonna have to do something but i think that hoping that bill tweaks leaks in plumbing are gonna work but we're going to save ten bucks member again to be a bit of a bloodbath as massimo's liquidity get with jewel and then fed tron on sort this out by the end of the year preston. I often asked where we get our information for our analysis of the financial markets and i know that you get a lot of your information from a very known source. They would like to surprise most all business. Could you please elaborate on how you used twitter to become smarter about. A subject twitter is an absolute game changer and i'm seeing suck everybody i know into its tax because it is the greatest free exchange of inflammation the greatest minds in finance. I literally ever seen so when i go on and say. Does anybody know about funding. I get these five anonymous guys. You get what you need. No i ended up speaking to one of these guys and he is the head of fixing comes traps jeep one of the largest fixing confirms in the world but you wouldn't know it from twist because he doesn't make himself known people everywhere in the past reached people listened in somebody. Help me out. It's about the oil markets. I think they're gonna come down but i need to know and <unk>. I'd like ten people who were incredible. It was the head of hedging but one of the biggest tracking firms in the united states and he wouldn't disclose himself but privately said right how can so help you. It's extraordinary yeah and i don't think people realize how much were cheating by having this access to just shoot out a message and just how many people are feeding us information about what in the world's going on and i'm at times i don't feel like i can distribute it fast enough based on the the inflow of emails and just ran the messages you get from people that here you spread an idea or in the counter way. If you say something that's wrong. I don't know about you but we hear about it immediately. From one hundred different people all saying you might want to consider this aspect and then i'll throw chart at you and you're just kind of like your minds blown you like. I never thought of it that way. Yeah you know what's interesting is politics twin. Several celebrity twitter's not like finance towards whole that is a deep black hole of kind of narcissism and everything else at hat cool defend twit community is actually really generous with his time and knowledge yet. There's a bunch of dicks on there as well but really speaking at cool that komo consolidation of financial information that did not exist before is alive and well going back to your initial narrative that you were saying there for somebody who's here and that they're just thinking. This is going to be the big one right like this is. This is the perfect storm. I don't know how anyone could see it any other way. So who rallied powell is just the perfect storm that we're seeing. You don't want to say these things because there's always the possibility of being wrong but i've been following this this this whole thing started in march two thousand eighteen and i had a dinner with the anti he's actually just to twits which is a bizarre thing. Saddam had dinner and i'm like dan. I'm seeing some worrying signs and said yes monitoring talking through and we realized what we were seeing potential deflationary bust and it was coming <music> out of china so china was slowing us anybody at noticed what was happening was things like culprit. Oil was full and the currency markets were changing changing the stance originally started watching it and getting bullish on bones in august of last year and then the whole tray absolutely took off and and i realized that the world is slowing faster than i anticipated dollar is about to break out of its range of this painful to years if it properly break rigs how which is off seat just did against the chinese currency that cream wanted a bunch of others. E dolla compound starts to break then we've got a problem problem because everybody she'll dulles and donald payne hasso then you buy those back that means a bunch of companies and people are gonna go bust. It's probably the upset the entire apple of the european banking sector which is on what i refer to the clinton death when you look at the thirty year chop cotton. It's horrific. We've got the biggest challenge edison in the history of the currency markets in the eighty x y breaking as we speak <laughter>. We've got oil if it breaks any low than fifty three dollars level than that's kind of break down to probably fourteen and twenty and i haven't seen this obsess up like this well since two thousand eight so it is huge what's going on so can we stop it in the middle of this treasury about to start tightening by mistake. Can we stop this. I don't know there's always when you go into recession which i think we could have very high probability. We're going into now. The the global pay him is now fifty so we're going to recession he was going to hang your hat on. Something in a recession is usually one big. Thanks so two thousand eight was housing and banks. Two thousand was equities. The equity markets the over exposure to equities so what is but now by fear is european situations going to stop blowing at credit spreads and credit culprit credit market in the u._s. and globally because of the sheer amount of issuance is getting somewhat problematic so let me explain council debt-to-gdp has shrunk since the crisis because we would have been a bit careful financial data center g._d._p. That's come off government desperate sensitive g._d._p. That stabilized cooper that has doubled since two thousand nine so it is now seventy five percent of g._d._p. In the u._s. and ninety three percent of g._d._p. Worldwide of which everybody has been borrowing money to buy back tech shares so that's been the big feature of the markets and those shed by backs <hes> the only source of consistent buying equities to all all other market participants ourselves equities including the pension system so you got one bar records is which has driven by issuing debt and that dad who buys the debt that is actually bought by the pension system because the baby boomers retire every stampeding vehicles so what's really interesting in that scenario is is the real bar of that debt is the bankrupt state pension plans like illinois too illinois raise taxes exes specifically to plug that pension black holes so eloy tax receipts go straight into the pensions which goes straight to by the cooper cadet that these companies issuing okay so that's the mechanism. The problem is his. Both companies are able to buy back shares issued that because got enough cash flow but when the business cycle goes negative which it's going then they don't they don't have ability to issue is so they stop issuing dead at means they stopped buying shares which does know buys of equity okay so on this business cycle. You might have a hell of a downside but even more interestingly. If you look at tax receipts. They're also cyclical so they are obesity with the business cycle because people pay more taxes when things are going well by less tax on businesses. This is a game badly so suddenly the tax receipts are gonna stop to so there's no basel copa eva because both sides equation all the bosley so so if you think of the european banks in this now that credit plays so you're going to start to see credit spreads widen and it's quite systemic so what happens is the credit spreads widen well some of the company share prices start falling these triple b shares triple beam their investment grade only just and if they get downgraded to junk all hell breaks loose story goes on is that to all of these companies of which four trillion trillion dollars their own pension system the moment get downgraded to junk the pensions are not allowed by trust by the trustees to own them so they have to sell them so so they go into the junk bond market for john. Mark is a different buyer and the job market ready has a trillion dollars and it can't absorb this stop to who all these companies well. A trillion dollars is five companies is a._t. And t. which is the largest borough earth dell board general general motors general electric one of those guys get downgraded and the junk bond market colleagues orbit and the pension sellers again just kind of be selling it took credit spreads are gonna blow out but the critics prize blowout the equities full so it's going to stop pushing a._t. And t. so let's say jeez the person's ago well l. G. goes eight hundred why not like crazy. The equities going to stop getting slammed and the spreads widen if the spreads wiedeman looks like they're gonna get downgraded did before you know the ratings agency has the grand downgrade them they go into junk. Junk lombok entirely freezes so the only way out of this doom. Lou is essentially for the central bank to step in and underwrite the entire pension system the private sector and the state sector and that means it's gonna i have to say to easing to underwrite the pension system and that's gonna get pretty ugly and it's going to be huge but there is no other way about so if that is what happens next if the federal government has to underwrite that entire disaster one could argue that it would turn into a big currency issue but before for anything like this could happen. We also need to consider what the other central banks purdue as a reaction to this. How do you see this play out a much bigger problem on their hands because basically the incident banking system not insolvent pension system so they're gonna be things even more extreme and at the front of the queue of extremity is japan. Japan already owns sixty seventy percent of the time bomb market so the next q._e. Means they're going to one hundred percents vets what's so this is now. They can write off on debt to themselves and what does that. Do that probably collapses the currency. Which is the point you make about the u._s. So i think you're right about the u._s. Japan's doing this then europe's going to be on the precipice and the u._s. Europe and maybe china and whoever else has got maybe get together and think about some sort of global debt jubilee or some kind of way of managing this whole kind of fake currency crisis the final debt deflation so my deal is the answer probably lies somewhere within fussy. Goal is going to work within that system. Goal is going to go up because it has the price in this game and it's already centenary you can see how it trades even when the delegates up gold's up it knows its job which is like. I need to protect against this debasement. That's coming but the big thing for me is kurt type hannah's bitcoin this equation because i kinda feel like there's a parallel universe being developed as fast people can do it which is an alternative to all of this and that's why i'm credibly bullish on bitcoin as well so <hes> raoul. Let's talk about this from the investor standpoint. One could argue that gold. It is the best way to preserve your wealth. If what you're describing here actually takes place but there's this thing called bitcoin <hes> that's now out <hes>. What's the word heard what are your thoughts and what's its role moving forward. I think that it is one of the biggest concepts that ever gonna head around and i think anybody who thinks they know whether she's going is lying. What we can do is begin all guess but it seems to be is it seems to sold an enormous amounts of problems in that white paper because it solves everything from trusted ownership all assets particularly all digital assets any security anything tonight matt could be real estate. Well once you have blockchain abilities. You can find out the source of everything what's true and what's not so. There are so many things any. He's a currency. It's a meeting exchanges store valley. It's so many things it's quite ridiculous now. Everybody is developing certain aspects of it which bits are going to prevail vail. What is it. Maybe it's the new operating system to ownership. It is an extraordinary concepts and bitcoin has a part in this. This now is bitcoin the answer that the people are thinking that it's going to be the currency. I don't know right now it cannot be. It's too volatile because it still what is exponential growth. Tears needs to get fed valley would have about it is now. Maybe the plan b. Guys right and it's worth under trillion dollars well. It's not until it gets there which is basically interestingly enough about the size of global money supply so once it gets to the size of global money supply. It's price will be stable because it is the global supply before that we don't have a price so it doesn't really function meanwhile that could be sold by something like facebook libra which is an enormous concepts and itself. They kind a stumbled into this bent. They probably thought about. I don't think anybody realizes how big a deal lieber is. It may not happen but the genie's apps after the bottle which was a private sector player can basically invent a global s._t._o. Currency which has exposure to ole cards including clued door so the denominator against other currencies even against goals even against bitcoin but with this libra it wouldn't be it'd be positive basket so what is the denominator. It's probably global supply money. Okay so now you've got a extremely stable thing where it's very understanding what it these and it looks more like a crypto currency because it's all about supply supply and demand now a currency like that is really interesting because governments might allow it because does you can still pay your taxes. You're not supplanting. The actual existing currency underneath. We'll doing is using it pretending into the super security governance that minded because you're buying bonds because that's how you have to create this fun to do that. It's but anybody can do this now. Amazon could do that. Alabama could do that as anybody buddy. Could this works for the guy. The guy gone gone china brazil guy in england. We can use it as currency so that genie's bottle. It's not going away and i think so. That's very interesting so my overall view in this is bitcoin is the kind of big daddy lots of this but there's going to be a lot of resolutions solutions within that whole ecosystem and it's not just about currency sites about breaking down the different components of currency medium exchange store value that can be two who different things now so yeah. I'm extremely bullish. What are your thoughts on the immutability of the ledger so in bitcoin the whole bitcoin community is gonna make the argument that the reason bitcoin is gonna be paramount to any other digital asset is because no person it can be called to congress or any other governing body and be told you are going to adjust the ledger. This transaction took place between these two nations needs to be reverted in be redone with libra. You have facebook that you could call facebook in there. You could force them. You could put up whatever whatever law or tell them however you would go about doing that legally to reverse a transaction with bitcoin that is impossible because it's a distributed decentralized centralized ledger yes but the problem is is not what one hundred trillion dollars yet and it doesn't have the stability that's required so so maybe in the future that is the case but maybe there's a way to crazy disputes and legend that holds one of these global coins. That's called it that again. I don't know all i know is that there are a lot of probabilities at different outcomes digitization of everything that is really the big trend here and how do you zeke gold. It has had quite the bull run or the past. Call the six to eight months gold. It's just a probability on this end game. And how do we handicap that. I wouldn't give it above fifty percent odds yet because we're not in a recession situation. We're extrapolating file and that's what being macro guys always do. It's a lower probability still so gold has to adjust the probability of the outcome is starting to happen. Let's say the u._s. Does not getting into a deep recession. Some of this doom loop starts kicking off in the european banks extol happening. What is the value of gull. Is it abandoned percent. Does it get five thousand bucks. Show reason why not so has a very skewed would profile right now in the short term. That's pretty dumb. You know i think it's gonna struggle a little bit on writing dulles exploding higher over time madonna problem i also try gold verse zabuski of twenty seven currencies executing the and it's been outperforming all of them basically the second strongest currency in the world later lost the air so that's telling you something it's doing its job as a currency so as just as we speak in new zealand cut rights fifty basis points counc- fell another percent well guess what goals has been out ruling the kiwi dollar for awhile now an actual nailsea dollar and the korean won and the in bay and the euro and the pound and everything so it's not great job anybody are you sick currencies full because what the europeans doing what are the japanese doing. What are the chinese. The chinese currency guys from seven to eight to nine. Well forget it. The the u._s. doesn't count. That's a lot of buying dollars this guy no and if that happens in all of asia acetate audio against the dollar so it's really hard for the dollars go down and the europeans with irish as well if the federal in q._e. What what are the europeans gonna do. That's q._e. Times too and if they're doing that one of the japanese doings q._e. Times three so you know. I think it's a extraordinarily difficult situation for the u._s. I think everybody has a blind faith that out as soon as the fence cutting rates adult go down and i kept all the thing is they don't see enough. The dollar's gonna explode n._s. Exactly what's happened and i think in all of these situations. The delegates are aw so which are really saying is you don't think that the fed is independent and i'm not saying that in the context that i think a lot of people might interpret it as far as like politically within the political structure united states driving what they're doing. I'm saying the fed is not independent from other central banks those other central banks banks are absolutely dictating what the fed is going to have to do next because you've got global deflationary wave. That's the problem you're dealing with so every central find the d. balances currencies creating motivation. We saw this in the nineteen thirties. It's a well-known playbook so that deflationary wave and you can sit in commodity prices as you can see all over the place it is very very difficult to deal with which forces more and more extreme central bank outcomes which is why the fed was so terrified of this recession. Let's assume we're going into recession and would so keen to raise rights because they felt while at least we can cut rates again. I mean really they don't have to cut rates back to zero and three goes. It didn't help him. Its hole. Let's take a quick break and hear from today sponsor if you're anything like me. 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That's blinking spelled b. l. i. n. k. s. t. blinking dot com slash <unk> billionaire to start your free seven-day trial blinking dot com slash billionaire. If you don't know your numbers you don't know your business but the problem growing wrong businesses have the keeps them from the numbers is the hotchpotch of business systems they have one system for accounting another for sales another for inventory worry and so on and it's just a big inefficient mess taking up too much time in too many resources and that hurts the bottom line introducing net suite by the oracle. The businessman's been suffer the handles every aspect of your business in east us cloud platform giving you the visibility and control unique you to grow with net sweet you save time money and unneeded headaches by managing sales finance and accounting orders and human resources instantly right from your desktop or phone. That's why net sweet is the world's number one cloud business system and right now. That's wheat is offering you valuable insights with a free free guide seven key strategies to grow your profits at net sweet dot com slash t i p that's nets dot com slash t i p to download your free guide seven key strategies to grow your profits net sweet dot com slash t i p right back to the show so oh everyone that listens to our show is a stock investor. Are there any stocks that are going to perform well in this upcoming environment. Just give you the question listen. It's difficult to create a bullish equity arguments. I know there are some people that say if the u._s. is so strong dulles so strong the maybe u._s. Blue blue chips continues alcohol so it's a little bit tricky so you get into the bali driven worlds you know because valley's underperformed growth so much the easiest trait the world has been long bombs. It has been so easy because every outcome leads to lower yields almost no situation. I can find right now. It will see the yields rise yet rams. If there are no lending markets anymore what happens if crypto and blockchain allow the fractional ownership ship of everything and there's different ways of doing things maybe you don't get paid any longa to lend money maybe because lending so secure because of the recorded <music> ownership against certain assets it's riskless so maybe we'll becomes an equity base. Well who's pressing capsules bench. Capsule basically is a big change engine. How things are done it goes from thinking that in the past of your company you borrow money to to launch the banks and bill. I'm starting a company can abreau some money. I have gone what happens. Now is a v._c. Will give you money in exchange for equity because they think equity in this disruptive environment is an option and the option has more value than you'll sell it for so what's that saying is is also. It's kind of like burns right now. Boone's negative deal. Why would anybody bargained because galloping price. Every single day cares about the negative yields because they appreciate and price. I'm starting to think. I don't know whether the whole system lending borrowing and everything doesn't change. I'm not sure whether this is not entirely new system. That's being trolled. I'm not sure that even with the poss five hundred years of the jew alleged system and lending of money in that lenny money's being a couple of thousand years to the bomb markets is being done at seven hundred years since the italian sauce in it so the answer is i don't know maybe it's a different way. Maybe it's not inflation. The bond market blows up and we go back to the old system doesn't exist any longer brow. You have access to literally smartest people in the planet within finance. Have you heard anything thing the past year where you really thought wow this is completely changing the paradigm of harm seeing things. Here's a piece that somebody did unreal collision. Which is the discovery that all of these state pension systems we using tax receipts to buy these cope bonds that was like oh my god because i just platoon go together and just dropped out because the bone guys aren't talking to the equity guys so nobis knowing that what's going on here so that was a really big moment intimate. I think the potential pierra chat that we had because i got out of bitcoin in long from two hundred bucks about two thousand bucks and then that had been begging being made to look at it again he's into this is too much going on weekend's recession its bones bones bones familia by bones went on monds and dance sounds like yeah. I get it but you gotta go back to bitcoin so then eventually sat down with him and rail vision. That was a real eye opener for me realize okay. I knew things were developing but i haven't figured figured out how far this was moving and how big the full price is now getting so that was a really interesting conversation for me and kyle unveiling the complete bit show as the hong hong kong dollar was also the classic moment of real visual. I sat down with michael jordan getting on my god. This is a mess. Is there any way we can get access excess to the video clip that you're describing with the pension fund. I would love for our audience to be able to check this out. I'll give you the link. I think we got a new version of pro vision which is religion dot com forward slash free and that is as it says is a free bird. Now all of content discovered twenty percent or so. I think that he does that. I'll send you the link anyway. It's absolutely insane well row. What a pleasure having you on the show and we're recording this late in the evening. You made time out of your insanely busy busy schedule. I see all the places you guys go and i know for a fact. Everyone in our audience is going to benefit from tremendously so thank you please please give everybody a hand off to this amazing work that you guys are doing. I mean i've been touting real vision for years but tell people the address and where in what you guys are doing we basically built the net flicks finance and what is i'll mission is to democratize the very best financial information bringing to everybody because we don't believe the people like me of old in the middle of the financial system that we should have information it should be given to anybody to for one hundred and eighty dollars which essentially the net flicks you get access to do all of the famous hedge fund manages the greatest minds the analysts the strategists anything the very most elite hedge funds in the world get for nothing basically hundred dollars and then we started the free service to make even more ludicrous which is real vision. Don't come forward. Slash free to somebody can't afford it. Just wants to look at it is not as indulge in finance the socks off. Go there consume everything you want because all which on it too is help you navigate situations like the ones that look like it's lying ahead. We started in this business. Is this for exactly this reason and not fear mongering not trying to say this is definitely going to happen but there's a risk so people better educate themselves fast because if not you'll taking risks. You don't understand well raul. Thank you so much for coming on. We just really enjoyed this. Thank you again reached out to really appreciate it as well all right guys. That was all the press on. I have this week's episode of the podcast. We see each other again next week. Thanks for listening to access assess the show notes courses or forms go to the investors podcasts dot com to get your questions played on the show go to ask the investors dot com and win a free subscription to any of our courses on academy. This show is for entertainment purposes only before making investment decisions consult a professional this show. Oh is copyrighted by the i._p. Network written permission must be granted before syndication rebroadcasting on ah.

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Alibaba Founder Jack Ma Has Fallen Off The Radar. Here Are Some Clues Why

NPR's World Story of the Day

05:01 min | Last month

Alibaba Founder Jack Ma Has Fallen Off The Radar. Here Are Some Clues Why

"Jack ma is one of the world's most successful business people and until recently he was also among the more visible. The founder of china's giant company alibaba often turned up in interviews or at conferences on tv in two thousand seventeen. He gave advice at the world economic forum. Everyday's settle the only certain day was yesterday. That's why i should retire early. The man who said every day is uncertain now faces an uncertain fate and the man who often spoke in public has not appeared in months. He recently missed scheduled tv appearances. It's becoming more clear that this billionaires out of favor with china's government so what exactly happened to jack ma to find out. We placed a call to beijing a tech firm advisor named duncan clark nose jack mas business empire amazon alabama have some similarities but alibaba's more than that because imagine if you know half of the transactions you do in your day in the us were also controlled by the same company. Alibaba created a service called ali. Pay it's a system for making payments by phone using qr codes it's now used for billions of transactions and is making cash nearly obsolete ali pay was spun off into a company called ant financial last fall and financial was on the verge of an ipo. An initial public offering of stock potentially the largest in history. And that's when things started to go wrong dunkin clark who wrote a book about jack. Ma has known him for decades. Jack ma is an unusual tech entrepreneur. That he's not Tech idle a hit. A pretty modest background is come from wealth or connections. He was formerly an english teacher. that on his third attempt outside of the teaching became a very successful entrepreneur. He's an amazing communicator Which is odd. Because the reason we're talking about him is that he gave a terrible speech that much like a bit. That didn't go well. What did he say in october. Well in october he was speaking at something called abundant finance summit in shanghai. It was not the most important person in the room if you think in terms of the government regulators with there and he proceeded to basically tell them that they were an acronym sick that you cannot for example run. A an airport liked the way run a train station and then he effectively not any. He initially launched into an attack on the global financial system of banking but then he kind of moved his topic to china and said as i described that he he thought they were out of touch and that there was a new revolution. Coming was actually almost a for revolution in terms of the finance sector. What happened to his. Ipo after this speech It never happened. The stock was supposed to start trading in both hong kong and shanghai. China dual listing and Initially the regulators in china said it suspended. We've never heard an update. Subsequently the government has announced investigation into the sector also into alibaba itself and other tech platforms saying that. You know. it's time to check whether there's monopolistic behavior or excess power. So i think underlying this pushing back on jack. Ma is also a reassertion of the role of the state in the economy which is very much part of president. Xi jinping's agenda. When and. Where was jack ma last seen than than i mean basically i think after. He left the stage in terms of public appearances. That hasn't been one in two months now. My understanding is that he's been told to lay low. I think he just basically want him back in his box and wonders. If there's some degree jealousy your irritation for president xi or know the government in general that this rather uncontrollable figure as popping up in different places around the world to state the obvious you can be in a lucrative position but also very powerful position if you're present when money is changing hands and here's this guy running this company. That is almost literally everywhere. That money is changing hands. Is that such a powerful place to be that china's government would be especially concerned about what that company and what its leaders would do right. Well there is talk that maybe the government wants to you know take a stake or even take over these core payment companies because they're so essential both for the smooth operation of commerce but also a social level and this was what an did basically was used as payment method which actually go in very profitable. Because they're not they're not making that much money on these transactions but all the data they were building up they were then starting to sell financial products to these consumers because they knew they could see how much they were earning. How much they're spending so. It's like perfect transparency. So ultimately i think the government realized that this power was something that they needed it themselves. I think there will be a joint statement at some point by the government may be jack personally to reassure people that he's like a proof of life kinda thing but also that they're going to work together some face saving way but i don't think the ever can happen in the company probably broken dunkin. Clark thanks so much pleasure talking with you. Thank you my pleasure.

jack ma alibaba china duncan clark dunkin clark world economic forum shanghai Ma jack beijing ali alabama amazon Xi jinping hong kong government us China dunkin Clark
Why the Fed Has a Hidden Influence on Foreign Affairs

Knowledge@Wharton

24:26 min | 1 year ago

Why the Fed Has a Hidden Influence on Foreign Affairs

"Podcast is brought to you by knowledge award. Today. I'd like to welcome. David's airing to know which at Warton he's a professor of legal studies and business ethics and he's going to discuss with us. His new paper called shining, a light on the Federal Reserve's foreign affairs. Welcome, david. It's pleasure to be here. You know, we sometimes think of the fed, as a largely domestic organization whenever we see the fed in the news. It's about interest rates. Usually are you know what's that going to mean for the economy? And it's closely watched every EV it's like Kremlinology, right? You like they, they talk in mysterious ways, and we try to interpret it, and it's usually about domestic issues, but actually, it has a lot of connections, many, many connections to global the global financial system to of course. And so you have been looking into that. So why don't you tell us a little bit about what your research has found such as a round the idea of policy coordination? And I know that the paper covers a lot more than that, but that's a good one to start. Yeah, that's exactly right. People think of the fed is a domestic institution and it is an important ways. Our research work, I did with done with Peter Conte Brown. My colleague in the legal studies and business ethics department has. Focused on one of the ways in which the fed is really interested in its domestic pursuits as sometimes to the some inconsistency with the way it deals with its foreign counterparts, but the core of our research is this insight that the fed is increasingly engaged in relationships with other central banks and banking regulators, and that a lot of its foreign policy and domestic policy initiatives, are compounded, by the fact that it's interacting with these foreign central banks and foreign banking regulators. And we also found when we took a look at the history of the fed, which is a relatively young central Bank. It was founded in nineteen thirteen that this interest in foreign affairs and foreign policy was right there at the founding where one of the reasons to create an American central Bank was to sort of take on the Bank of England, which had its own sort of. Currency global currency of last resort. And it was something that American policy makers, very much were interested in maybe displacing. And one of the ways they tried to do that was to create a strong or somewhat strong American central Bank, which since then, as increasingly found itself, and meshed in these sort of foreign relationships. So we know that during the financial crisis that there were lots of problems, especially in, in North America and Europe. And that the fed coordinated closely with foreign banks and foreign financial officials to basically bail out the world economy, would what it more or less came down to that was an emergency. Maybe not something that was planned, or people would have hoped to see, but it happened, and now looking back, I guess, some people saying are we is our central Bank to intertwined with some of these foreign regulators or foreign banks and to, to the. Possible detriment of domestic affairs. That's right. When we think about who makes foreign policy in the United States. Some people put the leadership of that process at the executive branch with the president and congre, certainly, has a role to play in foreign affairs, declares war has to ratify treaties. It's supposed to regulate commerce with foreign nations, and one of the. Interesting aspects of our constitutional history as being the tug of war between these two parties congress and the executive branch for control over foreign affairs and what we saw in the financial crisis. Peter, and I document is that the fed an institution that's really neither accountable to congress nor the president. It's self-funded. It was created by congress, but it acts on its own. The president is not supposed to intervene. Really? Nothing. Quite like it at the federal level. There's there's a fourth branch. It's got a degree of independence from the political branches, which is remarkable never gets reviewed in court. The president's not supposed to mess with it. And the current president has been critical of it in a way which is resulted in some pushback from fed officials, and it shows up to testify to congress, but congress doesn't hold the purse-strings so during the financial crisis, what you had was this really independent institution making sure that there were enough da. Dollars out there, so that other banks would have access to dollars the currency of last resort during the financial crisis. So it did this through a pretty tricky maneuver. It extended swap lines that ultimately amounted to hundreds of billions of dollars to foreign central banks, which basically guaranteed them access to dollars and guarantee them access to dollars at a rate that was predictable and fixed. And then those central banks distributed those dollars to their, the banks that they regulated. And it was a way to get dollars in the hands of struggling financial institutions and many ways, it looked like good policy. The thing that is interesting about it. And we don't want to quibble too much after the fact is that it was good policy that was justified on something of a legal technicality. And that was never authorized by congress or explicitly supported by the president. Instead, the fed went out there and spent hundreds of billions of its own. Dollars on these walk lines and it did it on its own accord. So that's why we think increasingly looks like the fed has its own foreign policy priorities that may be different from those of congress and the president in your paper. I mean, the one figure hit that caught my eye and, you know, obviously, it's public record, but I didn't realize it was a high as the, the at one point, the fed had swapped currencies worth five hundred eighty three billion dollars. And that's not, not only is it huge. But you point out by way of comparison, that the entire foreign development assistance budget for USA. I d is only twenty two billion. So just put it in perspective. It's huge and the fed is a enormous player in international financial relations, and dwarfs all the other sort of financial support by. By other American regulators. And at some point, you know, something like a quarter of the Fed's balance sheet was devoted develop devoted to supporting these swap lines and that meant that the fed itself was holding all this foreign currency against which it had promised dollars. So everyone would pretty much agree that, that more or less save the world economy or at least Europe and North America from pretty much tanking. Correct. It's only helped one of the reasons and maybe we don't have to get too far into the weeds. But there's a one thing, the financial crisis revealed to us is the importance of the so-called euro dollar market, which are basically dollars held by anyone but financial institutions in particular offshore and the problem with the euro dollar market is that the, you know, the fed produces dollars in the supply of dollars, but it can't control what's happening, two dollars that aren't held in the United States or affect what it's doing. So. So what happened is that banks all of a sudden found that they were experiencing a run on their dollar reserves? They needed dollars to support their positions in the euro dollar market. And that's one of the things that the fed decided to give to them through these lines. So, of course, some critics might say, well, there was a cost of that, and, you know, what are we doing bailing out, these foreign banks in the retort to that is, obviously, well, if they go down, you know, that's going to release verily affect our own financial system. So but I think the point of your paper is more that, well, it worked out this time. Thank goodness. But maybe we need to have something more orderly setup so that we can make proper decisions in the future. Yes, in some ways, the, the swap line gambits is something like a gamble a big bed that the fed took, and it turned out that, that was the correct one. But one of the things you worry about is, whether these sorts of big one-sided, unhedged bets are going to turn out the right way. Every time the fed makes them. So that's one of the reasons why you think about oversight. It's also I think we're sort of sympathetic to Peter, and I are sympathetic to the idea that the fed had a role to play in stabilising the global financial system. But and it could be that most people agree with us on this. But it's certainly the case that, you know, congress never authorized this kind of big bail out of foreign banks with dollars who wanted access to dollars. And so there's some real accountability questions that are raised by you know the feds. Vision here. And one of the things that we think it shows is that in something's not in everything, but in some things, the feds are really a cosmopolitan entity it views the global financial system in Konomi as, as extremely interlinked, and so therefore instabilities in one part of the financial system can show up in one country or or series of countries and then affect financial institutions all over the world. And this sort of cosmopolitan view of how financing works affects the Fed's view of financial regulation, which thinks should be done on a global level and makes it willing to participate, and sort of global regulatory approach to financial stability that once again is, I think defensible, and in many cases, a good idea, but not everyone in this country would agree. That, that's the sort of thing that are central Bank ought to take on. So away to square the circle of fed, it's a good policy to have the fed be as independent as possible. But at the same time, that's not to say it can't overstep, those bounds or there aren't there, isn't some line beyond, which they need to be reviewed more closely, which is what you're referring to. So what would that look like I believe your paper talks about a twice yearly congressional review. And what would that look like? That's right. So one of the conclusions we have in this paper is that this is a difficult problem to solve because on the one hand one thing that we've cherished in this country, the idea that the central Bank is independent from political meddling, and so, at least until recently at least until recently, yeah, now, maybe, and we're, you know, we think that central Bank independence is as a worthy goal and everybody. At Warton thinks central Bank independence is important to a variety of different degrees, though. We would say that the decision about what to do with monetary policy and foreign relations. These decisions are in some ways political to some degree. They're gonna affect the way, we experience the government's, you know, control and oversight of all kinds of things that businesses want to do, so we want the fed to make decisions for technocratic smart reasons, we think that, that's most likely to keep inflation under control, which is one thing that essential Bank wants to do, but we also want the world and the United States and in particular congress to have a sense of what it is the fed thinks about it's international initiatives, and whether thinks are going to happen with those initiatives. So that's why Peter and I have a recommendation away to may be bring the Fed's central policy out into the light from. This sort of hidden shadows in which it's operated in the past. And our proposal is supposed to be modest and incremental and Jeeva ball. And we think that, that congress could responsibly ask the feds vice chair for supervision, who the current vice chair is the head of an international organization that involves a financial regulators from all over the world. He should come and testify twice a year to congress about what the fed plans to do. And next six months, and this kind of disclosure and sunshine. I think will solve some of the accountability problems that the fed faces by you know making the decisions that it's made in the past in a somewhat more of hidden not. I don't wanna talk conspiratorially, but unobserved way. So what happens when congress doesn't like what the fed has to say in that hearing. All right. So our proposal depends on the valley. Of disclosure, which of course, comes with some threat that the congress or the president will respond in some way, about we think that so far fed independence has been principal that's been strong enough to, you know, it's hard to it's hard to pass legislation. It's especially hard to pass legislation these days. And so the idea that congress could legislate to reverse some fed policy in some ways, we think that, that would only be something that would likely to happen, when there's a wide agreement that what the feds doing is bad in some way. And if there is that kind of wide agreement by political actors, that's a bipartisan and something that both houses of congress compassion, the president can sign then maybe there should be some sort of response. At least the fed should be aware that there could be some sort of response in that it has to think about the more politically cannibal branches when it acts. So that's injuries in boy and. And in most cases, it will at least have the, the benefit of, of airing. What's going on and bring it in into the lane as you're suggesting? Yeah. This is where we rely on some of those maxims that are associated with them. I think Louis Brandeis said that sunlight is the best disinfectant not that there's creepy crawlies hiding out there and what the central Bank is doing. But that disclosure is a good way to regulate especially when it comes to things like capital markets. And, you know, our approaches to look to the advantages of sunlight disclosure and communication. And we think that if, if the fed goes down that road, then it's much less likely that there will be some sort of outraged after the fact reaction to some decision. It's made about international relations that really don't enjoy the support. Of broad array of elected officials taking this up as interesting congress or the beginnings of interest. There is increasingly some effort to now that congress recognized that, that are financial regulators and not just the fed plane important role in when they enter into agreements with foreign regulators. That, that's a real source of policy making Congress's express some interest in doing something about that. So a couple of bills introduced in the last two years have asked federal regulators to come and report to congress, either before they enter into these international negotiations during the course of those negotiations and aspects of that are exactly the kind of thing that we're proposing in our paper. So interestingly, maybe you can quickly go through there's alternatives to your idea, all of which your paper suggests are not really very good ideas. But one won't you tick through them? So. Listeners and readers can be aware of them, right? So has I said earlier, we're looking for a Goldilocks solution something that gets the fed more public about what it wants to do with its foreign affairs policy, but not something that takes away. It's, you know, independence which we value, along with everyone else. And you could imagine some less attractive outcomes, that would maybe harm the central banks independent. So in example, would be a, an equivalent to the United States trade Representative the US financial Representative could be a cabinet level office, appointed by the president confirmed by the Senate who would enter into these foreign negotiations. And that is a straightforward way to ensure that the president basically has his foreign affairs negotiators all reporting to him. He's got the department of state, the US TR, and now the US bi-national Representative all singing from the same songbook in the president himself can sort of set up, what he wants that song to look like we worry that, that might be too much presidential that might make the president to important or give the president too much control over what the fed is up to. So this means that the president might want lots of swap lines when it looks like the economy's at risk and direct financial regulator to do it, and, and that in turn might affect monetary policy, where the fed is most interested in staying the course of staying independent. We can imagine doing nothing and that would leave the problems that Peter and I have identified, you know, out there somewhat hidden with the rest of America in the legislative and executive branches. Not really knowing what the fed is up to. Or we could imagine that some of these proposed legislation could go too far so requirements, that the fed set forth or other financial regulators set forth, their foreign policy in advance before congress take comments from any interested party present its negotiating position to the House Financial Services committee in the Senate, banking committee. This is a puritan some draft legislation, which hasn't gone anywhere and some other contexts, and that really would make it hard for the United States to have any sort of give and take between its financial regulators and foreign allies or potential allies. Instead, it would have to present every international effort is a fate accompli. Here's what we agreed to at home, and take it or leave it. And we think that, that doesn't give the fed the flexibility it might need to take on a financial crisis or something like it in the future. So it brings you back to the twice yearly. So. So peter. And I worried when we when we said. You're calling from more congressional testimony. Is that a exciting sort of solution to a problem accountability? And we in some ways, think it's the worst solution except for all the others. It gives you disclosure without taking away flexibility, without giving the president or congress too much control over over the foreign affairs of the financial regulators. So what else about all this haven't we talked about or having? I asked you that would important for. Listeners to know. Well. One. I think interesting aspect of this fed tension in the role, the fed plays in setting forth foreign policy, is that it's, it's a tension of some long standing, and so students who are interested in how the fed became what it is today. I think might be not, not just anyone who's interested in how the fed became what it is today is gonna be interested to know that it took sort of an effort to finance the Korean war. Treasury fed accord in the nineteen early nineteen fifties where the fed really strongly stood up for its power to set interest rates in a way that the White House didn't want. And in addition to the stuff, I've said about why the central Bank was set up that is a, that's a time, where the fed won its independence, or fought for its independ-. Silence in a period where the president was most interested in controlling what it is. The fed did with interest rates, and that fed independence came back and caused contortions in the United States during a Latin American debt crisis in the nineteen eighty s where the feds raising of inflation, or raising in American interest rates, very high to combat inflation. All of a sudden lead to a sovereign debt crisis where Latin American companies, which had relied on the, the -bility to roll over there dead at lower interest rates, all of a sudden looked like they wouldn't be able to pay back those debts and that to created required. A lot of contortion and the president's treasury department, they came up with this, this weird creature Nunez Brady bonds, which did address the situation. But there to the fed created a foreign policy problem for the president precisely because for them to get to that solution. Yeah. There was like horrible economic conditions in Latin America for a number of years before before that happened, yet very, very, very creative solution that maybe we would have liked to see a lot quicker than we did. And you know that this was still during the Cold War, and Latin American countries on the American side were, you know, pleading for help, and we're having a hard time getting it now. So, in other words, this problem fed foreign policy independence, has been a problem for a number of years, and it's, it's created headaches for the political branches. That's not to say the fed never works with the political branches during the Asian debt, crisis of the nineteen nineties, there was a famous committee to save the world, which involved, the fed share and the Treasury Secretary during the financial crisis of two thousand seven thirty thousand nine there was close communication between the treasury department and the Federal Reserve. And so the fed can cooperate and play ball with political accountable actors, but it doesn't always, and this long history of that is, I think something that aficionados of, you know, the Federal Reserve might find to be particularly interesting, so we shouldn't just rely on the big bet paying off in the future. We need something more more structured an orderly too. To, to help shine a light on the path we like decision making process, which is set forth in advance and something that that's often a good way to make decisions. It's often away to remove at hawk or outlier decision making from happen and ING, and so that's process oriented approach had been a lot of advantages to it. So that's why we, we want to set up something where everyone knows what's going to happen. And how communication is going to be made. And, and we think that as that communications made that will make for a better process, and more adequately ventilated decisions, terrific, thanks for coming in and explaining all of this to us, and it's pleasure. For more insight from knowledge, Warton, please, visit knowledge dot Morton dot U. Penn dot EDU.

Federal Reserve president congress United States congress Peter Conte Brown Warton Europe North America Bank of England Kremlinology David executive congress
LTB E408 Bitcoin Game Theory for Countries

Let's Talk Bitcoin!

25:33 min | 1 year ago

LTB E408 Bitcoin Game Theory for Countries

"It's august eighteen nineteen and this is episode four hundred eight. Let's talk bitcoin. Hey folks. I'm adam levine today's episode stark bitcoin. I'm here with stephanie murphy. Hi jonathan mohan and andreas 'em and opelousas. Hello thanks to all the hosts and listeners for sitting in on today's session so when it comes to bitcoin china has long been the elephant in the room in the old days minors in pools within china dominated the knepper cash power and was home to most of the global trading volume at least as far as the official numbers went despite or perhaps because of that burning interests the chinese government would then put in place in the strictest controls specifically on exchanges enabling the local yuan to flow into bitcoin and beyond the nation's capital controls all of this of course happened years ago but even with these limitations china's still a big if not the biggest player in and crypto currency and an ongoing opportunity for bitcoin recently. We've seen two signals out of china that may be slowly things are changing and i wanted to discuss both of the events and then and kind of think out what an accommodative china would look like two bitcoins prospects and i think that this topic is particularly well suited given that our last segment we discussed the opposite situation. That's happening in india where they seem to be becoming more negative and more controlling and more as we said the law that was written. They're effectively forbids ads andrei's from ever going back to even have private meetings because of the way that it's written so again with that in mind talking about china what we recently saw are two things things one is a court case that basically defined and set a precedent for bitcoin as just straight up property with the applicable a couple property rates rather than capital restrictions as typically we see and then we also saw the central bank of china roll out an info graphic that kind of actually you didn't accurate job of explaining how bitcoin works what the value proposition is behind the scarcity and why you know it's an investment that people are interested in while also explaining how it's fall dole and all those kind of other things you know again feeding off the conversation from last week are these tea leaves that i'm trying to read here that don't mean anything or is this actually usually potentially a slow thawing of the relationship with china and bitcoin. I love how we went from. India to china to tea leaves <hes> very appropriate transition. I think it is a slow steeping of china. You know it's strange because these things could go either way and i think trying to predict what's what's gonna happen next like how many times says china bands bitcoin so far you know one hundred sixty seven and we have like a counter somewhere well. There've been like three major banning incidents that i can remember. They're probably been a lot of smaller stuff too well. Here's a simple role of them. Which is you cannot ban bitcoin coin unless you first on bannet so in order to be able to ban bitcoin in the future china has to unbanning now and then they can again okay so you think it's that perhaps i don't know i mean i'm very confused about what's happening. I think think there is a very big strategic conflict going on here and the strategic conflict is that on the surface it appears that digital currency's cryptocurrencies journal are antibiotics to the authoritarian state control system of china's political system combat's on the other hand from geopolitical and strategic perspective crypto currency is one of the best weapons that china can use to undermine the global dollar system and find avenues to connect with trading partners like russia europe and others who are on the naughty list in kind of defiance of u._s. sanctions in u._s. Financial cartels like swift and so from that op perspective china split right. There's some options where if it's used too much by people inside china that could undermine state control but but if it's used by china at the state level it could be a great geopolitical tool and so i think that's one of the areas is in which this flip flops back and forth yeah. I think you pretty much immediately went to where i've been thinking about this as well is that dichotomy between the fact that they really want control over their local currency but also on the other hand there under the thumb of the global financial system and it's a thumb that's difficult all to get out from under and which bitcoin technologies like it yeah present really a viable path forward to breaking those monopolies in a non-confrontational way. I think that's kind of the most the interesting thing about it is that we're not just talking about some sort of abstract situation. We're talking about the u._s. Government and we're talking about the u._s. Dollar and ultimately we're talking about the u._s. Military which is enormous if not terribly efficient you know you look at how most of these changes of powers happen and it's hard to see world systems changing without out there being massive forms of disruption because typically what happens is that one country is winning to the exclusion of another country losing right and bitcoin it kind of changes that math because it actually provides not just bitcoin but bitcoin it's kind of the most emblematic and most perfect example of it provides this very interesting completely -pletely neutral platform that really does for the first time i think the history of global reserve currencies represent a level playing field that doesn't give an inherent advantage to any one user of it even if that user is the largest user on the system. It still doesn't matter because it's not something that's in the control of anyone which again gets us back to really the original the value proposition of bitcoin fundamental differentiation between it and projects like libra. I really think that in many ways bitcoin at least for now is is two english-language centric and western development centric to really be able to offer that relief all. I think that in many ways we are going to see the emergence in the interim period at least of things that are more the sino-centric more localized versions just like we didn't see ebay craigslist yahoo etc in china and then in the second wave we we didn't see amazon google the center we have a hundred chinese companies that most westerners have never heard of that are behemoths the size of amazon and google goal or bigger the dominate that environment and i wouldn't be surprised if we see something similar with chinese origin stable coins joins that are attempting to do some kind of regional dominance play where you see a lot of the surrounding satellites countries the neighbor in trade with china from south east asia you know laos cambodia vietnam thailand to india pakistan to the philippines and and other nations in the region all trading with chinese central crypto currency so it's going to be very complicated game you know as we talked about the three body problem album. It's private currencies like when we chat tonelli pay are enormous in china and they are doing pretty much. What lieber says it will do. Oh already they've already got fully built payment system. That is absolutely enormous. Not just in china. I remember half the shops in zurich. My most most recent visit would take we pay and alipay because they have a lot of chinese tourists in there. They do have a lot of volume. We recently talked with leo leo and christina from hong kong actually about kind of exactly this and their perspective was that the we chat currency in the alley pay currency had gotten popular because they were so easy to use and what actually happened is that has become more popular and especially recently a couple of months ago this happened. They've been pretty major crackdowns on who you you can make payments to with those services so just like a pay pal type situation in the early days. It's really useful because it's useful but eventually some of the utility winds up dropping away because all of these restrictions get added on top of it so it becomes basically like everything else yeah and a rival to that will be open public digital currencies but they're not necessarily going to be many of the same ones we see in western countries. I think we're gonna see much more local development now. Eventually these omay converge either in lueders above for directly through economic attrition but i think that market is so different and in many ways so separate from the western turn developments model that we will see local stop happening there same as we will see in russia and perhaps even india now i mean it seems inevitable that we're gonna see local stuff happen whenever i think the question is will they be separate systems. Are we talking about a system that doesn't interface with the system used by other parts of the world. You know like a local crypto currency system that simply he has no ability the inner change out the moment. You build a system like that so mould wants to build the system that interfaces because we're talking about money the system that interfaces creases doesn't have to be directly connected. You can have various mechanisms from the most primitive over the counter mechanisms to peer to peer mechanisms that are similar to hawala networks or cash transfer networks. You know so essentially bilateral debts exchanges by individuals who trust each other that form a node between the two systems all the way out to protocol integration at layer two with things like atomic swaps but the the markets will emerge naturally if you have two systems that will be trade between them because there needs to be trade between them so just again projecting a little bit out if we take like the idea that we're gonna see crypto currencies come out of china and they're going to be supported by the chinese government or by regional governments. What have you let me go for another article here. No matter where you draw the line in terms of open systems close system state controlled privately controlled corporal currencies or open public crypto currencies the main theme here were the main trend that started with bitcoin is the proliferation of alternatives no matter what we're now talking about a world in which thousands and thousands of systems emerged the compete were no longer restricted to eight hundred nine four national currencies are. We're seeing this explosion of choices. This and many of these choices are going to be more open. Some are going to be more closed. Some are going to be more stealthy so i'm going to be more public and some are going to be more endorsed by the states some going to be more contrary into the state but the fundamental underlying theme here is that there's too many to keep track draco and not just too many for us to keep track called but too many for regulators and enforcement agencies and anyone who who wants to put a thumb on these systems right so we were talking before about china trying to score amounts of under the thumb of the u._s. but everybody's got a foul on these systems right the problem is now underneath that found you've got a swarm of crypto currencies much like ants swarming you know to remind you of the cover of mastering bitcoin but there's a reason i use that image and it oh if you tried to eradicate the answer in your garden by going out and squishing them with your thumb. It's going to be a lot of squishing for a lot of nothing in the end of the day. Hey that'd be more so if we see official crypto currencies getting released in this area and they're going to interface with bitcoin. You know whether directly or indirectly then maybe maybe this strategy that we've seen so far from the chinese government actually makes sense band exchange to minimize capital flight while there is no equivalent alternative live that they like locally right so the policies that they have around exchange make sense they don't want anybody converting yuan into any of these other things or probably probably back the other way but they're more concerned about capital flight so if they're going to introduce their own versions of crypto currency but not actually ban or try and make them not compatible with the existing crypto currencies that are out there then we could effectively see in that circumstance really government approved if not government issued versions of crypto currency which might be very attractive to a local population because they have the ability to spend outside and so you don't need to have any other crypto currency right. You don't need to have access access to bitcoin because you can just use the local chinese version as the same thing as injuries were saying from a cultural standpoint. It seems like that might make sense especially. If it's an equivalent functionality optionality. It doesn't do everything that the chinese government perhaps would want and again the more they control at the less of an open and useful currency winds up being but still compared to the current the status quo where it's like offline yuan or you know crypto currency that they have no interest in which effectively allows people to skirt capital controls like right now. It's it's a lose lose but you introduce their own crypto currency and suddenly they are actually participating in the ecosystem and can win from that interaction well they would also have to ban libra and facebook coin. That's what i'm saying is like the strategy that i'm laying out is that they banned things until they have a competitor and they compete because the competition allows them not just to lose right now. It's just a lose lose for them. And in that case they can actually pull market share from other crypto currencies now. I think that's definitely the strategy. We're going to see and i think that's going to be a strategy. The gets a lot of compliments on board which is now they have a path forward which is issue essential back digital currency or so semiopen weird cryptocurrency or some local corporate currency and channel the demands into those rose and their lesser replicas but their local and that provides a good relief valve for the demand. It's a distraction traction game rights. It's bait and switch right but in doing so they actually do wind up introducing improved freedoms if that's the right word. I don't know like it's not something for nothing for people though right. It's actually an improvement over the status quo. Perhaps it's not to you know an ideal state but it is an improvement over the illiquid local version of the currency that you can't legally use for this stuff. I don't think so. I actually think it's dangerous because inevitably this move to digital currencies goes one of two ways you either move to a digital currency that is heavily controlled and surveilled or you have an open privates digital currency that is not heavily controlled and surveilled surveilled but both of those paths are at the expense of cash and other anonymous instruments meaning that all governments government moving to cashless societies and if people follow along on the path that funnel them into these surveilled and controlled currencies. It's much worse worse than the current status. Quo it's much less free than the status quo because the status quo still has this giant gray market of cash which is a relief valve for state our terrorism if you remove that by funneling everybody into digital currencies that are veiled in control. It's much worse so oh from an international economic freedom standpoint. This is an improvement but from the perspective of like anything though happened domestically. You're basically saying that this takes something that there is has no record of and is fully decentralized in that it's cash going from one hand to another and makes it so that there is that inherent record tie back too so this could actually be used as you said as a way to change the status quo for the negatives even if it makes it easier for things to happen it makes it easier for them to be tracked from central system as well yeah and you know the the situation is also getting worse for geopolitical perspective. I mean china's asserting its regional dominance and in doing so it's ruffling mm feathers all around the periphery and one of the things we're seeing now is what's happening in hong kong for example writes. The one country two systems is coming under enormous pressure by the local population and now they're lining up troops on the border same thing with taiwan one country two systems model model. Which is you know not to systems. How about one point eight systems have about one point six systems about one system that whole separation and is being eroded because china is exerting its control inevitably. That's going to cause pushback and what you're going to see the one of the ways. The pushback is gonna happen is through financial. Intial mechanisms like currencies. Hey folks adam levine here again with paul from edge for another quick sponsored minute so paul. I used to think of as a wallet but it seems like there's a lot more going on here. You're right at him. So edge is a wall built on jesse k which is open source as you for apps to be able to secure private keys for the user bunch like they do in edge with a simple username password to the back of keys but also it's the app transact on multiple different cryptocurrency currency blockchain bitcoin bitcoin cash ether tokens yose stellar and whatnot and it's actually being used by handful of great partners such as auger the decentralized fiction market on the theorem endorse professional network ember fund is an awesome decentralized hedge fund and even the top four bitcoin a._t._m. Operators and be use to learn more visit dot aps. Thanks paul. Thanks so much uh you know on the geopolitical side. None of this is happening in a vacuum and one of the things that what happened most recently. Is that the u._s. Central bank the federal reserve dropped the prime interest rate by twenty five basis points and it did that at a time when the economy by the metrics by which the government measures the economy if not in real life is about as good as it has ever been and all the metrics that the fed is supposed to respond to from this kind of data driven model actually like aren't saying that it needed to do that. It's the first time that that happened in. I think it was eleven years since the two thousand thousands seven crisis right it's like why do we need to juice an economy. That's doing grades is huge. It's better than ever greatest our economy and so why is the economy economy and a cocaine drip and why did it flat line as soon as we reduce the dose. It's not even that we reduced the dose necessarily like what andreas. I think you're talking about is is that the market basically has been going on the expectation that they would change this long term trend of raising rates and instead they lowered rates but the way that they lowered rates suggested suggested that they think that it's not going to be continued cycle of lowering rates. It's just one or two and so that was enough that the market had a very negative reaction to it because it didn't meet expectations nations but the point that you're making broadly about the state of the economy. I think that's the most interesting part to me. You know we very rarely talked about politics. It's interesting to me about trump is that trump is like the guy who gets into a situation and takes everything at face value and does everything as from the outside you would think that things need to be done on the inside and so he looks at the stock market and he looks at the federal reserve and things like that and he says oh well. This is how we measure productivity air go. I'm just gonna use the same tools as everybody else but it feels like in the past and we've had presidents who have done this. They've used the tools knowing fundamentally the lie behind them and fundamentally that these are tools that if pushed too far will we'll actually just prove that you're not leading the parade. You're actually just walking in front of the parade and in fact if you make a left turn and the prates go straight while you have no control of the prayed at all and sort of reveals does that. I don't really think this has anything to do with trump leading in any direction. This is a global phenomenon. Everybody claims williams to be a leader here but the bottom line is that the world's economies have managed to get themselves in a bit of a sticky situation and that means means that they've managed to concentrate a lot of the risk factors and correlates a lot of the risk factors by implementing these highly <unk> highly stimulus policies over a period of more than ten years and it's not just the u._s. It's most central banks. Wchs now are trapped in the zero interest range. They went down there. Some wins negative the conventional wisdom that you never go zero and you certainly don't go very low for very long because you will trap the economy and create mel investments was ignored award. They went zero now. They can't get out because every time they peak their head above the range between zero and two percent the markets rosa tantrum and now there are zero with notts much increasing return in terms of productivity growth so every dollar that goes into stimulus those in produce any growth anymore but if they take it away or if they stop stimulating the economy it goes into a nosedive so this isn't about the u._s. It's every reciprocal. Central bank in the developed world is currently trapped in this rate strange. I'm gonna push back to you on that just a little bit because i think that while you're right that this is a global thing that's happening opening. The reality is it's the u._s. Global reserve currency in the monetary policy that we've had here. That's really driving all of that as the u._s. Does this everyone else has to react act prior. Presidents understood that we can't do some of the things like even though technically we can have the types of devaluing policies these that were now apparently going to go down on the other hand. If we devalue then it makes it so that nobody devaluing matters anymore so to a certain extent extent although we're trapped at this part of the range the u._s. getting into it means that we're going to see a new part of this that we've never really seen before because the u._s. is taking steps and acting like every other central bank when they're not i think for our listeners away to understand these interest rate fluctuations and the stimulus policy. I'll use a different analogy. Which is you drink a cup of coffee. You feel more energetic and awake crates so you decide you can get more work done and be more productive. You drink a cup of coffee more energetic and awake you do more. You're very productive. Drink another cup of coffee now. It's time for your bedtime but you're so productive that you just keep working next morning. Drink another cup of coffee. You haven't slept all night and then you have another cup of coffee at some point. The coffee isn't making you more away. Now your or an exhausted jittery zombie and everyone's telling you you need to sleep dude and you're like no no. It just keeps feeding me coffee. The reason and i'm feeling crappy is because you cut me off my lovely coffee. I need more yeah. That's the stock market in a nutshell right now certainly and as a total aside as someone one who not that long ago did finals week you never want to exceed seven hundred and fifty milligrams of caffeine in your blood levels at any one time and coffee has a half life of about four our so if you're maximizing for a week long coffee bench just realize you wanna target under seven hundred milligrams at anyone period. Caffeine has a half life of four hours for men. I might add for women's actually longer. Oh good should know estrogen competes with caffeine metabolism but that's neither here nor there. I love the analogy so just like fed rates caffeine over stimulus is something that is overly complex. Yes yes so basically we are now living in the red bull economy and and the financial system is a jittery twitchy mass that hasn't slept in ten years and hasn't cleared out any the cobwebs and is unable to function and the solution. Everybody seems to bre- is more confident. Thanks for listening to this sort of. Let's mark bitcoin. Today's show sponsored by edge dot app and featured content by stephanie murphy. Jonathan logan andres antonoff lewis and adam. This episode was edited by stephen and featured music by jerry rubin's and general funds any questions questions. You know adam at l._t._v. showed dot com. It's a new york. Eldest adam at lt showed dot com. We'll see you next time <music>.

china u._s chinese government adam levine india china bank of china stephanie murphy official hong kong russia opelousas caffeine paul jonathan mohan andrei
How U.S. Banks Took Over the World

WSJ What's News

13:55 min | 1 year ago

How U.S. Banks Took Over the World

"The journal is a new podcast from gimblett media and the wall street journal about money business empower on this show. We show you how a company's bottom line affects the decisions. You make every day google's in cairo. Future is predicated on it continuing to be the one place you go for the answer to all information. We we follow the money and see where it takes us. This is one of the biggest financial heist that has ever happened period. The journal is out now on spotify or wherever you get your podcasts sponsored by merrill and linked in how u._s. banks took over the world u._s. Banks earn between sixteen seventy percent of the fees generated in banking global and british lawmakers upset boris johnson's brexit plan increasing the chances of the general election election the public less weaker but larger hurricane dorian florida. This is what's news from the wall street journal kim gittleson. Let's get started <music> now before we take a look at how u._s. Banks came to rule the global financial system a decade after they almost brought it down. Here's what you missed. Hurricane in dorian has weakened to a category two hurricane as it begins making its way north west. However forecasters warned that even though the storm has weakened. It's grown in size with hurricane. Hurricane-force winds extending sixty miles from its center in the bahamas prime minister hubert menace said the death toll from the storm had increased from five to seven people. Oh let me talk about. I initial assessment of arbuckle. Five deaths has already succumbed that would take that the number number of deaths to seven on again. I want to assure an informed beaming population. That'd be can john more debt to be recorded. Florida's governor ron descente said he was grateful. Florida was poised to dodge the worst. A hurricane in warning was issued for portions of the south carolina and north carolina coastlines and a man who went on a deadly mass shooting spree across west texas on saturday killing seven people and injuring twenty two others was barred under federal law from owning or buying firearms according to law enforcement officials court had previously veasley determined he was mentally unfit authorities said they were looking into whether the gunmen had bought the rifle and a private sale avoiding a background check federal law bars individuals joel's who've been found to be mentally unfit from purchasing or owning guns and british lawmakers delivered a blow to prime minister boris johnson's brexit strategy in a late night eight vo yesterday how well they took the first move towards passing law that would stop him from pushing through his brexit proposal at the end of the month. Here's how he reacted to the vote the consequences of this boat tonight it means that parliament is on the brink of wrecking any deal that we might it. He added that if british lawmakers do vote in favor of the bill today will be forced to call a general election. I don't want to election for the m._p.'s votes tomorrow to stop negotiations and to compel another pointless delay to brexit potentially for for years and that would be the only way to resolve this. I can confirm that we are tonight. Tabling a motion under the fixed term parliament matt's colchester is in london so max foof. What a night so what's going to happen today. And what does all this mean for brexit well. That's that's a very good question. <hes> we're expecting the house of commons to begin the process of passing a law that would force boris johnson to go to the e._u. And ask the <hes> october thirty first brexit deadline to be extended that law could take several days to actually wind its way through parliament it has to go through the house of commons through several votes there and then it also then has to go onto the house of lords <hes> where again brexit supporting lord's try and filibusters to slow it down but the rebel all seem confident they can get this law through meanwhile boris johnson will also table emotion for an election to happen whether the election actually happens is another question question. The opposition labor party has so far said they want to be sure that this law to delay brexit goes through parliament before they trigger any election so strangely strangely labor that a who spent years clamoring for an election may in fact vote today to block one and so that is the weird world of brexit the wherein you you can follow our coverage of the votes today up on our website now our main story sorry this morning. We're going to take a look at how u._s. Banks took over the world a decade after they caused the financial crisis last year u._s. Banks took home seven of every ten dollar. Merger fees six of every ten dollar in stock commissions in six of every ten dollars paid to hold and move corporate cash. Charlie turner has been finding out more from telus demus talk talk about some of the numbers that illustrate u._s. banking dominance so if you think about the world the population of the u._s. is smaller much smaller than that of europe europe as a whole and obviously much smaller than the collective countries of the asia pacific <hes> especially you know you throw in china and japan right the u._s. is relatively small population poppulation sense but in a banking sense it is dominant u._s. Banks despite really only coming from one country earn between sixty and seventy percent of the fees is generated in banking globally wasn't a quite a bit different in the nineteen nineties when the financial system went global and europe's banks were primed to benefit from globalisation sation once upon a time the the story banking was oh my gosh. The europeans are coming. There were some big deals done where european banks took over some storied u._s. names some some of them had been slightly troubled firms or a little bit past their prime but still it was a matter of y. The europeans have really arrived on wall street and all of a sudden. They were competing heating neck and neck in u._s. Board rooms with all of the brand name u._s. banks that have been around for years and years so for a long time. It was the story of ken the u._s. u._s. Hold onto its banks and that was actually one of the reasons behind the repeal of glass steagle which allowed commercial and retail banking to come together and part of the reason was will u._s. Banks be competitive with their european counterparts if we don't deregulate to this degree and so that motivated a huge change changing our banking laws to protect the idea of u._s. Banks being able to compete was the peak for european banks. I don't know five or so years ago when as you write global investment banking being fees were roughly split between european u._s. firms after the financial crisis. It looked like european banks. Were in a good spot <hes>. They were not at the epicenter of the u._s. Housing market driven financial crisis of two thousand eight and they were in a position. A lot of people thought to really grab some business from wall street. Which was you know some some wall street firms were being taken over by the government others were hobbled by big losses and things like that and it looked like europeans were in a great spot to really not just be the equals of but solidify their rivalry with the wall street banks and so at one point there was this global parody between the two regions all right so what was the turning point was it coming out of the financial crisis when u._s. banks sort of retrenched or did things turn sour for european banks. When global economy slumped or was was it both it took a couple of years after the fans crisis for this to really begin to play out and that's when you had what in europe was never quite as cute as the u._s. Financial crisis but was a series series of troubling events sort of slow burn of tepid growth other bad news especially when it came to the sovereign debt markets where there were a lot of banks that were hobbled by owning say greek bonds things like that and other just sort of lingering kind of problems in europe where the u._s. had cleaned up a lot of that aggressively after the rancho crisis europe which has more fractured regulatory environment took a different approach and so you had just really a bunch of things begin to <unk> hurt european banks at the same time that u._s. Banks were beginning to really recover from the crisis in the u._s. Fiscal policy and monetary policy was really helping u._s. S. banks but at the same time holding back european banks over that period you gave one example of american banks muscle at the beginning of your article when fiat chrysler and renault negotiated associated merger earlier this year. They enlisted u._s. banks to do the deal. I think that <hes> us was an example of wow these are conic european names and and companies who are turning to american banks to their most important work and we thought that that illustrated how american banks a feel local regionally that a big european company with primarily european you know market <hes> i can think about you know somebody from one of those banks like goldman sachs as being somebody who's as well versed in europe a european banker and it illustrates is that companies don't think about banking as kind of a regional thing anymore they just they will call the bank that they think is in the best position to do this type of work for them. You can find tell us his article with hoffman up on w._s._j. Dot com the journal is a new podcast from gimblett media media and the wall street journal about money business empower on this show. We show you how a company's bottom line affects the decisions you make every day. Google's higher future is predicated on in continuing to be the one place you go for the answer to all information reform low the money and see where it takes us. This is one of the biggest financial heist that has ever happened period. The journal is out now on spotify or wherever you get your podcasts sponsored by merrill and lincoln on to markets in hong kong the stock market surged after reports suggested the country's chief executive carrie lam was going to formally withdraw a controversial extradition bill. It's led to months of protests. Mike byrd has more from hong kong so what we saw after we had some local media reports saying that caroline was right on the edge of withdrawing the controversial. Oh extra addition bill sparked the protests earlier this year. He's so this boom in hong kong stock markets stocks exposed to the hong kong economy up about five percent today which is a pretty big move. <hes> some of the worst hit ones over the past few weeks particularly the property developers some of the big ones up eight nine percent so so this immediate reaction even before the news is substantiated that suggested <hes> markets have been really quite depressed by the continued protests. I don't think it's clear whether even in this case with the withdrawal of the extradition bill whether that would stop the protests but it does make it clear just how sensitive markets to the political news out of hong kong right now and now the scan. Here's what else were paying attention to today. Mm three more democratic presidential candidates rolled out their plans to address climate change kamala harris cory booker. Her and elizabeth warren unveiled plans including trillions of dollars in government investment ahead of a c._n._n. Townhall on climate change today several other prominent democratic attock opels including joe biden bidault rourke and bernie sanders had already released proposals. Finally recreational marijuana is legal in eleven states but when it comes to the airports in those states well. It's a grey zone are middle columnist. Scott mccartney has been looking at the confusing contradiction in federal and state laws when it comes to defying in some places like los angeles portland oregon <hes> even boston you can buy legally for recreational use use and you can take it to the airport. It gets a little trickier with the airport in not just sort of going in the front door but <hes> what happens when you get to the t._s._a. Checkpoint where federal jurisdiction takes over <hes> so it's it gets really tricky for travelers and that scott says is the key because the t._s._a. Site well. It really only has one role so yes. A is not a police agency t._s._a. Is an administrative agency and t._s._a.'s role in life is to detect threats to aviation and to people and marijuana's neither so if he stumbles upon <hes> marijuana ana the t._s._a. Agent can't prosecute you and so what they do is turn it over to the local police now in theory you know if they consider it a federal crime crime <hes> and it is a federal crime to take it across state lines magellan done that yet when you get the t._s._a. T._s._a.'s policing would be the f._b._i. Or the or the drug enforcement agency and they're just not there at the airport so you get into this sort of catch twenty two of t._s._a. May detect it and then turn it over to the local police in the locally says <hes> hey it's legal. What's the problem what's news from the wall street journal. Thanks for listening.

u._s Banks wall street journal europe boris johnson Hurricane hong kong florida google spotify marijuana prime minister merrill gimblett media kim gittleson bahamas
Heres Who Really Benefits From The Dominance Of The U.S. Dollar

Odd Lots

41:23 min | 9 months ago

Heres Who Really Benefits From The Dominance Of The U.S. Dollar

"Bull or bear recession recovery stimulus or stagnation. There's more than one side to every story catch to research analysts debating the effects of Cova nineteen on businesses and markets on the flipside podcast from Barclays Investment. Bank subscribe wherever you stream. Ooh Blue and welcome to another episode of the odd. Lots podcast. I'm Joe Weisenthal and I'm Tracy Alloway so Tracy. I hate to say that brought this whole crisis. There has been sort of one John of article or one genre of discussion. And I've never really been comfortable with. And that is people making really big picture forecasts or statements about sort of the future of the world. I Yeah I mean it feels like a little bit early to be jumping to discussing the second order effects right like there's so much to talk about right now as these things are actually unfolded. Yeah exactly and of course one of the big questions that's out there and that everyone wants you on and I'm GonNa give it to and I've written about it and I've talked about. It is what happens was sort of globalisation. What happens with future of the dollar the US's Preeminent role in the global financial system? We sort of talked about it a little bit with Adam to talk about it with other Other people as well and it's of course incredibly intriguing to discuss we still We just don't know anything. Yeah I think that's true and it definitely falls into one of those sort of big picture. Things that people are talking about at the moment. And it's something that we've sort of discussed on various episodes before right. Dollar dominance has definitely been a theme for the past year or so on our show. You little skeptical when I was like all. I don't think we should have these big picture. Future conversations. You seem a little skeptical of my now. I get it I mean. I don't think anyone really knows at the moment so a lot of it is speculation but also markets are always looking so I kind of get why people are naturally template to be looking at the big picture topics true. Yeah I guess you'd have to do so anyway. We're not going to make a big. We're not trying to make a big forecast here today. But as we talk about globalization as we talk about the dollar I do think it is useful to at least understand how it got to the current system what the current setup is. And what's actually yeah? Basically understand the the current world order and how we got her. Yeah I think that's a great idea and the dollar is so much a heart of the global financial system that we sort of take for granted. But it's definitely worthwhile to step back for a second and things like all. How did we get into a position? Where emerging markets are all like rushing to issue billions of dollars worth of dollar denominated debt? How did we get to a position? Where all of trade finances basically denominated in dollars. Why has that happened right exactly right and you know. There's a lot of misconceptions about all of this. How TRADE WORKS. Who benefits from the strong dollar or who benefits from the dollar permanent role we often hear of. Us ability to issue dollars as a privilege. But it's not. It's not really that a clear. We talked about this a little bit recently on an episode with met climb but the sort of the preference of different actors within the global economy regarding current arrangement is not as as clean as one might one might right and there is an argument that POPs up every once in a while but having the dollar so enmeshed in the financial system can actually be a negative for the US. And we've seen that crop recently with you know people talk about the Fed being the world's central banker does that sort of constrain. What it can do at times like this even before then so yeah definitely worth talking up okay. So today we are going to talk about that and we have a recent get. We actually talked about talk with him. Several weeks ago about Municipal debt when he is the CO author of a recent essay titled the Class Politics of the dollar system for the website. Phenomenal world is Yaacov Fagin. He's the associate director of the future. Capitalism program at the Berggruen Institute. And we're GONNA talk about how we got to this a the state how the dollar got to the state who really benefits from it. Who gets hurt from it and what it really means to preserve it so knockoff. Thank you very much for joining us. I should note that your co author. Dominick make it unfortunately today by glad we have you. What are you? Start by telling us what you The big picture of what your goal was with his essay. The class all its dollar system in sort of this essay was kind of a really long time coming And I really the person the two peop- The three people. I should probably think the most for kind of this happened are dominic who kind of got us to. Right. It's And the James Institute obviously for publishing yet but there's also someone else in the background of this essay. Is Nils Gilman? Who is my boss at the Berggruen Institute in over the years I've worked with him. We've had this very long conversation about we know. Why does the world use the dollar? And why is it a problem and he you know he's not specialist in international finance and this stuff is really technical and I spent like quite a long time kind of in a conversation with him like kind of pouring this stuff out right eventually told me you need to write this essay up right. You need to write an essay that just gives a literature review essentially of this kind of point of view of what the dollar system is politically. And why it's not necessarily you know very clear cut America versus the world story and so eventually this got written up right and that's the kind of story we're trying to tell is. It's very hard to pin down a national interest in the world that's hybrid as Perry Languid. Say Right it's a world in which there is a private system that's yearly inter mediating on an international level an a national in the system in which nations are essentially creating public goods called units of account right and that this international system mediates this hierarchy is of these units of account just as much as national power dynamics do so lucas through useless. Then talk about. The political system are around the dollar. What is that exactly? So argument is that it's actually class. Right is almost a or at least like social stratification as a kind of Meta politics right that the dollar is actually pretty good for a large cross section of people no matter what their position in the global value chain or where they're located and it's pretty bad for another other across sections again without considering international boundaries. That they are. It's pretty bad for a lot of people no matter where they're located or what part of the global value chain there though. This is similar again. I mentioned the intro. We recently talked to Matt Klein. Whose new book also explores some of these tensions that it doesn't really. It's not really so much about the. Us for China or the dollar another currency but that there are people all different positions around the world in any country who benefit from the existing system and people around the world who outlays out from the existing system. So let's start by talking about in your view. Who Benefits the most? What kind of actors in the global economy benefit the most from the Dollar dominance the role of the door. Well you know the way we put it is it's kind of elites especially run taking deletes within the United States and it's also elites especially capital owning elites in the in other countries are at an especially developing countries where there are also retaking league. So I think that's a kind of running theme through this. Is that this kind of the way. This system has evolved has really really encourage rent. Taking and the people who don't benefit are obviously people who are working people right who have do the work and are either getting worse jobs or not picking up most of the kind of surplus to their producing. Can you walk us through the mechanics of how this benefits that sort of a global elite and hurts a lot of workers? I imagine a lot of it has to do with these long run appreciation in the dollar which is walk. Us exactly how you see that working shirt right. So our story isn't as much based on appreciation or at least in or at least day to day exchange rates That's a whole other conversation about how that's measured but more about structures and institutions right. What the global dollar system does is give a privileged set of access to the international right. And what I mean by. That is the ability to choose where your wealth is stored. And how you store it and what kind of return so you have and that has long consequences rights so you have these. An argument for example Zoltan poisoner has made that. A lot of offshore plumbing is act that black hole he refers to his actually because of the accumulation of really wealthy entities. Right looking for somewhere to go. And that's not a privilege that most people can have access to right. I mean and the other thing is obviously you know the exploitation of rents of corruption. There's a really great book called dictators with a borders right by Alexander. Cooley and John Heather Shaw which really outlines how the international as the dollar and the creation of international money centers actually enables corruption in Central Asia and enables the Suppression of Democracy in Central Asia. Because what these dictators extrordinary able to do is partly out access to this international system. So if you're within if you're in say an elite within the ruling base you get to take the year proceeds offshore. If you're not you don't get to do that. Or they get prosecuted suddenly out of nowhere. And that's a dynamic. It's only possible with globalization. So we here a during the boom During the expansion there were all stories about Russian money or Chinese money or whatever it was flooding into dollar assets or real estate In the United States California New York City London other sort of so called Tier One cities essentially this internationalized financial system. Again of her. As you put it available to some available to the elites and theoretically available for elites to Dole out access to but that's clearly not something that say. Typical Chinese person or a typical Russian could do with their money so it creates a large on a large scale right to create a domestic domestic bifurcation in all different kinds of places. Not just yes. What about the impact on August employment and this trait landscape? This is the overlap with Mac. Kline's argument from a couple of episodes ago. But like what is the primacy of the dollar actually mean for the US trade deficit and the structure of the labor market? Well I mean that's actually like straightforward Matt Klein's and Mike Pence's argument which this is really like almost a tribute to right and it's like the simple accounting identity right. Kapil account surplus current account deficit. So you're always going to have a situation in which you know that. Us trade deficit is negative. As long as there's this giant desire for you as dollar-based assets and not only US dollar based assets you know created in the US but offshore that eventually will have to come at some point onto the into the continental us so the current account will become a positive but it's not even a full reflection of the demand for US dollars of to some extent right and that will create a trade deficit and that will create. We think that probably has something to do. With the fact that non tradable goods in particular services right have appreciated so much more in the United States in this is a kind of global phenomenon. But it's much more extreme in the United States. They have appreciated much more than tradeable goods and that is incredibly difficult for the average households. Right and you know. I don't think there's any particular magic to manufacturing jobs but it has made it has had you know especially regional consequences for manufacturing industries though to me. It's not as important what people do that. They're compensated fairly for what they do. And so it's not just manufacturing. It's the entire dynamic economy changes and you know. I use the term Dutch disease kind of as a joke but there is a kind of political story to Dutch disease about elites cool gain their incomes more and more of from rents and then a kind of service economy that lives off of the needs to the need to service those elites in whatever way they need to be service as creating extreme equality in bifurcation in an economy and I think that's pretty obvious for the. Us let alone the fact that those same studies say that really lowers the quality of governance us. Can you remind people what Dutch disease traditionally is within usually an EM commodities context. Like you hear it within a country that has a huge oil or oppor export. What the traditional use of that term is sort of a little bit what you mean by our allies in the US context. Yeah well like the term. Dutch Azizan usually am term. Is If you have a country that suddenly finds let's say a bunch of oil or any other valuable resource in that really makes the economy's exports dominated by that resource that really pushes up the value of their currency and because of that currency value that increase in currency value crowds out to all other industries. And eventually that has all kinds of problems development but it also creates political problems in which you do have increasingly small rent-seeking lead to a rights that controls that resource. That's making most the income so because and all the other industries are crowded out so you get an economy. That's really focused on one industry with a lot of the capital flowing to one set of people and everyone else working towards you know working for those people are not working very well. There was a second part to that question. Right what it means to the United States and that you know the joke we had and it's almost like a joke at actually came from. Ft Alphaville. Post by Brendan Greeley. We both liked like we should kind of think about this. Further is the United States exports is debt and its currency which is somewhat of form of credit do you see risk or an opportunity disruption or innovation future or fed. There's more than one side to every story so sharpen your own view. On today's biggest business and economic issues with the Flipside podcast from Barclays Investment Bank featuring to research analysts and one provocative debate subscribe to the flipside wherever you stream. You're painting a sort of maybe. Negative is in the right word but clearly. We're focused on the drawbacks of having dollar dominant dominant system are there any benefits to the US from having the greenback So enmeshed in the Financial System. There obviously tons of benefits to this right for the United States. One is you know the political power people call infrastructural power around kind of the key nodes of this global financial system that sit in the US. We don't think that's necessarily the primary motivation for how this system comes about or why it continues to operate. But there's obvious advantages in terms of what sanctions regimes can do in terms and in terms of what we know other political benefits to that or geostrategic ones. There's also you know the big economic benefit right and consequences that you know you can run a massive deficit and it won't really matter right. There's this question of you know. Deficit Finance or surplus finance Whether that's a universal feature of the deficits not mattering or not. That's an open question but I I think they certainly don't matter that much for the United States and because of that like we kind of argue that the deficit should be seen as a public resource right because that is to be redistributed so in some ways our deficit like the redistribution of our deficit should be thought of as our Norwegian Oil Fund survey into deployment. I know I. I've seen people argue that the US should have like are equivalent of a sovereign wealth fund or or the Alaskan oil fund. Or something like that. But this I'm one of those people are especially I think I've at Berggruen. We're actually kind of do advocate that and especially on a state level. We think it's really appropriate for states for example and should be done both state and national level explain further. What is the model like? If if the deficit is sort of our assets are equivalent of the Norwegian find. What do we would also be benefit from more explicit a state level or nationals sovereign wealth. Well I think those are somewhat different questions. I mean for the United States. It's obviously not going to be a natural resources. Going to be the ownership financial assets right and because of those inflows those financial assets will be very valuable on some level and you. There's a very good argument for the state owning some of them especially given the fact that in like the big assets in the United States for example the tech companies you know they were developed largely with taxpayer money end because an with like public investments. So I think the state should re recouping some of that value that is actually quite related to their bud. I don't necessarily think that's the same motivation as something like a Norwegian oil fund or a you know. The Singapore sovereign wealth funds or any of the sovereign wealth funds. You see which are really investing into some kind of resource right in export driven economy so in Singapore it's really like the manipulation of the their own currency rights. And a right so that's a resource events thing by sending the money outside same thing with Norway right. Norway is actually you know. Mostly invest is largely investing outside as well as inside with the influence to get it from oil so I think the United States should be doing the same in a variety of ways right state governments should be considering using them because they are you know not you know as we talked about before they aren't. They aren't financially sovereign in the same way. The national government is but even on a national level. There's been so much investment into valuable companies right by the public by the state and even you know there is a story that some of these assets are actually. I wouldn't say over value but the value of those assets are kind of larger. Because of the you know big capital inflows the US get so the state should get cut of that in that way. But I think in order to control this particular phenomenon. I think borrowing is actually much more you know. Borrowing Printing Your Hubbard who put it using the deficit. As a sovereign wealth fund equivalent is much more effective than a sovereign wealth fund would be for the same purpose precisely because we wouldn't be using a sovereign wealth fund in the United States the exact same way as Norway or Singapore does. It's not the equivalent when it comes to the environment there are. Let's say a lot of moving parts. Climate Change Air pollution water pollution nation neither species renewable energy super. That differ cycling. More is where parts per billion comes in. Join Me David. Scholtz on the parts per billion podcast every Wednesday to sort out everything that's going on in the environment from the courts to Congress to your backyard. Download and subscribe departs billion. Where every Yuga your podcast. And thanks for listening. I WANNA get back to the deficit idea because I guess. In talking about the drawbacks of dollar dominance for the US. The the subtext here is that will. Maybe there would be benefits if we had a system. That was less reliant on the dollar but how do you stack up those benefits versus having the privilege of being to not really pay that much attention to your deficit or at least not worried that much about it in the same way that say an emerging market. Would you know that's the thing? I am not sure? I think the dollar system has to be bad variety of ways of structuring dollar system. And really when we get to our alternatives at the bottom of the paper. You know we're not talking about bank core. We think it's you know bankers. A great idea that canes plan probably would have created a better world. But we're not getting there anytime soon and we don't think the dollar's GonNa be necessarily you know replaced anytime soon so. I think the question is more important. The more important question is how do we live with this system that has been created by privatized international space right and this is where put my historian hat on and tell you that you know for in global history? Release the study of a global society in global politics. The there's a very strong. I think. Correct argument that Empire International Space comes before the nation state and we don't really have a tool of governing the international space right. So we're we might be stuck with this thing. The point is how to fix it so I mean domestically it does mean using. The deficit is explicit redistributive tool and also explicit development tool which is. Why such big fans of you know the creation of these systems of development banks or Neo Ara Reconstruction Finance Corporation which would be able to leverage some of this stuff right in into productive investment right because we have very low infrastructure capacity right now so that's an easy thing to do for example right and it would improve equity may create and by creating while paying jobs and we probably will have to run a permanent fiscal policy. I think in order to create that. That's domestically I think. Internationally there a variety of ways of fixing it. There's this you know. There's been some suggestions by Nathan tank and other popular guest on your show and also that has been taken up either directly or just in parallel by Gordon. Brown up large in a letter. Actually are institute helps you know put together which would be to give the IMF swap lines to give the SDR's dollar like you know dollar like backing. Our Big One is that we think we can also be done somewhat unilaterally by the United States by integrating swap agreements right into trade agreements right. That would argue that in exchange for maintaining a reasonable traits Current account surplus surplus or deficit across this like. Free Trade Zone. You would have a guarantee that your currency will be backed by fed swap line in the event of a currency crisis. And that's a win win for everyone right and it's actually pretty interesting right. Because it's I mean there can be other conditions attached to that involving good governance Good macroeconomic macroprudential policy. That's a good way to sequence that because the their most time their currency crisis is your like the IMF comes in and it's trying to do all these austerity based reforms that don't really work and they actually make things worse so if you could incentivize some good macroprudential policy at the start of an agreement. Right is much more effective than doing it at the worst time. Possible when you need to rebuild a country's demand rights so I think that's a really great way of doing it and I think because the system has evolved. To give the US this ridiculous infrastructural power it should be onus of the US government to think this way. Just Roy together I guess the idea is that rather than dismantle dollar dominance which is something that people have been talking about and to some extent trying to do for decades now also to Joe's point in intro. People are talking about it again now and it's entirely unclear whether or not the current crisis is actually going to lead to that outcome. But rather than try to get rid of dollar dominance. The idea here is to try to use it differently. In order to sort of compensate for the downsides of that dollar dominance tried to redistribute the deficit per your idea and sort of offset or increase economic productivity the. Us is that right. Yes yes absolutely and increase you know equity of the world. That is a whole right. I think instead of dismantling a system which is very difficult and I don't think we necessarily I think the whole point of the say right is that it's not a political decision. It's a political economic decision. It's very hard to dismiss dismantle a system right. That's not been necessarily created with the purpose but has emerged out of you know underlying class and economic phenomena. So a better way to do this right would be to manage the system. It's hard to get there without an intermediate step of managing the system that exists rather than tearing it down so like I said at the very dicey to look at what we've experienced Just over the last two months for according to this may twenty first or maybe the last three months and try to make some abroad proclamations about what the future will look like so to do that. By in your view. The the stresses that we've seen on the system so far. Do you see tensions building that could materially change at least are pressuring the system in such a way we could get some sort of meaningful change. Either of it's sort of the end of this current dollar system or some sort of Rearrangement of it so that the benefits of it can be spread more equitably do the do the stresses and political pressure is an economic pressures north. In all around the world potentially move the ball in one direction or another in your so. This is the interesting part is. I'm actually not sure from the point of view of the people who can make a difference right now that there is that much stress on the system right. The system is operating in many ways. The way it should operate given how it's evolved right. Who is who is winning. And who is losing from it right and the people who can make a change for the most part are winning from it. Now I think in the long run. Maybe that's not sustainable. For though and that in the long run they should be thinking of like. Can we really go on with such bifurcating world? That is happening. You know both within and without our borders and that may be maybe there would someone out there with the political will especially you know. In the United States to put this at the forefront and really do something about it right for the good of the many but until you have such a change until you really have you know a set of governments that are interested in the common good. I'm not sure the system will change job. Because for the long-term it's operating exactly is designed to operate its well. I wouldn't say design but it's reflecting the underlying distributions of surplus. Let's say that have allowed to operate before so on that note if we all agree that it's difficult to change that system because you sort of have invested interests who are invested in it. How do you go about actually building grassroots support? I guess for for modifying it. How would you do that? You've written an essay but what would be the next steps you know. I kind of wish I knew if I did know I'd be doing it much more. I mean I think this essay and whatever else in writing because at least step one a bit right because you know you talk to anyone you talk to your family members. You talk to your friends about this. You Talk to even colleagues write that our senior. You don't specialize or think about these particular issues and it's an absolute mystery to people right and then when you start talking about it and kind of more approachable terms. I'm not sure if I did that or not but I tried. You know then people go. Why do we have this system? So it's GONNA take political organizing at the end and is going to take a very difficult kind of political organizing that might not just be national but transnational and you know it would be great if that worked. I'm not sure I'm the right person or anyone is the right per we know is the right person to do that. But I don or even if it'll depend definitely not dependent single personnel dependent a movement right. But that's the you know the only way to do this is to think about this with some intent. Reno would you sir? I mean just to and this kind of what I was going to get it without. My question is like we again this kind of client. There is some sort of like fury that the election of Donald Trump was an implicit or it had the potential to be sort of an implicit a rejection of this system. He did well among the Authencity a populations that haven't benefited you mentioned. Sort of regional manufacturing the will have not bribed in globalization. It was not a political movement. That was a rejection of the dollar system. Who's just baby some consequences of trajectories of us? And of course we haven't really seen any meaningful changes he's done some things on trade with China but nothing like that substantive in a lot of leads like Donald trump very much with could it be that the rejection of the system or the change just comes through wants to domestic changes such as what we're seeing the US but all around the world yes someone level you can like economic argue that Donald Trump and to an extent. I don't think that's the reason trump was elected. I think the reason trump was elected is over determined. There were so many factors behind it but yeah obviously that's one reason. Was You know the rejection of the harms of this system? But the problem is we're talking about trait right like one thing. I always try to get across in these discussions. This trade is only one element of this. And it's like a balloon right. If you shut it down at one place it will come out of another place. I don't know exactly how you politicize it but you need to politicize it systemically and you know there have been there has been some attend. There's the Baldwin Hawley a act that Peres behind. I think it will work to a certain extent but I think it. Has You know big downsides. Just actually might reintroduce a lot of very risky financial practices as we've seen during the crisis right So I think there are. That's one way of getting at it. I think we have introduced more internationalists way to try to get at it and I think hopefully some people want to do politics. Start thinking in this way and you know start to. Actually you know inform and build up systems like this. Maybe that's not for us to do you know where we were. Writers intellectuals were analysts. Our job is to try to speak to those empower and tell them. Hey it's not working thinking think about it in a different way well Jaka figuring a renegade having you on phenomenal I strongly encourage people to go check it out and set the website phenomenal world dot org class politics of the dollar system. Thanks for joining. Thank you for having me. That was good. I love talking with Yaacov again. This there is so much talk about the the dollar and who had benefits and so much of it is so like simplistic and it's it's extremely complicated like what the dollar's has demeaned and really Benefits from yeah. It's definitely it's sort of like a middle path in thinking about Dr Dominance but I have to say for someone who started this episode talking about how they don't like big picture ideas. This seems like a pretty big picture. Idea doesn't not don't get me wrong picture ideas. I think maybe I was saying he's like I don't like big picture like predict right. Maybe that's okay another big picture like we're all about here but I just mean like oh the world we're never going to go back to extra never gonNA trade with China the same yet or whatever it is we're gonNA shore all of our manufacturing because we had a shortage masks estim- stuff like it's like. Let's just wait if yeah okay. Well this definitely isn't a prediction in fact of was pretty upfront and talking about how this is all a very conceptual idea. And he isn't really sure how to get it done politically but I think I think also when we talk about this kind of stuff then you know. I sometimes think about this in connection with a modern monetary theory as well. But if we say that you know the thing that we thought was a problem isn't actually the problem. The problem is politics. I'm not sure that gets us very far. Like that's the sticking point and that seems to be the most difficult thing of all I had to have thought to. Which is that. If you have a set of people who broadly benefit from the existing system and those existing you ball are the ones who are in position to rent laws or change. How Society operates you do run into this situation of. It's like okay. Well like so who? Where does the political catalyst come from it? I thought your question to that is really important and you know. There's there's really no obvious answer to that it on again as you say modern monetary theory. It's okay so we can spend more into a lot more with fiscal policy than maybe a lot of mainstream views suggest but that doesn't give us any answers as to how we actually get people to vote for right. It's exactly it but like someone to actually vote to spend the money even if in theory fiscal governments are have much more flexibility on fiscal policy. And people really but I do like the idea of sort of using the deficit to redistribute to To America I like. That's an intriguing thing. And if it sort of offset some of the negative side effects that we've seen from dollar dominance you know the expansion of the trade deficit and the idea that the biggest export is dodge nominated financial assets versus something more tangible. Like which it's or something. That's an intriguing idea. I think definitely and again like the Alaska State Oil Fund and everyone. Who's a citizen of Alaska? It gets a check to benefit from that and so you could theoretically apply that model to the US as well as a whole in which the idea is like. Okay well the. Us is a major exporter of dollar dollar acids. So let's use that. Lets US debt? National Asset to distribute money more aggressively domestic. Yeah surely there. Let's see this has been a another episode of the thoughts? Podcast untrue alloway. You can follow me on twitter at Tracy Alloway and I'm Joe Weisenthal. You can follow me on twitter at the store and you should follow our guest on twitter. Yaacov Fagin he's on twitter at Buddy Yaacov and follow his co-author couldn't have them today but he's also great dominant laser. He's at dominic loser and you should also followed. The James Family Institute published the essay. Everyone should really go. Check it out. Gin In followed the Gruen institute alcoves Blur at Gruen. It's and follow our producer on twitter. Laura Carlson she's at Laura. Carlson Bloomberg had podcast. Francesca Levy F. French us today as well as all Bloomberg podcast. Check them out under the handle at podcasts. Thanks listening

Us Joe Weisenthal Dollar TRADE Yaacov Fagin America Donald Trump Singapore Tracy Alloway dominic Matt Klein John Heather Shaw Fed Buddy Yaacov Adam Cova twitter
Dictators in Moneyland: A Conversation with Oliver Bullough

Power 3.0 | Authoritarian Resurgence, Democratic Resilience

31:36 min | 1 year ago

Dictators in Moneyland: A Conversation with Oliver Bullough

"Hello everyone and welcome to the power three point. Oh podcasts examining authoritarian resurgence and democratic resilience billions in an era of globalization power three point. Oh was brought to you by the International Forum for Democratic Studies the Ideas Center at the National Endowment for Democracy. I'm your host Chris Walker Vice President for Studies and analysis at the endowment recording from our studio in Washington. DC and I'm your co host shanty colossal the senior director of Nets International Form for democratic studies all corruption poses a persistent challenge in Mo- societies its scope and impact can be kept in check back to a country's internal accountability and transparency mechanisms including independent media civil society impartial courts and legislative oversight and and Kleptocracy. Meanwhile is a system in which public institutions are used for a purpose. That's different to enable a network of KLEPTOCRATIC elites to steal funds for their own private gain in such instances internal checks on power neutralized the status captured by narrow interests who use the global financial system to launder wander and protect their ill gotten gains. This international dimension of Modern Kleptocracy creates a complex problem that requires new more sophisticated responses sponsors and in recent years the term talk rec- has grabbed attention in ways that are distinctive from its prior appearances today barely a week passes without some new revelation relation in the headlines Russian officials oligarchs with extraordinary lifestyles and luxurious homes in the Pasha's settings in Europe Chinese political leaders in their family family members sending millions of dollars overseas family members of African tyrants flaunting their sports cars and other extravagant possessions as they enjoy the protections afforded afforded by countries that observe the rule of law globalization and the ease with which money can flow through the financial system facilitates kleptocracy dampening the prospects specs for accountability in the countries where the theft occurs and ultimately corroding degrading democracy and rouge based institution where the money ends up this money Janis borderless making it difficult for law enforcement which is limited by national boundaries to stop it to shed further light on the phenomenon of Transnational Kleptocracy Chrissy and the tension between borderless money and bordered states replaced. Welcome to the power three point. Oh podcast Oliver Below an award winning journalist author and commentator specializing Schol ising in the former Soviet Union illicit money flows and the author of money land the inside story of the Crooks Kleptocrats who ruled the world which was named an economist. Book of the Dr Oliver were delighted to have you for today's discussion which in a riff on your title we've called dictators in money land so welcome Oliver for q firms for inviting me and colliver and thinking about what you've referred to as the dark side of globalization. What are the most important things that we need to understand in the context of modern kleptocracy? I think it's very important to understand that kleptocracy and corruption different a corruption has always been with us I think ever since there's been power people have abused their the power that is you know what satellite seems to be baked into human nature kleptocracy however is a relatively recent phenomenon it appeared in the one thousand nine hundred sixty s with the birth of your finance so what kleptocracies is a hybrid between a globalized financial system and corrupt officials so previously corrupt officials could steal money but there wasn't much they could do that wants to stolen it. They could bury it in the ground or if they spent it. It was kind of obvious what they were up you too but thanks to the anonymity and convenience provided by the global financial system now. They're able to steal money. Send it offshore bouncing around a few jurisdictions get their fingerprints of it and then spend it on whatever it is they want whether that Sir a yacht in the Netherlands or a Condo New Yorker or mansion in Malibu or or or a nice terraced house in Eaton Square London or whatever I'm you know that's the that's the amazing power of the financial system as it connects crooks and thieves who rule through Saturday so many developing countries with the great wealth havens of of of the West and this is like I say a modern phenomenon. It's it's it's a relatively recent thing and we're still really grappling with what it means and what you've just described really speaks to the the network dimension of this phenomenon in a sense. It sounds sounds like the KLEPTOCRATS have formed quite Brazilian networks. What's your sense of how the response to this network aspect of Kleptocracy accuracy has developed so far so far very weakly. I think a much more of the public understanding of corruption is informed by publications like Transparency International's corruption perceptions index which treats corruption is something discreet within a country. You know if you go to a country a Denmark say you won't get shaken. Condemn for bribe on the street. If you go to country B Azerbaijan then baps you will. I'm and therefore Denmark gets a high score on the index and has genius a low score. That's what's that this of the general public understanding of corruption but actually if you look at how corruption works at the ruling family of Azerbaijan steals hundreds of millions of dollars washes them off shore via Danish Bank Danske Bank whatever and then spends them on your property in Dubai or all influence in Washington or London or whatever it is that they wished to spend the money on producing movies anything so it is an inherently transnational institution Kleptocracy. It always involves more than one jurisdiction restriction it exists between jurisdictions and I think the world has been very very slow at understanding that and is only now catching up on it and so much these these networks established here that cover plug and play networks. Anyone can plug into them that so established that it's very difficult to disrupt them so so in your book you write modern. Kleptocracy is not just a question of stealing anything that's not nailed down it also consists of magic those assets into the limited offshore world where laws are negotiable and the police count follow so a couple of questions on that. I I I was wondering if you could briefly tell the story of offshore which you mentioned in your book and which is fascinating and why that's so fundamental the natural to the concept of Claw crecy and white important to that offshore was a was a creation of board bankers in the city of London in the late nineteen fifty s and early nineteen sixties essentially essentially after the decline of the British Empire and because of the Post War financial architecture of the world. I'm London went from being the world's leading financial centre to rapidly declining a second tier financial center on Wall Street had taken over London's previous role is the sort of financier of the world and there were bankers in London who essentially remembered how things used to be. I'm very much board with the the new order looks around essentially for a way to to make money for a new way of trading on what they did is they. They essentially identified that there was a large volume of cash sitting in Switzerland essentially primarily kleptocratic cash tax dodging cash which you just been put in parked in Swiss banks and wasn't really doing anything and they had kind of came to this equation. We'll look there's a lot of money not doing anything and we've got a lot of bankers who aren't doing kind of thing. Can't we bankers do something with that money and then we'll both be put to work what they created was essentially by by clever mixture of little bits of different countries regulations into into one unit. They created the what could the euro markets initially the euro currency markets in the European markets which were unregulated it spaces. I'm they existed geographically in London but they were not covered by British regulations and they they're. They're trading dollars because it wasn't happening. Geographically within the United States the Fed had no jurisdiction over it so essentially they created a shadow parallel financial system that exist outside of the regulations at the time and that gave save Kleptocrats and tax dodgers alike the space they needed to essentially. I'm not just steal money but then to move that money freely enter profit from the money that's stolen and this gave a great impetus to kleptocrats steel because if you can if you you can not only steel but enjoy the fruits of your theft that obviously you're much more likely to steal so this is when if you look at any kind of statistics for the growth of the amount of money held off shore it always starts in the in the early to mid nineteen sixties and then if you look at the kind of the really seriously the release of egregious kept critic thefts they start at the same time sunny a bachelor in in Nigeria the Marcus family early in the Philippines obviously the looting of the countries of South America you see the the this tendency particularly in ex-colonies begins ends in nineteen sixty s and then really just picks up essentially in a very steep curve up to in the nineteen ninety s obviously the former Soviet Union the two thousands China and then up to scandals the one MTV's scandal in Malaysia since then so you're off shore it remains what it always was which is essentially a a as an anteroom of the global financial the system when we're that Rauner regulation so global finance continues in a regulated way and then you step through a different door you're still in the same place and you've created a kind of legal space legal fiction where you kind of claiming that it's all taking place somewhere else because that's what offcial means it we think of offshore meaning baps a Caribbean island or perhaps in an island in the English Channel about Singapore. It isn't that offshore isn't there either of show is always somewhere else and in this way. I you know in my head is I try to conceptualize and you you sort that's essentially what you mean by money land right sort of this little world where it's sort of a shadow world looks like our world but anything goes and you talk about how the laws are negotiable. Police can't follow their Why is that I mean we we. We'd like to explore why they're there seems to be an attempt to rein rain in these kleptocratic practices and yet in this case borders. Ashley do seem to matter for law enforcement at least so globalization is incomplete. Essentially essentially what we have is a globalized financial system but still a national level enforcement system so money can go wherever it likes but but the lowest don't follow it so so inevitably what that means is that for you can move your money to wherever it will be best treated and this is what money land is money essentially the the what what you you get if you can put your money where you want and therefore you can essentially pick and choose what laws your money lives under but one thing. I'd keen to make clear in the book as offshore isn't justice something available for money and you can put anything offshore on if you're living in in Ukraine your government minister in Ukrainian looting the education system awesome. You don't want your children to have to live in an study in that education system. If you put your children at school in England your children are offshore. If you wish to you know travel all to see your children but you don't WanNa have to bother getting a visa you can buy these from Saint Kitts and Nevis Molterer Cypress or Dominika or of the countries and that point your citizenship is offshore off-shores at is a is a eminently expandable concept. That can take almost anything if you if you Sou- A business rival in the commercial court in London or in Stockholm your then injustices offshore if you sue a journalist who writes about you in London than your reputation is offshore. It's it's it's a much bigger concept than we normally give it credit for money. Landis is not just about money money. Land is a place where rich people go to put everything which they wanna keep safe and you know that money land is not just about money and you describe the innocence the technical mechanisms to move the money from Point A. Away from point a to a safer place in the view of the kleptocrats who do this but perhaps you could say a word about the knock on effects of the KLEPTOCRATIC resources entering different ecosystems. It's not benign. It's not neutral it actually starts to shape things and you might talk about what you mentioned in the book among other things this feedback loop in curbing curbing free expression that occurs when the bad money starts to find its way into open societies and rule of law environments the first thing to mention it is the extraordinarily negative impact. This has on the origin countries kleptocracy is a scourge in countries like Ukraine obviously Golden Nigeria Malaysia. This is this money is supposed to be paying for school. Supplies be paying for police officers salaries. It's supposed to be building roads building hospitals paying for soldiers Chris Boucher weaponry everything that a country needs to keep itself safe and prosperous insecure. This money is being stolen so the first point is that end of the of the pipeline. It is a disaster and you know there's nothing good about tool at the other end of the pipeline. It is also bad. I'm if you see the impact on on on the housing markets in the places where the money ends up in New York you know it has helped inflate prices in Manhattan beyond the reach of any average New Yorker the same in London Simon in places in south of France or in Paris so in that regard it drives inequality in wealth havens as well but yeah the the the point. Is that that any KLEPTOCRAT. Let's a craft they don't. They don't happy living in the ruins of the country which they looted. They want to live where their money is. They want to live somewhere nice. Whether that Zero Waco or cans or Monica were London. Wherever a New York Los Angeles you know so they wished to live in a prosperous Western rule of law country because they want to be subject to the to the problems that have created a but that then causes a problem because almost all of these countries that new traditionally all of these wealthy countries have also been democracy democracies open societies and Dafur journalists will write about you know if you are a cleft gutten you turn up and you start splashing your cash around. Jealous wants to write about you and that is a problem. So how do you solve that problem. Well fortunately the enablers of money land our solution which is the based on British defamation law which is very strict. I'm so so we have to do is establish a reputation in the UK as perhaps a philanthropist. You can give money to a a museum or money gunnery money to university. Make sure that that's publicized publicized of a foundation get a few members of the House of Lords on the on the board and therefore it makes it very very hard for any journalist Rice about you because if you if you are written about in a negative active way than your reputation has harmed you can sue then the point isn't so much that you might win the court case but the point is that it will cost the journalists so much just to prepare for the court case the sensually you there will be outgunned is rather let your playing poker against someone with a giant pile of chips and you've got to chips. It doesn't really matter that you've got a royal flush in your hand. You might win this hand but the next one you'RE GONNA lose. I mean the moment there is a the billion dollar whale about the one on TV scandal by to Wall Street Journal journalists is about republished in the UK. I it was published a year ago in the US and the reason for the delays that are very well resourced London law firm acting for the primary villain of the book. I'm Guy Kwajalein WHO's currently hiding in China he has retained a London Law Firm to essentially right extremely strongly worded letter into any bookseller any publisher uh anyone in the UK saying if you touch this you'll take you to the cleaners and this is an industry which then has this knock-on effect this the feedback newt that you mentioned which is that if journalist and write about these people then law enforcement often doesn't find out about them. You know this is journalists. Were key source for law enforcement nor enforcement com prosecute these people than these people don't get convicted and if they don't get convicted journalists cut right about them because you know it's the conviction of someone is a is a is a moment when you can write about them so you end up with people who should be disgraced people should be prosecuted essentially getting away scot-free because of the the way that money land this through the reputation laundries of money and keep people safe so you've described a fascinating phenomenon because I think the way we've traditionally understood corruption especially in developing countries with authoritarian systems is that okay you have these corrupt leaders at the top and they essentially corrupt all the institutions of accountability within their own country so that they themselves will not be brought to justice but if we understand this as a more transnational is national process and one that's been globalised to essentially operate across borders and you have these authoritarian leaders looting the money okay and then stashing it in other places also then going after institutions of accountability in the places where they choose to park their money and park their assets you you have an essence sort of this degradation of accountability that also follows them across borders. It's no longer confined to these authoritarian carrion countries that they have looted. I mean there's always been corruption. Obviously you know your countries to be corrupt. My countries to be corrupt countries corrupt one time you're the rule of law was built very slowly by in in many increments by battles between brave courts and politicians between brave journalists and politicians for for hundreds of years and we came to this point very slowly the reason why we were able to have that fight and why we were able to eventually win and build a rule of law jurisdiction was because the money stayed put so if someone was corrupt and committed a crime they could be prosecuted and they could lose the essence so essentially you it was it was a kind of a firefight everything took place within one jurisdiction the problem that offshore has created for all of these countries that are trying to follow the path that the UK and the US and other Western countries followed followed is that they want to democratize to they want to build prosperity and the rule of law to but it isn't a fair fight anymore because the the rules of the countries that corrupt people who are stealing all the money they have far AFA tools at their disposal than anyone opposing them you know and even if they lose if it like in Ukraine as a popular uprising in the class get driven out the money's gone they. They get to keep the money so it's it's it offshore is done is it has a essentially change. The calculation change the calculus. That is the basis of political development. You know we talk about countries. Developing countries and countries developed countries as if there is a train track that leads people. You know a a country from one state to the other. That's no longer the case. The train truck is broken instead. We have a different destination talk. CRECY which is where these countries will now end up and that is a you yeah uncharted territory. We don't know what that means. We don't know how you how you reverse out of that. Sighting end up back on the track that would like them to be following and it's a it's a very very serious situation and like I say something which I think has been significantly under appreciated if appreciated tool and in some respects to the extent that these practices are being diffused from the places where there isn't accountability and free expression into environments that we have assumed you should always have that to some degree. What sort of things in your view needs to happen in the coming period. That haven't happened to date in part because of an appreciation shake the problem in part because some of the structures that have been established weren't really designed for the sort of thing but taking that into account. What would you say interested parties and those who WanNa see better outcomes should really be focused on at this point. It's absolutely crucial that we know who owns what mm shell companies. you know the the architecture the structure of money land you know without shell companies or anonymous corporate structures of many kinds not just show companies but was partnerships and trusts and so on without them money. Lambert fall away. It is an anonymity of that allows you to hide your money so that is crucial. Oh the understanding who owns public beneficial ownership is best but if you can't have that at least took a central register beneficial ownership as the new bill currently in Congress his hair is arguing for that is very important because then you can see if someone owns more than they've earned that quite clearly there is questions that need to be onset and the second one is an I think this is as important in fact possibly more important is enforcement of the laws. We already have a in a particularly in European. Paying countries enforcement has been pathetic you know and if there is no downside to breaking the law if there's no downside to helping people still money even if it's illegal but you're not going to get caught and you should get. GonNa get cold. You're going to get prosecuted then. There's just no reason people not to engage in this behavior. I mean it's it's you sit across the spectrum human behaviour you know if you know enforcement does not exist then bad behavior becomes normalized and what's become known is is very very hard to change that so that dial needs needs to be forced back again and I do think small number of high profile prosecutions would change people's behavior in a big way wants to go it to jail it almost republican disgraced it makes a big big difference if you look at the way you know relatively small number of big prosecutions of international banks by the DOJ Jay changed the behavior of big players in the financial system that that has been very effective the same could work with lawyers to send could work with accountants and so those two strands what we really need what is proper reliable ownership registries on ideally public and the second one is for people who commit crimes the people who help others commit crimes to be properly prosecuted an prosecuted you know at an treated very seriously by the no not not just made to pay fine. You know they it would if punishable by fine is is a sentence that translates as legal rich people that people need to go to jail and you know that's in the same way that it prosecute any other serious crime against society and presumably to affect these sorts of things we also so need the sort of groups and figures and institutions that can adapt and deal with these issues as as they invariably will change themselves so the think you point this out in the book. Oliver that there's a lowest common denominator affect essence now where the money will move where circumstances allow which is a form of adaptation in a sense and to the extent that we haven't come mm to grips with the transnational aspects of Kleptocracy one would imagine that we also need to rethink the sort of instruments at our disposal in groups that are working on this this in order to adapt to these new challenges. Yeah I mean money. Land is endlessly immutable so if one jurisdiction starts treating money less generously than it did previously than the the money will leave and go somewhere else or if another country undercuts the first jurisdiction and start treating many more generously the money will go there. I'm is constantly elite shape shifting or insensitive setup I mean we saw this off to the financial crisis when in order to essentially four Switzerland to stop allowing mass-scale tax dodging by US tax payers the Congress Pasta Foreign Foreign Account Tax Compliance Act which impose impose transparency on foreign financial institutions. Did it very successfully the the world copied at bringing in the common reporting standard which is multilateral but fat carries only unilateral unilateral. What that means is that if you put your money in America you don't need to tell anyone where she put anywhere else do so a lot of that money responded money land responded by moving money out of Switzerland moving it into the US so this has been an absolute boon to the financial sectors of states like South Dakota Wyoming Nevada in places with with develop trust industries here in the US have done very well out of this and that that Dan poses a new challenge in that you gained a whole new groups of interested parties who he liked the status quo don't wanted to change in places like South Kota. I mean it was tough commenting. Switzerland it will be just as tough combating South Dakota so this is a problem in the that there is always an opportunity there is always somewhere that is more generous than other places and we need to be aware of that and keep looking where the money's going follow the money all the time and you can see where money land is you know this this battle essentially not because of the setup of the world is partial globalization globalization of money but not laws and regulation. Mama was with us in one way or another function of the way the wealth now works and the question is is trying to make it smaller and smaller and less and less dangerous and that can be achieved but it will be we need to be constantly constantly vigilant this battle with the current setup of world regulations this battle never be one but it can be we can be on the front foot on the backfired it you know it strikes strikes me that the one way of combat in this kind of networked. Kleptocracy is not simply through a patchwork of nationally bounded good laws and regulation. It's also trying to find methods of accountability that Rely On for Instance Journalism Network Journalism which you know your book is one example of of a very deep dive into how money crosses borders and you were able to dedicate time to do that and so on and I'm wondering if there's just in the way that you described describe the ways that current indices don't really capture this network globalized form of Kleptocracy current reporting tends to be on okay this. This country is corrupt. Here's a story of corruption that happened in this country and then the story stops there and what we're starting to see emerge more and more is a way to connect those dots across borders and you start start to see these efforts like the Panama papers and so on the do tried to tell the story of Kleptocracy and I wonder what your thoughts are on how I suppose apart from law enforcement civil society activists and so on can essentially take a cue from that shape shifting nature of Kleptocracy and try to shift their own shape in response to it. It's a very good point. I mean a transnational problem requires a transnational solution and the solution that the ICJ and other journalistic groups are the OCC R. P. We have done of working in groups across borders coordinating tightly to make sure that they understand that they're able to go everywhere. The money goes is is is brilliant and marvelous. Louis Yeah the Panama papers stories and other similar ones have been revelatory in terms of describing how money behaves how people hide it how the Nablus of Kleptocracy work but that cannot replace proper enforcement action at least partly because journalists if they are costing kleptocrats money are astonishingly vulnerable. I just need to save for a treat and treatment of Honduras my liver in Azerbaijan an you know other journalists in in Russia have been treated similarly badly you know if you are costing essentially what is essentially a matthew reparation money than a maturation responds in the way that Matthew Operations respond and that is a very dangerous thing to do so you know essentially this will require more than civil society require more than journalism that part of the answer but they don't don't have the tools to stand up to what are essentially mafia groups. You're that request government and government you know ideally the most powerful governments and there are which are the the big western the government's because it is a greater problem than any one of these. Greeks can talk on their own before we wrap up our conversation. I'd like to conclude with our final segment. Colin what we're reading where we discuss. What's the top of our respective reading lists and might recommend to our listeners Oliver. What what have you been looking at. I am currently reading of just finished. Actually book which I'm reviewing. I don't think it's out just yet comes out in a couple of weeks called the triumph of injustice by Menus and Gabriel Zuckerman who both academics at the University of California. It's a study of US Tax Policy in relation to the super rich over the last century or so. I'm the change in tax take changing enforcement and the kind of policies that might be required to to to try to recapture the super rich in the US tax network absolute fascinating book mercifully brief very well written considering during the complexity of the subject matter I've written I really enjoyed it. I find it very informative and also ties into the money documents about the misuse of offshoot jurisdictions in order to hide wealth in this case from the IRS and Chauncey. What are you looking so my pick is a book. It's not a new book but it does relate to this topic and it illuminates the ways. The transnational talkers is related to resource extraction in Africa particular so the books name is the looting machine warlords oligarchs corporation smugglers and the theft of Africa's wealth and it's written by Tom Burgess of the Financial Times it traces the global connections between oil copper diamonds and gold and the global network up traders bankers investors and politicians who power this looting machine described in the title which effectively impoverishes nations nations that in fact possess vast quantities quantities of wealth and also enables long-term autocrats to maintain their grip on power and I'm reading a report released earlier this summer by the International Forum for Democratic Studies here titled to catch a Kleptocrat lessons learned from the Bien Malachy case in France and the report Arthur to twelve Alicante uses the key case to examine how strategic litigation can be used to important effect in the battle against Transnational Kleptocracy and and he lays out some of the main takeaways from this effort specially how civil society can work more networked and coordinated way using strategies that it can combat the Kleptocrats in this case it was relevant to the leadership of Equatorial Guinea but I think it's well worth reading to get a sense of how civil society. Can Leverage leveraged the tools. It's at its disposal to feed into law enforcement in the rule of law system in places where it works well. We've run out of time for today I know are we just scratched the surface but thank you so much for being a guest today. Thank you very much for having me has been great. That's all for today's episode of the power three point. Oh podcast for more on the topic we discussed today we recommend reading Oliver. Belo's book money land the Inside Story of the Crooks and Kleptocrats who rolled world for further analysis of the themes we discussed gust today and we'll be examining and future podcast episodes visit our blog power three point no understanding modern authoritarian influence. We also invite you to join the conversation conversation with us on facebook and twitter where you can find us using the handle at think democracy additional resources available on the net website at. Www you dot net dot org slash ideas. If you enjoyed today's show please rate us on itunes. Google play or whichever podcast APP you use CBS special thanks to our podcast production team at the international forum guest producer Melissa Aiden and our editing and sound engineer Rachelle Faust with additional support by Jessica. I'm Sean Coletta with Chris Walker and Oliver Below. Hope you enjoyed this discussion on dictators and money man can invite you to tune in again the future power three point zero podcasts.

London Kleptocracy KLEPTOCRATS Dr Oliver United States theft Ukraine Switzerland Kleptocracy Soviet Union UK International Forum for Democr Azerbaijan China Kleptocrats France
Babbage: Libra takes a pounding

The Economist: Babbage

24:47 min | 1 year ago

Babbage: Libra takes a pounding

"This marketing transformation lead Jason Galloway about how KPMG is helping companies transform the way they do marketing this economist podcast is sponsored by KPMG KPMG helps companies anticipate tomorrow and deliver today stay tuned after this episode dear from KPMG's form the way they do marketing visit future of marketing DOT economist Dot Com global financial system is at risk from crypto currencies such as libra and unless it addresses their concerns libra may not get approval from the regulators. Thank you serve cash in highly liquid assets and to discuss this I'm joined in the studio by Tim Cross The Economist Technology Editor. Hello Tim Hi Ken Tim Lee Time and is headquartered in Geneva Switzerland and the idea is that libra will be a sort of globe spanning payments mechanism based to some degree and we're not really the idea is that rather than facebook being sold charge of this thing it's the Lieber Association of which facebook is a member but only one member that will govern how it works it sounded over the future of the cryptocurrency behind libra is that sending money should be as easy insecure sending a message we will be a global payment system fully backed by editor at the Economist and coming up on this week show timber mill Finland is changing the face of sustainable some American senators wrote to them and essentially said this thing is going to have to be very very tightly regulated you need to be really careful associating with now why don't countries like Lebron but first facebook's yet to be launched crypto currency called Libra has suffered numerous setbacks in recent weeks chairwoman waters ranking member mckenry and members of the committee thank you to top it off. FACEBOOK's Mark Zuckerberg is being grilled in America's Congress seven of its partners quit the project including visa MasterCard paypal and the high profile payments startup stripe then the G. Seven warned facebook has maybe sort of underestimated the size of the regulatory backlash to this so you mentioned some of it we've had that g seven report that you mentioned in the Intro we've had front saying India's a a huge market and there's been a lot of regulatory heat even in America where it's based so the rumor isn't it is only rumor that at least some of these companies left after aw to what degree on similar technologies to those that Underlie cryptocurrencies like Bitcoin tamed a bit to make it a bit more palatable for regulators and it's something that we do not see trust I think that's quite warring good and like Geneva Switzerland neutrality my heart's wounds it's so close to Basel wise everyone abandoning it well it's hard to know for sure but one of the patent seems to be Roy is struggling what is the Libra Association and why can't they hold it together so deliberately is a group of companies that one day assuming this thing and I ask Damian Brad feel we transfer what the trust festivus give we just look how much information we give away and how trusting we are four st through its cutting edge technology I think the world has a lot to learn from the finish meals and from the Finnish industry that's for sure L. particularly among government regulators popping up and saying Wiggins US something that's a bit like a cryptocurrency and the word cryptocurrency if you were regulator immediately confess I've spoken to an American banking regulator who is livid about the fact that it didn't actually indicate how it was going to handle its reserve makes you think of the fraud and scams and all kinds of you sometimes dodgy unregulated activity wiggins use this technology to try and disrupt something that's pretty fundamental to you know what it means to be a nation state to the idea of currency and how money and finances is handled so I think even from the start it was always going to be quite a mountain to climb so if you're a financial regulator what you've essentially got is facebook which is one of the world's least trusted tech companies Irv currencies that it was going to hold and how it was going to handle its overnight value of it it was very intricate but again we were talking at a Croaky bar in Tokyo flatly that they're just not corralitos operating fronts we've had India say the same thing and of course given that one of the use cases of libra is anqing the unbagged doing international remittances and stuff it was a pretty difficult pitch for them to make and facebook and Mark Zuckerberg's line has been that okay they recognize that they're not exactly the ideal of ecosystem agree on WHO's paid water who and it's very hard to see how that scales up to something that can handle the sort of tens of thousands of transactions any central oversight an order to get that anarchism into your currency you have to design a system this is where these blockchain's come in there essentially very launch will be responsible for sort of governing the currency so if we go back to the beginning in June facebook and a bunch of other companies signed up to this Lebron Association the twenty eight of them at the and tech companies like Vodafone blockchain startups does almost nobody now left with any direct experience of running system like this so basically the adults have left the room you could put databases with a really clunky consensus mechanism because instead of having one central overseer saying you know cans payment to tame gone through we have to have sort of all that way okay so I understand what's happening but it seems like there's a big idea behind all of this sort of a meteor thing what is that what's the story behind the story so company to be fronting this kind of plan but I think maybe they've underestimated the degree to which they really are not the ideal company to fund this kind of plan and I think this may be is is one reason every second or more that you would need to compete with the existing payment systems now maybe they can pull some kind of technical rabbit out of a hat but there is a lot of people who studied this that would make it a cryptocurrency and then the other argument is the regulatory wanted to what extent states have prepared to allow this and this goes right to the heart of what a nation processing facility in Finland near a town called advocacy it consumes six point five million cubic meters of wood a year and that equates this economist podcast is supported by capital one capital one is re imagining banking by offering accounts with no fiercer minimums that can be open the departures was so damaging because all of the phones that left were payment firms and if you look at Lebron Association now with one exception that people who are left their mix of venture capital the really big question in all this is whether a private company or you know a a group private companies can really sort of engineer a whole new global financial infrastructure out of nothing description just go to a communist dot com slash radio offer to get twelve issues for twelve dollars or twelve pounds next up that is the sound of trees being poked in a giant a two in the morning but it was such an intricate argument that I could barely follow it tell me what is the main reason why financial regulators don't like Lebron so I guess there's sort of two answers to that okay well thank you for being on the show thanks can and you can read more about Mark Zuckerberg's trials and tribulations in this week's economist and to take out from anywhere in five minutes capital one what's in your wallet capital one in a and so on but of course it's not just the American regulators he he has to satisfy Lee whether it was restricted to the US would not be a huge amount of us he's going to have to satisfy and the one that you got at two am in the Carioca men at work all that well on the radio either but these sort of broader less technical answer is if you look at facebook's pitch into all this on the other hand Zuckerberg said this will not launch until US regulators to satisfy that it complies with all these anti terrorist financing and your customer it does and if the nation state doesn't libra in its territory than they have some pretty big and pretty powerful levers if they can pull try and stop that what do you put your money on it forrest looks like the very intensive environmentalism but the mets group who operate the advocacy meal claims the very opposite to find out why so the consumption there is quite major but it's not just that it's big it is of course what it does so the Anacostia bioproducts meal is and one of the many reasons that cryptocurrency haven't really taken off is that the technology that underlies the is is pretty clunky and basically sort of anarchists dream of a currency without I'm joined on the phone from Finland by Katharina Culpa Pine and the development manager of metric group. Hello Katharina hello so I one large lorry loads of trees every six minutes day and night on the face of this such for pace industrialization of the finished goose going to outsource meals and where the would also then stays in in products that become carbon storage so for example buildings wouldn't buildings this resource efficiently as possible so that we get more value out of sidestream swell so can you explain bit by bit of the tree that you use rated in America in Europe and India in pretty much anywhere it's going to going to operate and I think again that's a pretty big hill to climb but 'cause whether something launches weather something properly aches often and develops and takes flight and is used there's sort of two different questions so you'd put your money on it but you wouldn't put your money in it I don't think I'm going to be being paid libra anytime soon. In bioproducts meal it is actually only eighty percent value coming out of the pulp and twenty percent out of all of the other products so of course in addition to to these all the solid break acid production there which we can do from the motorist gases that are created in in the system and then that skip using any any external to it definitely it is it is both and this is a great win win situation because the more wiser smarter resource efficiently we used the tree the touching next year I think you have to question now I mean it would be on the one hand it will be embarrassing for them to roll back and they have said twenty to the launch date and they're trying to inject a sense of urgency explain to us what this is why it's special idiots actually a very large would handle inside it is the largest side angling wooded the northern hemisphere he's one of the most efficient meals of course energy wise since it's a completely new meal river I wonder is this a Finland story they are small lots is kind of a mosaic structuring the forests and there's a long tradition in Finland Whitey's like that so so for us gas plant there and this is something completely new to the pulp and paper industry at the moment though I see that this is more environmentally efficient but is it more economically efficient you use it okay so first of all the pout male we only get the feelings and the thing the parts of the trees so we want to ensure that the lodge load can this be globalized well I think part of this is due to how we manage for us how they are owned in Finland they are privately owned outbreak essays but one other new product is coming away from would because in in wastewater plants we create sludges and typically these largest just reaching stages drying and then to to chemical pulp bales that we can ship but maybe most of the new new things are then in the recovery cycle combusted but of course in in some other fields difference launches an Arabic digested to buy a gas and this is what we are doing in the biproduct meal so so we have so we put in Pulpwood debarking and bought of this bark is then used to fuel the lime kiln through gasification so we can guess bird or copied in in other parts of the world because there is so much tradition behind it but of course parts of it can definitely the way we look at I think the world has a lot to learn from the finish meals and from the Finnish industry that's for sure it sounds like you're like these sort of like saintly miracle executives who are saving the world five to go into new value chains and make the meals energy efficient reduce the environmental impact that they have of course this is a natural way to yours the trees on it happens to be very sustainable at the moment so it cannot be very easily maybe transfer entreat time well I have to say it's a really rewarding industry to work in because the basis for the business is so could it is the Nordic would that was a pleasure and finally what is the relationship between the Internet and ethics they don't have to be contradictory they could be complementary at least waist growing so no no matter all of these industrial use it is still growing wow this is going to be really transformative thank you very much Katrina thank you so much Kennedy I think that to the extent that we were really cryptocurrency it's going to find it very hard to scale up for technical reasons and to the extent that can scale up the technical reasons it will have to ditch some of the things we know it is grown sustainably it's mostly eighty percent certified ninety percent of what we use this certified it is family owned material products we we are a major producer of green electricity which was l. to the finish read so that's one big part there as a as a side product and the bioproducts meals and there was no real simple way to get files from ABC we transfer is just the simplest way possible to deliver something to a client or customer friend a pulp mill and what you can do also continue for example wants textile fibers that we are doing oestrus try to create ways for these sustainable alley by respecting user privacy and Damian has written a book about the importance of Technology and ethics called the trust manifesto what you need to do to create a better internet any joins me in the studio Hello Damien Hello thank you very much having me so let's begin here where did the idea for we transfer come from it came from without any sign up without any real friction and without any banner ads and you know back in two thousand nine it was like the peak of destruction and banner ads it wasn't a various whatever we do to the tree creates local value in the country in case of Finland the forests stock carbon stock is called by product meal because we want to emphasize the fact that it doesn't just make pulp as regular about misty but but we want to use the wood and our mission was to try to keep people in that state of flow so that they could just get on with making more work and use our service as and when they needed to but that is what Damian Brownfield senior executive at we transfer the web file sharing platform believes the company tries to distance itself from the tech giant's and silicon get your attention and then you're gonNA Click and disappear Morales and our methodology was always just WanNa do something that looks aesthetically pleasing and believe that over time people will actually get away from the distraction of closing the loop that most technology companies are into By being just saying you know as a as a high street store the doors begins net back in two thousand and nine okay so there's no friction no banner ads no revenue how do you make money we actually broke even in two thousand we've taken a very lean approach to data viewpoint was always that we wanted to deliver a service to our customers and create trust and we believe that we about using the data of the interactions that you're seeing to create a whole new product or service around it again we very light on data so the way the advocate being in the media world working in two thousand nine where still many things are being sent on curious. DVD CD ROMS delivering assets. All over the world is in business worked for nearly ten years was really around looking at how we could basically zig when everyone else is zagging the that the advertising revenue is most generated online is through Um you know at capturing people's attention Google and facebook where eighty seven cents on the dollar are we using the Internet and I think it's important that we when we're spending so much time on the Internet and my kids eleven and four teams up with twenty hours a week you know in some way advertising on the Internet let's go back to the ground truth of how technology companies operate and this idea of the trust manifesto tell me what is the trust manifesto goes of all marketing budgets is based around trying to capture your capture your attention and collect more data to get more insight and our model was very much about values create out of each so there's actually clear numbers for that if you not typical palpable we get ninety percent value out of the polyp and ten percent comes from the rest burner gas in the LIMEKILN and then skip using heavy fuel oil and then when the wood is chipped it goes to the digesters then through Washington Oh and so you sit on a lot of data how do you use it to optimize what you do to turn it back into a product or service to the customer so historic fourteen already and our money bags than initially came from straight appetizing but we had just one billboard so it was massive ad run in the background of we transfer motivate people to follow that example or do you accept the fact that in fact that there's a limit to how big you can be I think there is a limit to how big you can be I think we've seen we give away and how trusting we are of something that we don't actually trust I think that's quite worrying and if just reconsidered the amount of time that we spend online in in my book I referenced Ben and Jerry's Ben and Jerry's is a fantastic case point that you know these two hippies in Vermont back in the sixties setup these values for how they wanted to operate it didn't harass anybody but we just tried to really put across branding and no one was really dum branding at the time on the Internet it was very much driven by you know I'm GonNa Flash something at you hopefully do it by actually leaving people alone and if you're in the creative sector we were talking earlier on about you traveling on the train and not want to be disrupted by having WIFI that by not peeing people's phones with notifications at their we transfer has arrived or it's been downloaded I get that but what about using information to optimize the service right so your most effective when you're on Wifi if you're creative the hardest thing few to get into his State of flow and the easiest thing is to be distracted me is someone in business and me in some way shape or form having something to do with government and hit me up with your best ideas what can we do we really need to take stock of how in environments we don't necessarily trust and look at what we would expect in the offline world I think we'd have a very different web experience and we would dimond more of big tech how can we impact these two hippies that have they've made over a massive corporation I think we'll see the same happening through technology people spend so much time with the Inter the web but they treated very differently to the way that they would do the offline world and I think if we just consider how much time we spend in the online world and look at how much information we are going to put up billboards of the web and allow people basically just through recognition to to come back and we completely changed the way the people be so much more financially focused and that's really causing them to change their own skill set what kinds of skills they need to bring to the table and how does that differ from say ten years ago it's really about it's really a book about trying to ignite some dialogue around what we

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Editors Picks: October 12th 2020

The Economist: Editor's Picks

24:44 min | 5 months ago

Editors Picks: October 12th 2020

"When you need your bank capital, one is right in the palm of your hand. So you can check your balance deposit checks, pay bills, and transfer money from your phone with a top rated APP and when you're done banking, put it back in your pocket, a banking experience built around you and your life. This is banking reimagined, get started online anytime what's in your Wallet Capital One and a member FDIC. It's Monday the twelfth of October twenty twenty. I'm Rosie blow editor of eighteen, forty, three, the economists system magazine. Welcome to editor's picks where you can hit three highlights read aloud from the Economist. This week our cover story in Asia, looks ahead to the monster listing of aunt group China's largest Fintech firm. Ans- right shares how the global financial system is being transformed. Our other cover story assesses the economic consequences of the pandemic. More than a million people worldwide have died from corona virus and it's caused the welds economies to diverge, but it's long term impact will be even more far-reaching. and. Finally, Lexington our column on American politics is on the election miniature in a small town in Pennsylvania. The stories you're about to hear are just a sample of what's on offering economists this week with subscription you can read or listen to all of what we do including regular content from eighteen forty three. Go to a communist dot com slash podcast of your best introductory rate. The link is in the show aches. Stop on the March and Group and the rise of. Digital Finance. In thirteen hundred or so Marco Polo of Venetia Merchant introduced Europeans to a monetary marvel witnessed in China. The emperor he wrote causes the Bark of trees made into something like paper to pass for money all over his country. Eventually, the West also adopted paper money some six centuries after China invented it. More recent foreign travelers to China have come back Agog at the next big step for money. The total disappearance of paper replaced by pixels are thrown screens. China's preeminence in digital money is likely to be on display in the next few weeks with the monster listing of aunt group, its largest fintech firm in Hong, Kong and Shanghai. Measured by cash raised, it will probably be the biggest initial public offering in history beating Saudi Aramco's last year once listed and which was formed in two thousand and four could have a similar value to J. P. Morgan Chase. The world's biggest bank which traces its roots to seventeen, nine, thousand nine. Aunts rise worries hawks in the White House and then throws global investors. It portends a bigger transformation of how the financial system works not just in China but around the world. Jamie. Diamond J. P. Morgan's boss and others have kept a wary and admiring I on and for years. Spun off from Alibaba an ECOMMERCE firm. It has over one billion users mostly in China and it's payments network carried sixteen trillion dollars of transactions. Last year connecting eighty million merchants payments adjust the appetizer uses can borrow money choose from six thousand investment products and buy health insurance. Imagine if Main Street Banks Wall Street's brokers Boston's asset managers and Connecticut's insurers all shrunk to fit into a single APP designed in Silicon Valley that almost everyone used. Other Chinese firms notably ten cent which owns the we chat. APP also operate cutting edge FINTECH arms. China is not alone the pandemic has supercharged activity elsewhere alongside the surge in global ECOMMERCE and remote working there has been an accompanying boom in digital payments which have jumped by fifty two percent Advan Mo-, an American network compared with last year, and by one hundred, forty, two percent at mccarter Pago Latin American Fintech. Parisian farmers markets pizza firms, and Singaporean hawkers have upgraded their systems so they can be paid instantly without physical contact or cash. Investors sense a tectonic shift like the one that shook retailing conventional banks now account for only seventy two percent of the stock market value of the global banking and payments industry down from ninety six percent in twenty ten. If the surge in digital finance is universal the business models behind it a not. In Latin America, look out for digital banks and e commerce pioneers such as new bank and macadear libra owner of mccarter popular in south. East Asia grab and go Jack to ride hailing firms are becoming super APPs with financial arms. fintech firms now provide the majority of consumer loans in Sweden. In America credit card firms such as visa. The world's most valuable financial firm digital finance giants such as Paypal, the sixth and the big banks both cooperate and compete. Tech giants such as Apple and alphabet ought dipping their toes in tempted by the financial industry is one point five trillion dollars global pool of prophets. There is much to be excited about and it's best fintech off his big gains in efficiency. If the world's listed banks cut expenses by a third, the saving would be worth eighty dollars a year for every person on earth. And makes, Razor thin margins on payments and takes minutes to grant alone Ghana. The days of getting gouged by money changes in airports firms such as transfer wise and air will ex offer exchange services that are cheaper and faster. Digitization also promises to broaden the spread of finance reaching customers will be easier and data will make loan underwriting more accurate. Firms like square and stripe help small businesses connect to the Digital Economy In India and Africa digital finance can free people from dodgy moneylenders and decrepit banks by creating their own digital currencies. Governments may be able to bypass the conventional banking system and tax take deposits from and make payments to citizens at the touch of the button compare that to the Palaver of Uncle Sam posting stimulus checks this year. Yet, the fintech conquest also brings to risks. The first is that it could destabilize the financial system. FINTECH firm swamped to the most profitable parts of the industry, often leaving less profit and most of the risk with traditional lenders. Fully, ninety eight percent of loans issued through aunt in China ultimately sit on the books of banks which paid a fee. And is eventually expected to capture tenths or more of Chinese prophets. Lumbering lender in the rich world are already crushed by low interest rates, legacy it systems, and huge compliance costs. If they are destabilized. It could spell trouble because banks still perform crucial economic functions, including holding people's deposits and transforming the short term liabilities into long-term loans for others. The second danger is that the state and Fintech platform firms could grab more power from individuals. Network effects are integral to the fintech model. The more people use a platform, the more useful it is and likely that others feel drawn to it. So the industry is prone towards monopoly, and if Fintech gives even more data to governments and platforms, the potential surveillance manipulation and cyberattacks will rise. In China and is a cog in the communist party's apparatus of control. One reason it is often unwelcome abroad. When facebook affirm not known for its ethical conduct launched a digital currency libra. Next year, it caused a global backlash. As, the FINTECH search continues government should take a holistic view of financial risk that includes banks and FINTECH firms. Chinese regulators rightly snuffed out and booming business in loan securitization, which had echos of the subprime fiasco. Government should also barriers to entry. So as to boost competition, Singapore and India have cheap open bank to bank payment systems, which America could learn from Europe has flexible banking that lets customers switch accounts easily. Last the rise of Fintech must be tied to a renewed effort to protect people's privacy from giant companies and the state. So long as Fintech can be made safer open and respectful of individual rights than monetary. Led by China will once again changed the world for the better. When you need your bank capital one is right in the palm of your hand. So you can check your balance deposit checks, pay bills, and transfer money from your phone with a top rated APP and when you're done banking, put it back in your pocket banking experience built around you and your life. This is banking reimagined get started online anytime. What's in your wallet? Capital one and a member FDIC. Next winners and losers how covert nineteen is reordering the global economy In? February. The coronavirus pandemic struck the world economy with the biggest shock since the Second World War. lockdowns and a slumping consumer spending led to a labor market implosion in which the equivalent of nearly five hundred million full-time jobs disappeared almost overnight. World Trade Shuddered as factors shut down and countries closed their borders. An even deeper economic catastrophe was avoided. Thanks only to unprecedented interventions in financial markets by central banks government aid to workers and failing firms and the expansion of budget deficits to wartime levels. The crash was synchronized as a recovery takes place. However, huge gaps between the performance of countries are opening up, which could yet recast the world's economic order. By the end of next year according to forecasts by the O., E. C. D. America's economy will be the same size as it was in two, thousand and nineteen but China's will be ten percent larger. Europe was still languish beneath its pre pandemic level of output and could do. So for several years a fate, it may show with Japan which is suffering a demographic squeeze. It is not just the biggest economic blocks that are growing at different speeds in the second quarter of this year according to UBS bank. The distribution of growth rates across fifty economists was at its widest for at least forty years. The variation is the result of differences between countries. Most important is the spread of the disease China has all but stopped it while Europe and PAP soon, America is battling a costly second wave over the past week. Paris has closed its bars and Madrid has gone into partial lockdown. In China meanwhile, you can now down some Buca shots in nightclubs. Another difference is the pre existing structure of economies. It is far easier to operate. Under social distancing than it is to run service sector businesses that rely on face to face contact. Manufacturing makes up a bigger share of the economy in China than in any other big country. A third factor is the policy response. This is partly about size. America has injected more stimulus than Europe including spending worth twelve percent of GDP, and a one point five percentage point cut in short-term interest rates. But policy also includes how governments respond to the structural changes and creative destruction. The pandemic is causing. As special report, this week explains these. Will be immense. The pandemic will leave economies less globalized, more digitized and less equal. As they can't risks in their supply chains and harness automation manufacturers will bring production closer to home. As office workers continue to work in the kitchens and bedrooms for at least part of the week lower paid workers who previously toiled as waiters, cleaners and sales assistance will need to find new jobs in the suburbs until they do they could face long spells of unemployment. In America permanent job losses amounting even as the headline unemployment rate falls. As more activity moves, online business will become more dominated by firms with the most advanced intellectual property and the biggest repositories of data. This is boom and technology stocks gives a sense of what is coming as does the digital surge in the banking industry and low real interest rates will keep asset prices I even if economists remain weak. This will widen the gulf between Wall Street and main street that emerged after the global financial crisis and which has worsened this year. The challenge for Democratic governments will be to adapt to all these changes while maintaining popular consent for their policies and for free markets. That is not a concern for China, which so far seems to be emerging from the pandemic strongest at least in the short run, its economy has bounced back quickly. Later this month it's leaders will agree on a new Five Year, plan which emphasizes Xi. Jinping's model of high tech state capitalism and increasing self sufficiency. Yet, the virus has exposed longer-term floors in China's economic apparatus. It has no safety net worth the name and this year had to focus it stimulus on firms and infrastructure investment rather than shoring up household incomes. And in the long run it system of surveillance and state control which made brutal lockdowns. Possible is likely to impede the diffuse decision making free movement of people and ideas the sustain innovation and raise living standards. Europe is the lagarde its response to the pandemic reschedule ossified economies there rather than letting them adjust in its five biggest economies. Five percent of the force remains on short works schemes in which the government pays them to await the return of jobs or hours that may never come back. In Britain, the proportion is twice as high. Across the continent suspended bankruptcy rules tacit forbearance by banks and flood of discretion restate risk prolonging the life of Zombie, firms that should be allowed to fail. This. Is All the more worrying given that before the crisis France and Germany were already embracing an industrial policy that promoted national champions. If you're ABC's the pandemic is a further reason to nurture Z. relationship between government and incumbent businesses. It's long term relative decline could accelerate. The question mark is America for much of the year. It got the policy balanced roughly right. It provided a more generous safety net for the jobless and a larger stimulus that might have been expected in the home of capitalism. Wisely, it also allowed the labor market to adjust and shown less inclination than Europe to bailout firms that are in danger of becoming obsolete as the economy adjusts. Partly as a result, unlike Europe America is already seeing the creation of many new jobs. Instead, America's weakness is toxic and divided politics. This week President Donald trump seemed to ditch talks over renewing its stimulus meaning that the economy could fall over fiscal cliff. Critical reforms whether to redesign the safety net for tech driven economy or to put deficits on a sustainable course our orbit impossible while two warring tribes define compromise as weakness. covid nineteen is imposing a new economic reality. Every country will be called on to adapt, but America faces a daunting task. If it is to lead the post pandemic world it will have to reset. It's politics. And finally, the US election battle in miniature a modern day Alexi de Tocqueville might find talk of America's painful divisions baffling at first blush up close as Bill. Bishop, wrote in the big sort, the country has never looked more cohesive. The leafy suburbs of America's fast-growing diverse cities are so uniformly democratic. It can be hard to find two people in serious disagreement. Republicans and older less mobile group live equally clustered father out. Country is less fractured than ghettoized as is especially apparent at election time. In Lexington suburb of the national capital where Donald Trump won four percent of the vote in two thousand, sixteen local opinion is expressed in a phonics of Joe Biden Yard signs. Drive twenty minutes into the Maryland countryside, and as if some part is on border had been crossed Donald J trump signs are everywhere. Yet there are still places along the frontier where rivals coexist. One is eastern an unshowy town in eastern Pennsylvania where you're calmest went to see some weekend canvassing for the president. A former transport hub at the confluence of the Lee High and Delaware rivers. The town wants thrived on strategic site and still relies on it. It is seventy miles from both New, York and Philadelphia adjust about commutable distance, which was brought new families to the town attracted by its house prices and visitors to its main attraction. A theme park for Crayola crayons by no means rich yet not struggling hardly dynamic yet replenished by income as the town sits between socioeconomic categories and political cultures. This has helped make it one of the most contested corners of one of the most competitive states in the country. North Hampton Candy of which is the capital was one of three in Pennsylvania that flipped to the Republicans in two thousand, sixteen giving Mr Trump the state by a whisker. True. To form the quadrant of four streets around which Lexington accompanied Karen Fray and. Republican foot soldier wherein red deplorables club sweatshirt and not wearing the trump twenty twenty face mask that dangled alongside a stun gun alarm and may spray from her wrist display trump and biden signs in similar measure. They otherwise, no clue to the occupants affiliation. Outside the forty odd houses Mrs, free cooled on Virgin. Mary statue or we support our police flag was no likely to denote a republican than democratic household. At a corner of Hickory lane the occupant displayed signs supporting the police teachers and Mr Biden. We're not trump here keep walking. He yelled at Mrs Fray through his car window. The suburb is a throwback to presort America but bristling with post sort partisanship. The result is a rare microcosmic view of what partisanship is doing to America. Very few who answered the door claim to be undecided and most were probably as Mrs free conceded being kind. Only one vote expressed week feelings about her choice. I, vote for the party not attended said Lisa a lifelong Republican staunchly against abortion everyone else appeared fiercely decided. Given. Not just over half were planning to vote democratic. They see more than ever several said this gave rise to awkward scenes. I'm sorry I'm sure you're a nice person but I'm ninety two years old I voted for Republicans and Democrats, and I cannot understand how you can like him a man on Hickory Lane told Mrs Free He then launched a fact filled disarray Shin of Mr. Trump's record before ending fighting back tears on a personal note my father came from Italy trump hates migrants my five dead brothers fought for this country. The son of a bitch calls them suckers. When Mrs Fray Visiting Shaken said this was untrue the man quoted the president slander of John McCain Mrs Fray counted with a fake news story that the late Republican senator killed scores of sailors a fire God. Bless you said the old man. It multiplies said Mrs Fray enigmatically as she walked away though she knocked on at Three Thousand Dollars Twenty sixteen she did not seem used to such pushback. Modern campaigns aimed canvases almost exclusively at likely voters for their own side. She had kindly decided to knock on every door mainly as a favourite Lexington. It was also apparent from her assertions which tended to be untrue that Mrs Fray inhabited a deep realm of the trump bubble. Considering much of Fox News too liberal. She got her news from the far right one America News Network, and Epoch Times A pro-trump newspaper produced by the Fallen Gong sect that has spread the Anti Semitic Cunanan conspiracy. When she encountered a like minded voter, her relief was palpable on their doorsteps. She referred to Joe Biden as a communist and any self professed Christians who voted Democratic as Satan worshippers. Lee Druckman political scientist attributes the mutual loathing of America's political tribes to three things cultural sorting, including media bubbles, the slim margins of national elections, which makes them seem existential to both sides and the nationalization of politics which has bulldozed local concerns that once girded communities. All all evident in eastern though it's much provoked voters live cheek by jowl. What lessons does that? One is that politics exaggerates reality while several voters expressed unease about their neighbors allegiances, your columnists nothing to suggest a community anything like as divided as the political views its members expressed on a sunny Saturday morning trumpers and anti-trumps mowed lawns and walk dogs together. Outside. Elections most of them probably give politics little fort given the state of things that is consoling. Yet this election will prove harder to recover from because Republicans taking their cues from the president already trying to invalidate it. Almost misses phrase first words to your columnist were trying to win without stuffing ballots with the Republican Party. She repeatedly assured voters that mail in voting was fraudulent. This promises a new order of conflict for a society whose forbearance cannot be counted on indefinitely. Thanks for listening editor's picks. For. More from US subscribe at economists, Dot. com slash podcast offer. I'm Rosie blow and in London this is the economist.

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The Central Bank Digital Currency Paradigm Shift: The Interview

Adventures in Finance: A Real Vision Podcast

1:14:00 hr | 3 months ago

The Central Bank Digital Currency Paradigm Shift: The Interview

"A qualcomm we believe in staying connected and you can see us wherever five g is helping transform telemedicine supporting remote education empowering mobile. Pc's the invention ages here. Learn more at qualcomm dot com slash invention age. Welcome to real vision. I'm ed harrison. And i'm going to talk to bill campbell. Who is a portfolio manager for global bond strategies at double on the welcome to real vision or welcome back and thanks for having me back. It's a pleasure to be here. You know I was telling you before. What will how are we gonna do. This is i want to start people off knowing that will you and we actually talked. And we had an interview that appeared on the platform at the end of may based it was basically a master class in Non us markets which is where you are a portfolio manager and we went no soup to nuts in terms of currency strategy and bond strategy outside of of the united states and i think people really appreciated that interview But you know you. You're someone who who's sort of sort of a big thinker. You're thinking about not just what's happening for the strategies right now but what sort of paradigm shifts are down the road and one of the big ones that comes up to mind and we're really very interested in that at revision is digital currencies. So talk to me about first of all what is the digital currency from your perspective from where you sit And how are you thinking about that at. Thanks again for having me back. I i think that this is actually A historic time for global financial markets. i think fifty ideas that are being brought forward by central banks right now in the i has been putting working groups. Central banks together on. How a central banks are going to implement. The new central bank digital currencies is going to be a historic seachange. It's going to be a revamping of the global financial system and i think as as international ms international portfolio manager. All of us is International investors. It's our job to try to understand as best we can the changes and the potential implications that are coming down the pipeline. Now these Central back digital currencies have not been implemented yet but what we wanna do is Identify and hopefully be able to see in real time Some of the themes that we're going to discuss throughout this hour And then when they if we do start to see the signs at these themes are happening it can help us. Position ahead of them And you know that's kind of the the basis of in for a lot of the thinking we're doing around digital currencies right now so I think to understand why. I just made the statement that i think. It's really a historic sea. Change is i. Understand is a digital currency and i think the easiest way to understand it is it's a currency in digital format. It's a medium of exchange and this meeting with exchange Can be met by both private and public money and the medium of exchange happens. I you know On the on the digital side it can happen through currency such as Bitcoin it can happen through a settlement system Such as libra But it can also happen through Transactions on off things like credit cards that we are all familiar with. And and we broaden the scope to include all digital payments which central bank digital currencies are not just that this topic doesn't just focus on the currency itself which is certainly a key part but it also focuses on global payment system when you include all of that Right now about ninety. Five percent of all transactions are being done digitally and a lot of them are being done by digital platforms whether it's visa mastercard of bank credit card so in a lot of ways this Is the the government's behind the is kind of behind. The starting block already led the way on this. I also for years when we start to think about how far ahead the private sector is on Just proliferation of Let's call it the end the end consumer digital settlement use I think this is that there is not only this is not only a research fascination that banks should be interested in but this is a pressing policy need and it's going to push a lot of new In a policy and a lot of new frameworks and a lot of new structures into the global financial system. And i think One of the items that Starting to push Central banks into this arena is the creation of digital money By these private actors in weather is mastercard or pay pal is actually a liability of bat secular company and is not lively of the government. So now you start to creep into financial stability issues which absolutely is gonna pull the financial authorities into this discussion so this kind of opens up a little bit more of a another. It'll be a little bit. More of the theoretical side of what is money and really money should be public. It is a public good and it should be a liability of the central bank. It should be a medium of exchange that is legal tender or each akon and It right now For example amex is in. It is not accepted everywhere but the dollar is so when central banks i introduced the digital currency Basically it's just gonna be a replacement of the currency as we know it. The paper Cash bills that we received from the federal reserve uses currency. It's just going to be that in digital format in its simplest four but it's a little bit more profound because it now a liability of the central bank it will be legal tender You know for each economy Not only the us. But each economy is going to implement their own digital currency. It has the Has been the property of a store of value. I know there's a lot of discussion on the store of value. And you know some of the new private coins can eat that standard and i would argue that The private coins are still too volatile. And they're still a little bit too much in their infancy to truly meet that standard. Although i'm sure that you know there are some Very sophisticated people who might want to take the other side of that argument. I propose that in a given Where we are today with all of the private coins issue You know that volatility makes the store value question a little bit more open and also it needs to be a common unit of account and it's not clear that we have a standard On the private side that is the combination of the camp. We still always go back to. What is the central bank's currency. What is the central banks Know what is their back. Liability is our common unit of account across each nation. The one question. I think that's took that sticks out for me is when you were talking about Even before you started talking about The currency of account I was thinking about. You said that it should be or has to be a liability of the The state why is it that we can have some sort of free for all where different currencies are competing against each other. You know issued by different private actors. You know all competing against state money at the same time. How is that not a good outcome for going forward while you can. And we are right now but ultimately You're introducing the credit risk of an individual company You can Either be worse or better than that of a state in. I think you know you bring up a very profound point when we think about I think the The idea of libra like this end to end. Payment infrastructure is kind of interesting because it's backed by a company a a very strong company like facebook. In when we think about a major countries i think the the liability those governments Of those central banks you know are very strong. It'd probably stand up stronger but when we start moving emerging market countries and. I know we're going to get into a lot of these issues about You know institutional strengthen trust in the government All of a sudden when we do the credit analysis you might get into a situation where you do have a private end to end. System like libra a being preferable to stay currency. So i think that What the the situation you describe the situation. We're in today I i'm not making the argument that In a one one particular pass the central bank digital currency is the you know the path that stands above all. I'm merely pointing out that in this in the assist in the global system right now We we're gonna see a complete. Revamping of the way people i think do credit analysis and look at countries versus private alternatives. So there are a lot of twists and turns to come and you know this is obviously a one area to keep an eye on especially when it comes to markets outside the united states. And you know Let me ask you a second question. Because i was actually looking at some of the notes that you had taken before and one of the things that stands out for me is that you said that ninety five percent of money is already digital and i was thinking about this in regard to libra and and and state money. What your i. I get the impression that central banks see libra as a threat in some capacity. Suddenly we hear about the central bank's definitely now saying okay. Now is the time to get into digital currency whereas we're already at the point where that ninety five percent of all monies digital. What was the impetus. What was the thing that really. You got the lightbulb on for them that we to get on top of this. Well i think there are a couple of items that Have potentially you know turned Focus their attention into the digital arena. one is obviously the majority of private transactions are settled digitally You know the The the other item is when we think about You know where central banks are today. We've kind of We've reached a limit really as far as exhausting You know the traditional policy toolkit of using interest rates to try to set monetary policy the know unorthodox monetary policy tool kits of you know buying up both government bonds private bonds in some cases equities and i were in the middle of a historic crisis of covert. Where right now. We're starting to see a lot of the second wave of lockdowns. Come through europe and you guys have done a good job of covering that issue. There's also the concern that structural unemployment might be much higher going forward in a given the proliferation impulse alive technologies and the disrupting supply chains. That are happening due to the corona via. So we're at a historic point on the policy side whereby central banks toolkits have been exhausted in this would actually potentially provide a new tool for them You know in order to affect We've seen right now. Is central banks and have been asking fiscal policymakers to do more and we just finished the imf You know by a biannual meetings. And i think what we saw is an interesting Message change From the imf whereby they're telling countries if you have room now is the time to us. And there's a discussion about using These extraordinary monetary policies of bond purchases. You'll per controls to effectively subsidize fiscal policy. And then we get into all sorts of issues around. Don't house fiscal policy going to be implemented and that's where the digital currency. I think offers that new potential policy tool kit of being able to go that final mile allowing central banks to not only provide currency and liquidity to the banking system. Which currently does but it will now be able through a central bank digital currency to provide that to the individual and let me just slow down for a second here with the quantitative easing happening. Basically with you see central banks or purchasing assets from the private banking system but then they credit their reserve account. And it's up to the banks the decide how they're going to allocate those reserves to the real economy ought to buy a financial asset market. Make are they gonna give alone. And unfortunately what we've seen is that that creation really isn't happening and we've seen the velocity of money fall across pretty much all economies we've seen inflation not take hold which you know has other structural reasons but one of which would be you know this hurdle of getting the all this excess liquidity that sitting in the banking system out to the public who When we look at the end public especially the lower income parts of society are likely to spend more out of necessity. They save less and they spend comes in so that it's that final policy tool that i think is It dirt it's it's a creation of new policy tool of potential for new policy tool In the middle of this crisis whereby you know a double dip a recession at least in know internationally is not a is something that we just can't completely discount say that's not going to happen and i think that beyond just a need for a central banks as you know the As financial authorities to get ahead of all the private infrastructure that's put put in place or digital payments miss his digital financial infrastructure. You also have the policy needs that are also creeping in to really create the motivation for this point in history to be why you're central banks are going to be forced into it up implementing that's and of as we're gonna get into a lot of the implications of you know what some of the choices might mean for commies but i really believe that this is coming right down the pipe and as we've seen in the european central bank and the bank of japan are hardy and comment period. I know they're trying to say well. You know we're trying to take time. Jay powell is a you know. We're we're taking our time. But we're watching. And he sat on a panel with the i s. Which tells you that. This is the area of focus and highlighted area for all the world's major central banks. I really appreciate the neutral tone that you give that in terms of Out there But i i want to inject a certain Skepticism until all of this. Let me let me read something to you. actually let me. Here's the quote that i want. The goes like this quote The acute phase of the credit crisis ended years ago giving away nearly a decade of global economic growth. The central banks however have lacked the courage to unwind. Qa that quote is from a gentleman by the name of bill. Campbell is from the year two thousand eighteen in a double on piece called dated easing. Welcome to the hotel california. And i think the implication there is is once you have the tools You you kinda wanna use them and And not unwind those tools were in a completely new paradigm potentially When you talk in that way we've gone from reducing interest rates to asset purchases with quantitative easing. and now. you're saying that we are potentially going to the new paradigm of digital currency. That's right so i will thank you for pointing that That quote out. I think it was obvious to see that. You know the the the fact that central banks gain those new policy tools and they said that they understand the economy In a better than all the rest of us and they'll be able to unwind. Extraordinary policy always seemed like a fantasy to me because we you know did see opportunities or them to you know. Take that off ramp. Even marginally they never did. And i think that that's basically where we're going with this Policy with with the potential is that a with implementation of central bank digital currencies We can get into this quasi fiscal aspect. And i think it's very hard to roll back Any a any. You know the old saying you know. There's nothing more permanent than a temporary government policy milton. friedman You know said it best and it you know it's absolutely right in that sense so it's coming now let's think about What are the potential implications of the digital currency a central bankers currency role The first thing is a there's going to be a lot attentions as with any government You know a step forward reach into the private sector is always tensions that rise in the first one is with In the most obvious one is with the banking sector so the central bank digital currency rate now effectively Many people may not think about this but the central banks actually do have a form of central bank digital currency. That's already out there You know in bank resorts so bank reserves are custody the fed they're able but it the problem is they're they're kind of like a wholesale currency they're stuck in the banking sector. But when you think about what is. Banking reserve as a preferred asset like it's deemed is one of the safest assets in the banking sector. That you can have and you know a lot of banks want have it You know for safety reasons you know. Keep themselves well capitalized. Well let's take that one step when you know one step further with the introduction of digital currency to the private To you know to private depositors You could end up in a situation where financial stability could become a at risk as there could be a preference for people to say. Hey i would actually prefer to have all my assets Custody at the federal reserve so one of the questions right now is will central banks allow individuals to have custody accounts. Demand posit accounts at the central bank. Loretta mestre actually said you know. Look there is a much latian. That's looking at that. As a is a worst case scenario that we may have A situation whereby i we need to provide payments to individuals and potentially Could pass legislation. That would them mandate that. All people have an account at the fed. But i think venue get into this issue that You know you could have a preference. I floor assets at the fed versus at deutsche bank or bank of america j. p. morgan which then starts to create a know issues or those banks is they would lose their deposit base Then then you say well you could have You know you could walk yourself down. The line Them nationalizing banks in that situation would make sense. Because now the governments provide You know the credibility that those institutions will get custody those assets safely. When you mentioned loretta master. I think she's supposed to be considered a hawk. He's the president of the Cleveland federal reserve. The the thing that you introduce just makes me think one of the things in two thousand and eight. That we were talking about was the fact that a lot of these investment banks were relying on wholesale deposits you'll goldman sachs and and the likes. They've gone out and they've actually tried to attract deposit but you're suggesting that actually if if we take a hawk. The federal reserve position in a worst case scenario. The fed would be competing with those banks for deposits. I'm ash bennington host of the real vision daily briefing. Today's episode is sponsored by wine dot com online ordering and delivery. Have been a lifeline for so many people during the pandemic. but they're still a wide misconception that you cannot purchase wine and spirits online you can have wind delivered right to your door with wine. Dot com wine dot com. Lets you discover by and enjoy wine right from the comfort of your home with delivery on your schedule. You choose your delivery date or pick your order up at one of thousands of walgreens or fedex office locations or other local pickup sites across the nation you can even get free shipping year round with a wind dot com stewardship membership for only forty nine dollars. There's no minimum purchase when you're stewardship member you can order one bottle or hundred bottles and shipping is free every time you can even use your membership for free shipping when you send gifts throughout the year to family and friends if you want. The convenience of buying wine online wind dot com can bring the world of wine straight to your door go to wine dot com slash real to get thirty dollars off your first order. Terms apply correct. Yes in that than Puts into question the entire system of you know fractional reserve banking so it hasn't been implemented yet but this is a risk that if we see You know all the Architecture come out that central banks are saying we're setting up a citizens facility accounts. I think we need to take a hard look at the banking sector so point that out as we discussed at the beginning you know what are some of those signposts in implications. Lets you know that. That's something that just talk away and start seeing that you know that. That's a potential signpost implication that maybe we could then take advantage of In markets we also need to think about credit disintermediation. So there's a couple of things that come to mind Know the use of Visa mastercard all of just the traditional electronic payment systems that we use We all use you. And i you know all the way like across the borrowers spectrum from strong borrowers to week borrowers we all. I use credit cards and some of us paid off quicker than others. But you can see a situation whereby view have a very strong borrowers that say you know. I don't want the fees associated with the visa and mastercard I and i think my preference would be You know to pay everything more on debit card basis It could have a situation whereby you know the rates that are already high enough for carrying balances on visa mastercard way because that final of subsidy of the stronger borrowers in the system disappears There there's some good aspects of of credit creation. I you know that are happening as well. I seen the idea that Using private the the private sector. Technology of security tokens can help Sectors that had not received credit such as small businesses. Potentially start to receive a more credit more funding. And i think actually you have a another video that goes deep into detail on that so that that's a potential positive side and i think one of the Issues i pointed to the current central bank policy is what are we. Since march is we've seen the majority of central bank liquidity go to either individuals rather price appreciation or go to large companies as definition by corporations. And it's really left out you know the small business You know in the the small business sector so that that's kind of an interesting innovation that could actually lose potential growth in countries that are able to effectively do that correctly. But part and parcel to just that little element would be You know how government set up the domestic payment system. I you know governments are going to get more involved and You know. I think what's ultimately going to happen. Is they're going to increase operational efficiency Both internally and externally and you're gonna see a lot of these larger transactions that banks now facilitate become much more commoditised and much much easier. you know to do in either new government payment systems in new private structures. And that's gonna disintermediated Revenue source from banks as well who especially for a large cross border activity know for the final Ghetto payment settlements. I think that there's a big potential for the new architecture. That's coming in with these Central bank digital currencies in the and. They're a companion payments systems to displace banks in that in that area of credit creation. As well i think this is a good a time or good example To talk about some of the implications for the investor before we go onto more. Because as you say that immediately. I think to myself about How do you implement this in argentina. What are the implications in argentina in terms of legal tender public good Common unit of account and the competition of this digital currency with private digital currencies. And then. what happens. How do you as a global portfolio manager. Think about this new world that we're living in the country risk associated with argentina. Could you maybe give an exact use that as an example well-fed So it's very deep You know a very deep question that you just asked. I think initially You're gonna end up in a situation whereby the argentinas argentina. I think would be difficult example because you already have a lot of exchange rate controls that are put on the country and You know the ability for money to leak out in new platforms to get in is Is very controlled as is With china and I think ultimately we're going to end up in a situation where you're going to look at countries in start to say okay Institutional strength becomes a major factor of in a evaluating the country. And what i mean by institutional strength is The government's ability or lack they are willingness not to monetize deficits the government's protection of privacy rights. And the also the government's willingness and ability to keep an open capital accounts to allow money to both. Come in but also i to leave and maybe go to either another public platformer private platform so countries with lower institutional credibility obviously going to face a balance of payments risk. Similar to what we're seeing right now and the digital currency could work in in one of two ways. My concern is that it is a much stronger. access to the government in all payments in all financial transactions which then gives them more control in the ability to prevent capital in savings from leaving that country. So i you know in one respect. I think you see a situation whereby you know if used incorrectly Or if used for purely domestic political gains. There's the risk that it could increase. The inequality issue because puttering because capital. That's already trapped in a week. System would then get even more so and though would get into a very much a halves in half. not so people with the wherewithal. Either you already have existing savings outside of the country or through political favorite against savings out. It would be preferable situation Compared to to that domestic capital but i think more more to the point like getting back to kind of the institutional strength and You know the you know how we're thinking about Countries going forward. I think that you know the these new payment systems That central banks are looking at are going to There's a big question about negative interest rates and know who can the policy hit Governments tried to affect outcomes by saying basically. We're gonna tax Your your cash. Basically the value of your cash is going to start disappearing through time if you don't use it so this is this is Know and i know there's been a lot of research into you. Know why would be a great thing. You'd increase in the of money and all the rest. But i think this is a very a dangerous idea. And it's gonna. First of all i in its attacks like roy lesser start with it secondly it creates the real need for new. Say facet in a safe digital asset. So if you think about the that your your demand deposit now if now can just start dwindling over time Any savings you have. You're going to have to invest in something right. You're going to have to get it out of the cash out of this digital cash system as quickly as possible so obviously you have bank risk there that you know. Demand demand deposit accounts You know might be moved now. This might be where banks could get creative in offer like their private. You know hash. Demand deposit accounts commend create a preferential treatment to try to regain some assets but You know barring barring matt if we're in a situation whereby people are The governments are charging negative interest rates on cash. I think we're probably the situation. Whereby government bonds are no longer yielding positive rate likely or at least they're at their lower bound and unlikely to provide you protection in risk in a risk off scenario so that's the big point and Wise that that they wouldn't provide protection in a risk of scenario what once the effective lower bound is hit. It cannot rally any. We know that the idea that the government that you know develop market government bonds treasuries are under the last safe asset on the world is due to the fact that you think that you know there still is room for capital appreciation or enough money is gonna go into the government bond market rates to rally. And you know make that security appreciate in a time of rest and i think this is actually a very important point. We're discussing You know one of the discussions that you out of permeating the market right now is the sixty forty portfolio and government bonds have historically been viewed as that risk hedge and that sixty forty portfolio. Will i just discussed the need for a new safe asset. And i've heard a lot of discussion. Well you know Right now what. I'm hearing is bold and bitcoin are to natural candidates maybe to replace treasuries in that sixty forty portfolio. And what i would say to you. There is my opinion. Is that golden bitcoin or debasement assets and I say that. Because when i look at vaal scenarios were volatilities but and this is. Let's let's put bitcoin out for a second and just stick with gold in two thousand eight when we had you know the true volatility spike. You had the deflationary stairs. Whereby evens rallied much more than novels and caused really yields. Push up what happened there. Gold sold off in march. We saw a similar with flash in the pan of that that exact. Same scenario ball spike. And what happened. Gold was actually sold so in a sixty forty portfolio that safety asset is supposed to offset the fall in the risk on asset in those spikes volatility. But what actually ends up happening in the case of goal is goal doesn't rally until you get the commensurate where you know the follow on the central bank or fiscal authorities then implementing a massive stimulus measure. So in effect it's not trading the vowel trade it's trading the debasement trade. And when i look at the bitcoin correlations with risk assets during risk off environments to twenty eighteen march of twenty twenty. I see a very high correlation to the way gold behaves in those that it's appears to me that it's trading more debasement risk rather than like the volatility risk. That you're you're trying to get so right now. With government bond yields hitting their effective lower bounds across developed markets and with the risk that you could implement a rate policy on cash when central bank digital currencies are implemented creates that need for a new safe asset and. I don't know what it will be. But it's gotta be you know a digital safe asset that is usable by you know by most people limit a riff on that in a bunch of different ways if possible. You know. i don't know if you know. I spoke to ben anchor at a gym. Oh he's a. He's there acid alligator of people. Call them the heir apparent to jeremy grantham and he was writing up about the fact that actually you can see from that march event that the negative yielding countries there was no offset To in their sixty forty portfolio as the market melted down. So you had the huge vall spike equities plummeting and actually those negative yielding assets. Did nothing and sometimes they actually added to your pain. Whereas only in other countries that had positive yields and those positive yields were very miniscule and have reduced since then did you see any sort of offset so we're at a point now Where we don't have any offset Across the developed economies and that means that the full force of the ball spike that is caused by declining asset prices on on on a risk assets is going to be felt in an individual's portfolio if there are sixty forty The the thing that i find interesting is this. Also this This negative interest rate of part that you were talking about. I immediately thought to myself about the tax On you were talking about the digital currency negative interest rate. That's actually attack. Were seeing that tax right now In real time we're seeing in europe that they're trying to implement a very modest amount negative interest rates and it does not seem to be creating that increased velocity of money that you would want to see so within people are talking about policy implications of this tax. How do you think about interest rates in terms of its ability to. Actually you know do what people wanted to do. I think the negative interest rates do not stimulate growth and inflation. And i'll i. I think that a a pause for dramatic effect. But i think that that is if the heart of it. You're you're coming to the you get to a situation where people all of a sudden are i heard a some very smart people start to say native interest rates on know what were safe assets. I just wanna find the lease negative interest rate. Because it's still you know. Help store value in a situation whereby you know. Growth remains uncertain. Hand know i don't necessarily want to put all my money To rest in the credit markets and the equity market. So it's almost like an insurance premium that that you're paying and it's a shame but that's that's where the world is Governments have been able to get away Now with charging their Effectively implementing a new tax on their population In their implementing policies. That just aren't working. That aren't proving to generate the reflationary. You know strong. Growth and inflation impulses in wage increases. That all of these policies are targeted. i think when we think about the concept that you just laid out there they're still probably is One more What one more act. Last in some some developed markets Government bonds In the face of another a second double debt or you know a second recession because there are some you can find some slightly positive rates across the globe and What we've also seen is it of the back end of the kurds Generally i don't really go to negative They don't really try to test negative until the central bank breaks. That breaks that floor. Then the new tendency you know a rally in government bonds into negative territory which is kind of that one final one last act as i say and i'm thinking like the uk by the way walkers areas if you talked about specific policy from an investment perspective. I'm thinking immediately. Uk when you say that because that's an asset of the guilt that it's been it's been toying with the negative How however the u. k. Central bank hasn't said that we definitely going to go negative thinking about it. You're saying that when they actually do go negative then you have another Potential for price appreciation from actual negative on the duration of that safe asset correct. Yeah no that's exactly. What i'm saying i'm using the i m using german. Bund is a playbook with the e c b in a floor that that basically once the negative policy rate is implemented wants. That rubicon has been crossed. You have the the long end of the curve. has one potential in a last gasp of you. Know capital appreciation or rallied left in it But were were effectively. I if that's it then that truly is in my opinion. It as far as traditional non traditional monetary policy forcing central banks to revamp the tool and cross into this quasi fiscal policy space. Which they they've already done. But i do think that monetary inflation can absolutely come back inflation caused by the increase in money. supply it by you know central banks. I implementing digital currencies ability to put in a government cash in people's bank accounts. But then we gotta ask ourselves you know. This is the deficit spending versus debasement discussion and The question is What type of authority than is given to central banks when this in a new plumbing has been put in place and i think it really matters that if the new policy being put in place is funded by government spending tax increases. And there's you know the fiscal offset to it. You don't then. It's kind of a new fiscal policy tool. I think the real concern in the real risk is that we'll see a situation whereby debasement happens and central banks will merely print the money to Go directly into individuals bank accounts without you know the you know the offset on the sovereign government side from the fiscal the fiscal authority from government. This is a big distinction subtle but bay because then that outright monetization We've seen a little bit of like testing of monetization on central banks You know the governments. The uk has the ways and means facility by. That's a direct payment overdraft account that You know the the you take government can use. But they were they take money from the central bank to fund the current emergency program But then they promised to pay it back quickly You know you're seeing indonesia. Do direct i i if you're seeing the they're getting around it by saying well we're issuing to the central bank that the central bank event you know sell at the market. We promised that you know a priority claim that will will pay back as well. But we're seeing like these tests of the boundary Four is this deficit spending or is this true debasement ran. I think that that is such a slippery slope in that line. That line mets ban in-between the fiscal versus the central bank. The fiscal versus monetary authorities is bannon rotate overtime through the quasi fiscal help from quantitative easing yield per control. All of these policies were starting to see little tests here at and it's again emergency viewed song ladies emergency case. Don't worry by look somewhere else. It's this is something to keep an eye on because this would in my opinion In open the floodgates to monetary inflation where you really start to see you know the inflation is Starts increasing because of true money printing and debasement and this is where i think bitcoin gold can absolutely protect you You know in those in these scenarios. So i think i just wanted to separate out the mike my thinking on that I just wanted to make sure. I clarified that in a I want i want. I think investors need to be very clear about the risks that the asset is trading. Two zero Putting your portfolio together You don't get your. You're not counting on it to do something that maybe it's not quite do. And you know the that. I'm a i'm framing in my mind. What you're saying is is we have to policy options here When we're thinking about quals. I or actually outright fiscal policy from the central bank. The one that we i talked about was Going more into the negative interest rate the tax the tax were already doing with regard to negative interest rate policy. But you can move from there to a much more sort of debasement type strategy where you just credit account that that the central bank is engaged in the deficit spending so to speak and that's a completely different scenario where You know you can the the central bank rather than just giving money to banks Who have assets and then hoping those banks will a move those assets to the right places. They're saying actually we're going to target specific places when credit specific accounts and directly emf that impact the private sector that was right and that is such an important This whole discussion. I think has been important and again it. All of this is so new that there so many different avenues that we can dive into In the in the rollout of central bank digital currencies. But what you just discussed the ability to target outcomes In that opens up in mind. kinda wraps us back around to you know the institutional strength would a privacy discussion and in order for central banks to target outcomes. They need visibility into where exactly the currency's going into payment infrastructure. And i it. I think privacy concern comes as to You know what what type of visibility do we citizens want to give to the government as far as you know all of our digital payments so let me just give a quick example to kind of highlight. What's going on there Central bank could print the digital currency. And then could allow a private bank to do some of us reserve assets by the digital Private bank in distribute the digital currency the way it sees fit and all of those transactions than would reside on a server at the private banks such as bank of america. And you know if there's a concern of taxation money laundering know whatever else You know that the government would have to. I go to court get a warrant and then you know obtain those assets from a private party a bank of america and this example on the flip side If you really want to be able to target outcomes what happens if the it. All of that information resides at the central bank on a government server now. You really really need to have confidence that the judiciary is going to protect personal privacy rights because The the the the potential for abuse is very high. In order for this is the trade off. I think in order for them to be able to the outcomes that you were talking about. They need that type of visibility. So this is you know the this then becomes a situation whereby country by country. We can start to say. Does this country actually protect individual privacy rights do they have that type of strongest additional strength. And you know getting back to potential market implications It i would. I would believe that countries with stronger. Privacy rights in an institutional framework would be preferred for capital in that new environment versus countries. That don't interesting and you know Let me say that. A framework that i'm thinking about of this in is what i would call the currencies release valve and by that. I mean when we're talking about Debasement ma your direct marketers ation The interest rate isn't necessarily the release valve in the sense that the central bank can engage in. You'll core control or any sort of Ability within its own domain to suppress Interest rates you know so called Financial repression. But you do have the currency there. The release valve and so in some senses if we get to this new a rubric where it's a hotel california like scenario that you were talking about. Qe became then. You have this Competition this sort of race to the bottom where people are saying you know actually we can get some some use out of our currency being Depreciated because we're crediting accounts. Let's do that. So we get the double benefit of a direct injection to the places that we want the money to go and be the release valve being the currency and we can therefore still growth From the From you know the global community by having a weaker occurrence i mash bennington host of the real vision daily briefing. Today's episode is sponsored by believe in people believe in people is a just released book by new york times bestselling author and coke industries. Ceo charles coke featuring stories of social entrepreneurs and how. They've discovered new ways of doing things. The book has been called a roadmap for solving our country's biggest problems by netscape founder and famed investor. Marc andreessen some of these stories include a former gang leader who became a peacebroker and his community and an amateur athlete. Who created one of the most innovative recovery programs in the country. The book highlights the journeys of people who are willing to unite to move society forward and it is available now for purchase to order your copy go to believe people dot com slash row vision again. That's believe in people dot com slash religion to order the book. Today i would buy so. I pushed back a little bit. I see exactly what you're saying with that As like a potential risk. And first of all i totally agree that quantitative easing You know and You know Extraordinary monetary policy is about the currency in his about gaining market share and benefit from currency depreciation. I go back to the risk. That i said that you know i believe if you get into true Debasement via know monetization. That the risk of you know monetary inflation getting out of control is so much greater than the benefit you would get from any currency depreciation in that scenario that i i i would be a. I don't think that it that in my opinion. That's not the policy prescription because of that trade off but you did bring up. I just on the currency side. I wrote a recent paper. I've been doing some thinking about the dollar's reserve currency status umbrellas going next as well. Yeah all right okay. Do you want me to go there. Because i and i'll tell you that the way i'm thinking about it is the the The brits going hat in hand to the i. M. f. in one thousand nine hundred ninety six. I'm thinking of that. As sort of what happens when you lose reserve currency status and therefore you either have to Jacked up your interest rates in order to attract money Because of the currency your important inflation like crazy into your economy or You go hat in hand to the imf like the brits did. I mean that's what happens when you're not the world's reserve currency right so I don't think we're going immediately into an insolvency crisis in the us. And i think that's You know we can just say that because You know there's really no outstanding government liability in another currency that being said The implementation of central bank digital currencies. And the the The architecture that the central banks are talking about for the payment systems are first domestically focused but then these working groups are international collaborations of central banks. So what i envision is in not the first nation but you know as we start walking through time. We're going to see a system whereby the new Electric payments platform mets going to be implemented across the globe by each country's central bank will all talk to each other and ultimately what that's gonna do is it's going to allow countries to be able to bypass the us dollar in their trade in their international transactions. So now with i think what we're ultimately towards is a world in which countries can do bilateral instantaneous government backed government facilitated settlement of odd bilateral payments between countries on more of a wet like On a web like infrastructure. So we're moving from the dollar being at the heart of all of the majority of global transactions so the dollar the said that In twenty nine hundred dollar was about eighty percent of one side of all currency transactions with the number two in three being euro at like thirty thirty two percent again at seventeen percents of the dollar at remember currency one currency versus the other. so again this is the dollar on one side of those transactions as about eighty about eighty eight percent and the other item is the current global payment system. That's used across. The globe is swift. Where swift connects banks internationally allows international settlements in it. Looks like about eighty five percent of all international settlements Through swift settled you. Our dollar settled is well so this gives the dollars. Wait in the global system is it you know it is roughly that it's extremely large but when you actually look at all of what is the bilateral payment structure of each individual country. It's much less so countries right now because they know trade needs to be settled in all international transactions need to be settled in dollars. They're hoarding dollars in the fx reserves at the central bank for example and You know the dollar is the dominant allocation fx reserves. What i've just described to you is a situation where central banks now. We'll see i. You know the payments actually matched the true balance of payments transactions instead of payments that day transactions being a lot more a diverse but the settlement being dollars. Now it's all going to be a much more diverse mix so that's gonna start to remove the need for banks to accumulate Dollars now. us dollar a when we look at the us. We want a current account deficit. And right now we also have the privileged at a lot of us. Central banks end none other individuals recycle their savings back into us asset. So they have that in a global reserve asset when that disappears. I think that you all of a sudden get the structural pressure both from you know the rebalancing of the reserves from central banks but also from the yearly flow of the negative Us current account Starts putting structural pressure on the down to the downside on the dollar and when we think about You know we have to think not just about this stock up. Sorry the flow effect but also the stock effect and the us runs a very large negative net international investment decision and. That's just a long winded. Technical way of saying the majority of global savings is a large portion global saving sits in the us dollar so not just on the official side but on the private side as well and when you start to see the dollar come off. I could see a lot of that savings. Come back home come back out now. This is not a tomorrow trae. we're going obviously You know we're we're going into potentially a new era in lockdowns Because of corona virus in europe there are a lot of questions that are coming near term about this recovery so the dollar think in its status still will serve as a safe haven asset near term. This is a medium-term structural item that we need to pay attention to that has the potential to have huge ramifications for For dollar downside on the foot side to is it the when countries are allowed to settle a currencies I'm sorry Bilateral transactions just between each other that gives them the additional privilege at the. Us only had never doesn't really use but you can print money to settle the payment. If you're just a little bit short row this then starts to open the door to getting back to these debasement risks that you were talking about and i think then if we kinda circle the loop back to the debasement assets It's not Private people like you know private investors who are wanting to think about the versa. fine you know into into debasement assets at protect you against the basement light goal. It's also going to be central banks. So i think that you know. That's another item. Bat central banks may be looking at emi basically You know putting more of their reserves into gold and interestingly the two countries who have already a global payment systems that are in competition with swift are russia in china and russia and china doing. They're increasing their allocation to the reserves and goal. So i i think that it's You know that that's kind of a trend. I think that is likely to continue. Beat celebrated by What's likely to come. In a new global payments infrastructure rudd in eliminate you go back to the uk and the imf. And why. i think that's interesting First of all. I think that you know there's a chicken egg. Scenario with regard to the current account deficit that is is that you know from a capital perspective. The bid for dollars Is that driving. The current account or is the current account deficit driving the capital. Count with regards to the us. We do know that. There are other anglo-saxon countries australia's and example if you look at their current account the uk massive gaping hole in their current account relative to say nineteen eighty or nineteen seventy and and both of those cases when you look at the us dollar a purchasing power parity basis were to Go down its against the australian dollar's doing relatively well purchasing power wise. It's doing relatively well against the pound partially because of those current accounts. It's countries like the euro Against switzerland where you see the biggest problems purchasing power parity basis where. I could see the dollar going down. Now let's say that the dollar does go down as a result of the move to bilateral Settlements of accounts at that point a suddenly The us People who are have this. Massive current account deficit are importing goods That are in currencies that are appreciated against the us dollar and therefore we're importing a massive amount of inflation into the us system. This is what happened to the The brits in the seventies let some point they were forced to said wait a minute. Okay either with jack up. Interest rates in order to You know get our currency up and stop this inflation from being imported or You know we. We have to figure out some other way to get this problem because it's killing our economy and in their case. They decided that they would go to the imf to help relieve them of the of the of the problem and that's what precipitated their their crisis but they did have the degree of freedom they could have allowed it to continue to roll but unfortunately you know they just felt wedge then by The of massive amount of unemployment that would result churov the crackdown on interest rates. So i all all points. Well taken just point out sequencing to you that You know alternately we may get into the scenario that you're talking about but near term It'll i think that the if you will not near term but the in the initial phases of this given the large stock of foreign savings in the us the capital outflows are going to overwhelm You know on the currency on the currency side it. A full stop and I think that importing inflation at a time to potentially policies starting to stimulate inflation Causing the need to rethink what is the interest rate policy. is going to be that that is going to be a big discussion because In the scenario that we just laid out growth is also going to be challenged. So you could be in the middle of you. Know a true deflationary shock when it. I guess it would be it. What you're arguing is now. You're gonna need to support the currency you can have to let rates backup aggressively in. That's gonna take a sea change in policy. I think that Again i think the end state is gonna be a in equilibrium is going to be found because You know as you know with payments currencies. It's a it's a relative value so where where one flows going You know it's coming out somewhere else and vice versa. so Again on this relative value basis the sequencing of it to me seems that the first sequence would be dollar lower And then you're gonna have You know we. I think we have to look at at that. Point where the initial conditions In the global economy if the united states is in like the you know the worst position possible basically. It has slow. Growth it's importing inflation and there's nothing it can do to stop its currency devaluation except hike rates. That's going to be devastating and It but that would be in a scenario whereby the rest of the world is. Actually you know still doing relatively well compared to the us. So i don't think that you know that type of deal linkage would happen immediately. It's definitely an interesting thought for a. I think that's maybe a few steps past. You know what. I had initially written about But you you definitely give us a lot of bug especially give me a lot of food for thought about how that final system you know where the equilibrium would actually be Yeah you know what the what the end game might be down the line because obviously the british pound was in decline for quite some time before it came to that point And you know it was really a thirty year march for the a massive amount of deficit spending world war two two period. Where you know they had the imf problem in nineteen seventy six absolutely and pass might be prologue for what's happening to the into the world's reserve currency so this has been a pretty fascinating. I i wanna get from you your final thoughts just from a near term actionable thinking Both developed market and emerging market Both currency and bond you know how this What are the considerations that you're making as a portfolio manager right so As i said i think You know when this airs. I think will be through the election. So that's one big piece of uncertainty that we may have to come back and revisit. But what's not is the fact that we're seeing rising You know economic shutdowns especially in europe and It i'm worried that with the you know the increasing cova cases in the us That we could see it in another engine of domestic growth so given the the given the fact that in i know this might be kind of boring but we have a risk assets. I appreciate since march but it's not only been on the back of policy it's also bound you know. Now there's expectation that their certain assumptions to the path of global growth which don't appear which appear maybe are going to be optimistic. Even in these two year out scenarios. I think those will have to be revised down so We're more defensive near term because of these building risks versus valuations that we think Maybe discounting you know a little too much at the time for the time being so immediate actionable items You know. I think we're well. The interesting places again. Are the government bonkers where central banks haven't quite fond of yet so australia like looking at Duration in australia new zealand. I think even the uk's interesting especially if they have a little bit. I a messy. Brexit would be best for the long end of the uk t because That way you would actually have the central bank implement negative policy rates which might give you a little bit of jews You know on that. Trade i think on the currency side. We have to be very careful. I still think began. Which by the way. I'll take one one just brief aside here I like the allocation to the end on the risk off property that it has ended is one of the few Assets out there that you can start to think about. In avowal shock you would provide a you know some of that offset You know that you're looking for in the sixty forty reallocation were i think the near-term to most emerging-market currencies is a bit lower. But if we can get through the election in debt you know get through a little bit of a a gets a risk girdle A growth role in the near term. I think you're still gonna have interesting. Plays in mexico you're gonna have interesting. plays elsewhere Were the higher you know these. These higher beta still liquid a emerging market countries Can no longer be viewed in a basket but the ones that we are are kind of interested right now in watching we have not gone into them but would be mexico in russia You know For potential entry points after It we get a little bit of spike in volatility and how much of the differential in kobe outcomes in the merger markets Has any real events for you because you know east asia in particular They've been outperforming. A relative to latin america or in europe for example. And we're favoring exactly so we're actually You know in in latin america where much more defensively position we have in our in our local exposures. you know. We do have full allocations across in a across east east malaysia philippines You know even though i in the we're not quite going. We haven't gone into china yet. I know there's a lot of excitement about china. china be potentially safe asset. I still get concerned that The authorities although they appear to be liberalizing a little bit more. I wanna see a true test. Case of that before i put Any investor money to risk In china but absolutely You know asia not only the cove outcomes. But it's actually there linkages to you know this supply chains that are more technology linked so Even when we're looking at the asian In a lot of the asian strength in not only have they been able to open under control. They also have been linked to recent demand for both technology and healthcare Excellent ability to get that little extra juice out of you at the end. I really appreciate that some great deep thinking in this end. Please promised to come back. So we can revisit what Either your your market ideas or some of the deep thoughts you have on digital currency in other places. Great thank you. I'd love to thank you for having me on again. It's always a fun conversation yes definitely.

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CORRUPTION 3 - The Trouble with Paradise: How Canadians Built the Offshore World

Commons

27:44 min | 2 years ago

CORRUPTION 3 - The Trouble with Paradise: How Canadians Built the Offshore World

"Hey, this is our she before we get started. With today's show. I just want to give you one last pitch for our crowdfunding season. I promise that this'll be the last time you'll hear from me about this at least for this year, and we truly couldn't do the work. We do without the help of our patrons. And I've got to say some of the work that my colleagues here candle and had been doing recently. It's absolutely worth supporting Jaren Kerr's investigations. The we movement has been penetrating look into a really important story. And then investigation is still ongoing, and I've seen just how hard he's working and making sure all the facts are right. And the story gets told the way that it needs to. And if you haven't been listening to Ryan McMahon's podcast Thunder Bay you need to rectify that immediately. The third episode just landed and it keeps getting better. So if you throw five bucks a month our way, not only will you be supporting that excellent journalism you'll also receive some swag. But on top of that, you'll get all of candle and podcast. Casts ad free. And if enough people pledged their support candle and is committed to hiring journalists to focus on sexual harassment and misconduct who can make sure that those stories get told, right? So if you like what we do head over to patriot dot com slash candidate land, give whatever you can't support us. This episode of Commons is supported in part by lift lift the fastest growing rideshare company in the US is now in Toronto and the GTI so our listeners from Hamilton to aqua- from the harbor front to Richmond hill can now download the lift app and get a ride in just minutes lift as preferred by drivers and passengers for it's safe and friendly experience its commitment to affecting positive change for the future of our cities in our listeners can now get a free fifteen dollars towards their first ride by entering offer code Commons. Fifteen in the app or you can visit lift dot com forward slash invite forward slash Commons. Fifteen terms. Conditions apply lift it matters. How you get. There. This episode of Commons is also supported in part by end e since its launch in twenty fifteen India's become the leading online sleep brand in Canada. And it was founded because a great sleep surface is essential to everyone's well being in Canadians deserve a company that just gets it. Right. No gimmicks games or hidden fees. Just one perfectly designed mattress. India offers a one hundred night trial with free returns. So you can test your mattress where really matters in the comfort of your own home. If you don't absolutely love it. Indy will come pick it up from you and give you a full refund. No questions asked. So if you want to try out, the most comfortable mattress, you've never slept on head over to Indy dot CA and use the promo code Commons for fifty dollars off any indie mattress, that's indeed dot CA and use the promo code Commons. I want to tell you about a building. It's a pretty modest structure a squat office building at five stories tall. And it's on the outskirts of George Town the capital of the Cayman Islands in except for the palm trees in the tropical chic architecture. It's fairly unremarkable. But that building ugly and house sits at the very heart of the global financial system. In fact, twenty thousand companies from every corner of the world have it as their registered address rock. Obama used to talk about Oakland house all the time. I've said before either this is the largest building in the world or the largest tax scam in the world. Agoin house has become a symbol for the topsy turvy world of offshore finance this system. Works like, a fun house mirror stretching and shrinking things until they don't make sense. It's why on paper one of the world's biggest exporters. Have bananas is a frigid island off the coast of Britain or why besides the United States Canadian companies invest the most money in tiny bar Baidoa's, you'd think maybe China or Mexico or France. But Nope, eighty billion dollars goes to an island that has about as many people on it as Saskatoon, and it's why twenty thousand companies can all be registered in the same building with plenty of room to spare. And here's the thing about the offshore world Canada helped build we were the essential middlemen that came in islands building is home to Maples and Carter one of the premier offshore law firms, and that was co founded by Canadian in fact, the entire enterprise of turning the Cayman Islands into attack Savin was. Done by Canadians. If you dig just a bit deeper, you can see that vast swaths of the offshore world were created by Canadian banks businessmen and politicians who continue to profit from it today, and it's all at the expense of everyday people Canadians like to think, we're not big international players. But when it comes to tax savings where second to none. Turn down to the banking bombshell causing shockwaves around the world, so three years ago, the Panama papers released earlier to be the biggest data leak in history, or exposing how some of the world's wealthiest and most powerful people floating leaders like bladder MIR Putin, maybe hiding billions offshore the confidential filed for a Panamanian law firm gave us the clearest picture up to that point of how the offshore financial system actually works. Some of Canada's most wealthy and powerful figures are caught up in the system. The list included three former PM's Stephen broth in one Canada's wealthiest men and one of Trudeau's most important donors in even the Queen these leaks expose the blood and guts of the international finances. This is the system that ties together all of the world's richest and most powerful people the same institutions that serve major banks financial titans and multinational corporations are tied to fraudsters terrorists and kleptocrats. And at the beating heart of the. Whole thing. Sit these offshore havens tiny places that wield enormous influence if you want to understand how the world really works you need to dig into this labyrinth of money law firms and Chilcott. I'm Marsha man. And this is common. This upset of Commons is supported in part. By the great courses, plus learning doesn't stop after school, and you can spend your whole life learning and diving deeper into fascinating topics, and that's where the gray courses plus comes in. I really enjoy. Their course behavioral economics when psychology and economics. Collide, it offers fascinating insight into her decision making and the steps we can take to make better decisions were winning. Professor, Scott, Hugh will take you deep on. How behavioral economics can help us better understand everything from medical decision making to charitable giving. Or how small nudges can end up making a big difference when it comes to improving people's lives. It's a fantastic course to get you started with the great courses. Plus, and there are thousands of others to choose from learn from leading professors and experts, but any topic that interests you like politics human behavior, history science or even hobbies like writing and photogr. Graffiti watch or listen anytime from anywhere with the great courses plus app, and we want you to enjoy the thrill of learning from the great courses plus two. So today's listeners can get a special limited time offer get a full free month of unlimited access to enjoy any of their lectures, only at the great courses, plus dot com slash Commons. Start your free month today. Only at the great courses, plus dot com slash Commons. And this episode of Commons is supported in part by indie mattresses integrity is more than just a buzzword in India's transparent about its sourcing materials manufacturing and design old materials and manufacturing used to make the Indy mattress or sourced within Canada by keeping manufacturing. Local indie can avoid duties currency exchanges, and international shipping and keep prices fares possible for their Canadian customers, you know, I've spent the last few days sleeping on couches and on planes. So I'm really looking forward to getting home tonight. And. Laying down on my Indy mattress. Because I know it'll make sure I'll have a great night's sleep. The quality is second to none and the pricing is even better because it's a smaller price tag than its competitors. Indie mattresses cost between six hundred seventy five and nine hundred and fifty dollars Canadian that means even the largest mattress of California king cost less than a thousand bucks. You simply can't find that kind of quality to price ratio anywhere else. So make sure you take advantage of Indies one hundred night trial. So you can get the best possible sleep head over to indeed dot CA and use the promo code Commons for fifty dollars off any indie mattress, that's indeed dot CA and use the promo code Commons. This season. We're doing this whole series on corruption. An underlying assumption is that if you want to know, the real stories that matter all you have to do is see where the money is. And by that metric, this is the biggest story in the world number the amounts of money estimated to Bill Shaw range between seven trillion of the low end and thirty six trillion about high end, that's nNcholas Shackleton, a journalist and the author of treasure islands, tax havens, and the men who stole the world before we get to the entirety of that system. Let's focus in one small piece of that puzzle. Billionaire Allen Stanford. He will go to court where he's expected to be charged in what's been described as a massive eight billion dollar Ponzi scheme before his arrest ounce. Stanford was best known for his Texas drawl his lavish lifestyle and the gobs of money he made, but the Stanford Bank where he made all of his money was a fraud. The scheme itself was pretty straightforward. Stanford's Bank would take in money from investors and promise jenner's returns. But those returns would come from money brought in from new investors. Everything would work out just fine as long as people didn't ask for their money back all at once. It was a straightforward Ponzi scheme. Stanford's fraud grew to over seven billion dollars in total making it the second biggest Ponzi scheme ever uncovered a clips by only Bernie Madoff any funneled a huge chunk of his fraudulent assets through Canada zone. TD bank. T- banks relationship with Stanford was odd from the get-go. We'll start with Mr. Stanford was a personal bankrupt. So he was not fit and proper to run any Bank of tall. And that was in the public record. That's Martin Kenny. He's an international asset recovery lawyer based in the British Virgin Islands, and he's currently representing thousands of victims of Stanford's fraud in a lawsuit against TD Bank. He also happens to be Jason KENNY'S, brother. But that's neither here nor there. There was one aspect of Stanford scheme that distinguished him from your average fraudster Stanford's Bank was based out of Intego. One of the smallest countries in the Caribbean in a police known internationally for its lax regulation. As his Bank grew Stanford's power in Antigua increased by the late nineties, Stanford became by far the most powerful man on the island so much money from the fraud that he was basically running the economy, they're employing so many people building so many buildings with the money's he stole. And he went so far as to take over the banking. Regulator those supposed to keep folks like him in line. So the regulated became the regulator of himself. Stanford began to use the regulator to shut down his competition and to make it easier for him to commit his fraud. He basically had antiga as a captured state in one thousand nine hundred nine the US treasury department wince Afars to warn people not to do business with Antiguan banks as a result American banks refuse to work with them. But TD appears to have ignored those warnings Stanford's fraud likely wouldn't have been possible without TD Bank. Giving him access to American. Dollars. What is the poxy little Bank in Antigua doing receiving money from its customers or victims from all over the world to Toronto in US dollars. Why was the business purpose of that ninety five percent of the fraudulent gains flowed from Stanford's Antiguan Bank into TD? Now TD doesn't comment on matters before the courts, but in the past they've said that TD Bank had no knowledge that Stanford was engaged in fraudulent or illegal activities, and they say they were neither willfully blind or reckless as to whether those activities were taking place. In twenty twelve Stanford was convicted of multiple counts and sentenced to a hundred and ten years in an American prisons. Few of Stanford's thousands of the games have seen any of their money returned and the lawsuit against he Bank is still working its way through the Antero imports. The allegations against TD Bank and their deep involvement with the criminal based out of a catcher taxi than actually has a lot of precedence as it turns out over the last hundred years, Canadian banks men building the system that led Stanford and many others like him do this. That's system a complicated. Maze of tax havens has become absolutely are Guanzhou and like tracks and said earlier, it's estimated the between seven to thirty six trillion dollars is sitting offshore which would be as much as fourteen percent of global wealth. That's a pretty significant chunk of change. But what even is a tax haven while there's no generally agreed upon definition. You can boil it down to two words escape and elsewhere other. Would you take your money or sometimes you sell I set somewhere else in all the to skate the rules that home that you don't like? And here's the crucial point. It's not. Not just about taxes offshore haven specialize in escaping all kinds of rules environmental labor public disclosures and many specialize in secrecy. Allen Stanford was able to use Intego to go around money laundering rules in while the overwhelming amount of business. That's done. Offshore is legal. It has become V crucial pathway for corrupt governments and politicians to siphon off money from their people when you have a corrupt politician making, you know, a million dollars billion dollars, whatever with that cronies. They need someone to put that money and time, and again, they will put it all show almost always put it off shore every corrupt kleptocrat you can think of from Vladimir Putin to Kim Jong UN have billion stashed away offshore accounts. And when the Panama and paradise papers revealed, it really was a who's who of the ultra wealthy and powerful from every corner of the globe. Well, at the end of the day, the people who use the system of offcial tax havens, the wealthiest and most powerful people in all of our countries. I mean, this is an issue that affects both countries and rich countries. So. So you'll we're talking about the billionaires billion clauses and multinational corporations big banks. All the biggest fuses all this system. I mean, nearly every large multinational corporation vs will have literally hundreds of subsidiaries and track savings journals full two different things. Now, you might think that taxations have been around forever. Ensure people have been hiding their assets in Swiss Bank accounts for hundreds of years. But the system we live in today that so dominated by the offshore world. That's something that really came about in the last fifty years. So how do we get to the point where so much of the world's wealth moves through tiny islands in the Caribbean? Well, that's where candidate comes in. Over one hundred years ago when much of the Caribbean was still under colonial rule Britain decided to let Canadian banks run the show that time colonial bench in the United Kingdom. But at that, we subcontracted. The the management of the financial sector. The British colonies of the Caribbean. Canadian Vang's that's a lend to know a Canadian professor and the author of a number of books on tax savings because US banks couldn't operate abroad for quite a while. Canadian banks became the indispensable middlemen providing financial services to big American companies like United fruit, but they wouldn't provide those same kinds of services to the local populations. And that's why at the beginning of the century the twentieth century there were a lot of riots in the British colonies of the Caribbeans because small fishermen small pieces couldn't have access to loans as easy as the US clients. Could by the time the nineteen fifties came around and new stateless capital was zipping around the world, Canadian banks were ready to take advantage. So at that time you had already Canadian bankers in the Caribbeans that's were able to put under pressure the local governments to transform their jurisdiction. I help them using that capital in totally free manner out of without any kind of public constraints. Take for example, what happened after the Cuban revolution? In nineteen Fifty-nine. The American mobsters had been storing their money in Cuba needed somewhere new to go. So they looked to the Bahamas end the Bahamas. What did they found? Kidney Bennett's linked to support them to welcome this capital people like Donald Fleming. A former minister finance under defend Baker took their money in their influence to the British colony and they helped shape the way offshore systems work for the decades that followed Donald Fleming was representing this. And Donald something is affirmative minister of finance on decent Baker. And he was instrumental in influential in creating laws that allow corporations to richest your assets without any sation weed out we talked that he kind of supervision from the state Fleming. One said, quote, I have found that being a banker NASO is far more profitable than being minister, finance and frosty Ottawa that convergence of banking government and crime was best embodied by Stafford sands. He was the Bahamian tourism minister sat on the board of Royal Bank of Canada and had deep ties to organize crime, including two famed mobster mayor Lansky by the nineteen eighties. The Bahamas had become the main conduit for drugs to come to the United States and the Americans noticed do you start to put under pressure not only the Bahamas but Canada too because everybody you'd at Canada was behind all this. A US Senate report in nineteen eighty three noted that quote in the Caribbean. One major Canadian International Bank has consistent reputation for encouraging dirty money. They were talking about Donald Fleming's old Bank. The Bank of Nova Scotia in win an American court demanded that the Bank of Nova Scotia release records related to a drug traffic investigation. The Canadian government denounced it as an attack on our sovereignty. The allegations that plagued the Bank of Nova Scotia in the nineteen eighties. Bear a striking resemblance to a TD Bank is being accused of today in the Bahamas wasn't the only place that Canadians help turn into a tax haven. When a Calgary alderman named Jim McDonald came to the Cayman Islands in the nineteen fifties. There was no electricity. Only one road in the mosquitoes are said to be so thick that cows choked on them, but he and a number of other Canadian, lawyers, they convince the government to draft laws to turn it into a tax haven, and that's transformed the Cayman Islands into an international financial hub synonymous with the ultra wealthy. And then we come to the case of Barbados Canada created the verbatim. This is attacks in the nineteen eighties. It was during the sharp fair of time where Joe Clark was prime minister at the time Canada was signing a number of tax treaties with countries like South Korea, Spain Italy to stop something called double-taxation in general. This is a pretty sensible move. If a company like bombard, yea has a subsidiary in Italy, and they pay taxes there. This kind of treaty would allow them to tell the CRA that they shouldn't tax the profits from Italy because they've already paid it out to the Italians but Canada also signed one of those treaties with our betas, which makes no sense Canada signed that treaty with a country where the the income tax rate is less than one percents. So how kid he didn't corporation? That's have for instance, clients abroad to create a subsidiary. Barbados to send envoys from that subsidiary to make as if an activity was occurring there to register prophet of the the the VAR betas do playlets is there. Oh point twenty five percent tax on that capital. Do Senate back to Canada then to say to the Canadian fiscal authorities. I've already paid tax on that capital zero point twenty five percent. It's disgusting. I won't pay tax twice. That's why Barbados a country of two hundred and fifty thousand people gets more Canadian vestment at least on paper than China or Mexico or France. It's estimated that Canadians of lost taxes on around eighty billion dollars worth of capital because of this arrangement. That's money that the Canadian government could be using on essential services at home when we white for Howard's into hospital is because of ties evens when we wage for forty minutes, minus twenty for bus, it's because a tax incidence when they're there is not in your high school, the suport your need for your kids. It's because tax havens because taxi events allow wealthy individuals and powerful multinational corporations to rob the country. They are in and Canadian government after Canadian government has really done nothing to change this. The system of tax havens, Canada helped create has serious consequences around the world, and we are in the world the globalization in which countries exists to allow Wilsey people and powerful corporation who have access formerly to impunity. It makes it impossible for countries to govern corporations in any meaningful way today. Big corporations don't have to ask themselves what they wanna do is legal or not the questions about where you register your activity. Whatever it is. So that it becomes legal. The story of tax havens is very complicated. Honestly, you could do an entire series just on the offshore system. And you'll still only barely scratch the surface and the offshore world does have its defenders. Then includes Martin Kenny the lawyer suing TD Bank. He points out that would've tracked criminals of the austral world is not that they're lawless places where anything goes it's at the laws and regulations are actually strong. No grief will hand the proceeds of his favorite to another. That's why places that don't have a long tradition of the rule of law. Don't end up becoming tax havens, they're drawn to our sisters because they need to preserve the value that they've taken and hide it the paradox is that they're hiding in places where they're exposed because we have systems where they can't easily bribe judges and. And that's what allows a fraud investigator like Kenny to be able to do his work. While those subtleties are important. We shouldn't lose the forest for the trees, the offshore system means that people in companies were wealthy enough. Played by a set of rules at the rest of us. Don't have access to. But honestly, we can't just blame those small places like the Caymans or the British Virgin Islands nor the two biggest tax havens in the world are not in the Caribbean. It's the old city of London in England and the state of Delaware, remember, ugly house, the one I told you about at the top of the show with a twenty thousand companies registered to its address. There's actually another building in Wilmington, Delaware, and it has two hundred eighty five thousand companies registered to address. When the Panama papers in the paradise papers were leaked, the world's attention was focused in on tax havens and await never had before. But little appears to obtain. And I think there's good reason to be pessimistic when a system benefits exclusively the richest and most powerful people world, it makes it just that much harder to do anything about it. And that's your episode of comments for the week. I'm Marsha man. This was our third episode in our series on corruption. So let us know what you think so far you can tweet us at Candalyn Commons. That's c m n s can also Email me at Arshi at candle and show dot com. This episode was produced by t came Atanda are managing editor is Kevin Sexton and her music is by Nathan burly. If you like what we do go. Check out patriot dot com slash candlelight. Help us out. However, you can't you can also go to our website candle show dot com. We're will post them links to other work that helped inform the story. And if you like stories about power money and Canadian politics, you absolutely should subscribe to candle ends new podcast Thunder Bay, the first three episodes are already out.

Canada he Bank TD Bank US Caribbean Allen Stanford Stanford fraud Cayman Islands Canadian government India dot CA Ponzi scheme Toronto Martin Kenny British Virgin Islands Vladimir Putin Panama Senate Donald Fleming
NutriMedical Report Show Wednesday June 19th 2019  Hour Two  Lowell Ponte, FACEBOOK VALUE GOES CRYPTO, Libra Facebook World Currency Grab, Enter the MatriXX, End of Autonomy and Financial Privacy, Libra Not at True Private Crypto-Currency,

NutriMedical Report

59:45 min | 1 year ago

NutriMedical Report Show Wednesday June 19th 2019 Hour Two Lowell Ponte, FACEBOOK VALUE GOES CRYPTO, Libra Facebook World Currency Grab, Enter the MatriXX, End of Autonomy and Financial Privacy, Libra Not at True Private Crypto-Currency,

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But our real self is actually cyberspace, and levers another way of totally controlling it's not going to be a hidden crypto currency, this is going to be totally open for taxation control. It's scary as hell to see this rise. Isn't it? Oh, sure this is Stacey book trying to create entirely new global financial system system that will further weaken the dollar at her nationally. We'll talk about that most important, though. It is fanning, the cause of the cashless society will not be able to carry money anymore in effect, everything you have, we'll be credit at one level, another back in nineteen thirteen the maker, J, P Morgan told congress gold is money. Everything else is credit. Meaning if you take a paper that paper dollar can't be converted into anything. It has no guaranteed value. I will say at least Berg has tried to give the, the new currency, the digital currency your crypto currency, a value value based largely on a basket of currencies all of which are just printed, the up currencies by government pieces of paper. But at least it does offer some. Stability as opposed to none. That also have some stock in very stable, reliable, widow and orphan, kind of things, and they may even have some gold thrown in just so that people know that this is not bitcoin. This is the opposite of bitcoin, and certain ways did coin was a high risk high speculation limited quantity. Crypto currency something you could buy for twenty five cents. If you were lucky and sell for nineteen thousand dollars later, it was a miracle currently that will never happen with this library currency that Facebook introduced yesterday. And they'll finally began producing using early next year, by the way, why do we think that emir company and maybe twenty seven twenty eight compatriots who signed on to work with it are significant? Well, some of those partners are quite quite telling. I mean we're talking about MasterCard, we're talking about these that we're talking about pay power. We're talking about over. The smallest left in American ecommerce site that signed on with Marcado Lieber or free market in Spanish, but it has one hundred seventy four million Latino customers closely in South America Facebook itself. Remember as two point four billion customers every month even after purging two point one nine billion earlier this year, that he'd declared fake accounts. It has three of the most powerful web platforms in the world Facebook messenger and what's app, and that means that it will launch with more power than most national central banks have in the world. It will instantly go to the tier the most powerful central banks on the planet, if it wishes to what we're told is going to be done as, oh, we'll hear at Facebook. We're not going to control it, rather a consortium, or a group of all these various investor companies that put in ten million dollars each. They will be the ones who shape the coin. No. They want it will almost all be shaped and run by Facebook. But it at least gets Facebook out of the center of the bullseye, because right now all around the world what, what's the first thing we heard here in the US today? We heard various congressional leaders Republican and democrat say, well, we need to take a look at this, we need to investigate it. We need to have hearings, you know what that translates to an English. We're going to try to shake you down for as much money as you as we possibly can before. We let you do this. That's what it translates to. That's going on with government all over the world there Willie. Attempts to shake down Facebook get a billion here a billion there out of the company because it's just so wealthy and so powerful. And so this is whether sucker -ment is an angel or devil, and perfectly willing to believe he's a devil, especially giving his left-wing ideology, but the reality and his willingness to censor anyone who has contrary ideology, by the way, we've mentioned that the name is library, where did they get that name? That's an interesting place to start rivals Cameron and Tyler winkle Voss. Their company has another astrological sign named Jim nine libra, resembled Libere, the London, interbank offered rate, which sets values for gold and the world's most famous library is Russian leader Vladimir Putin. Go figure, but. Interesting. That didn't include an article, you know, the sign for the British pound. It's like a handwritten capital L with two little crossbars in the middle. The L stands for libra. I mean, it was the symbol of the scales, and money and exchange in ancient Rome. And so every time you see a British pound Notat that way anywhere, which is standard notation. He realized that his libra. So they're giving this name that is essentially the same thing as the name of the British pound. See, I think that it's the reincarnation of brief pounded off currencies is, is you actually look at the amount of value stored in these off system, banks and the Grand Cayman islands and New Jersey Guernsey islands by these British banks. It's more than all the computed wealth of almost three hundred dollars. And what people don't understand. This is a new way of getting total control the population now at the same time, we're actually I'm involved with called carat bars. Now care parts of Germany is totally the opposite. It's private. It's trackable you can have the actual gold Pasher cards. The ATM's are going to be demonstrated July fourth, which is two weeks from now in Las Vegas, you can go to ATM when they're set up in September, and October anywhere in the world, and you can get actual local currency gold cards with golden them or cash or local currency anywhere on the planet, and you could actually have these special phones. You can do encrypted chance for money from your account, anybody else's, and nobody not even the NSA can track it see the labor is exact opposite. Libra is a perfect example of what I see coming as the Mark of the beast. Now, designed to be totally trackable and Hackel. Right. And. In fact, it was designed to replace cash, which is part of the globalist agenda. Zuckerberg is not a coder. He's a he's if you wanna call it, digital y'all. And his theology was recruited from from MIT and Harvard mean to actually works Facebook and Facebook is just another technical of the no such agency, the NSA and global organization called project omega and the local one call five is which includes Mr. Steele, that already created all these fake documents with these Russians to try to go after Donald Trump because no matter what you think about Trump Bunin v screwing up. Interesting five network GMO food. The man is against the new world order and the globalist on the left end. Right. And there's both global symbol sides and where I see this going as libra basically is an example of Facebook, which is typical of the beast, getting ready to actually have a beast, control of the entire Kadhamy of the world and tracking everything. They will know where your money is lobbying libra. It'll be in supercomputers, they'll know where you are to cubic meter, they'll know what you like to buy just like Amazon does in remember, Amazon, even shares. Physical space was no such agency there zones, laying Virginia and elsewhere. So we have to understand is Facebook is just another tentacle of the beast system, which is digital control of Lucifer airing omniscious in other words, the devil wants to know everything about what you have what you buy what you believe, and what you're right. And when you talk about which is why they're actually censoring people to Facebook Twitter, all digital media. So this is just under example, that were marching toward people. Unfortunately, we need United, talk and Craig Smith needs to talk Trump because he's obviously not aware. He's a genius business. He's not aware that while he's doing this. We're marching toward the global matrix, aren't we? Oh, we are indeed, and this, the new library will be what's called a stable, coin. It is the opposite of speculative private coin. Like bitcoin, which has always had the impediment of government, not wanting there to be pirate currency in the world, not wanting there, to be something that could make it easy to carry out illegal transactions tax evasion, utter privacy, and so on, even though we can argue that bitcoin. I mean you realize there's a school of thought that says bitcoin actually created by the NS. Context problem is the most powerful currency. That's private is care pars no Burgess last year. And then the SEO digital coins were sent there now worth ten cents. And they're increasing very rapidly toward July fourth. They're going to continue rising and the thing about to care bars is, it's completely private and non trackable. And with these new crip shin phone systems, you can track and move cash from hundreds of micro banks of micro banks all over the world or take the actual cash or cards or donate Yemen, user, code and no one can track not government, not any agency. No one can track it. And this is something that the neural order doesn't want is the rise of a gold, backed cryptocurrencies, totally trackable by the government corporations. And so it doesn't surprise me bring libra and there's a lot of big backers. These big backers mean the big banks, the Rothschilds globalist they don't want you to. Escape their digital control. Do they know but as you said, what Facebook is going to be doing is making money hand over fist out of a lot of this, because they're going to create a huge fund back of the currency and that fund will will make interest and that interest will go, largely Facebook and second? What's in it for you as a customer? Well, you can buy all kinds of things that discounted price. If you buy them for this current becomes like a coupon. If you an advertiser at Facebook, you can buy your ads more cheaply, if they're bought with this currency, so they make it more attractive to us than dollars credit card and I can just picture the dread at least theoretically that visa and MasterCard as partners in this must have because this will from the get-go early next year when they friendly launched the coin able to undercut the prices that these MasterCard Hughes. That's a quandary. You have to remember that in the average store when you go into buy something everything has been priced so that prices in the cost of somebody buying with credit card. Two and a half to five percent right? Yeah. And therefore, you're paying more for everything then you really need to and companies selling you things just fine with that. But this will charge initially for many things nothing. And then only gradually increase very slowly, what cost us. So it's a desirable, currency relative to credit. And of course, the whole push the government is to get you entirely into credit, so that you're living off your credit card other a lot of different reasons for that one is that your credit card is like a casino chip. I mean, if you ever quite when you walk into a casino, do they insist that you play with their own chips, instead of real money? The answer is because your brain doesn't recognize their chip has money. For you can spend chip much more easily than you can spend a dollar. Piece of plastic. And you don't realize maybe a five hundred thousand dollars. Yeah. And so you're disconnected from that, as you are when you spend with a credit card. Oh, I guess I'm not gonna pay on this card anytime soon. So I don't worry about it. And by the way, a lot of Americans are not paying or deep in arrears on their credit cards. I mean, we have more than a trillion dollars credit card debt. The biz not being paid at any given moment. So this is what they want. Everything into your life will be lived should we say forward instead of backward, or backward, instead of forward, depending on your view. He will not earn money and then go, spend it on something. It will spend it, and then you'll have to go earn. But what it takes to pay off the debt that includes both the cost and the interest of the credit card company. Welcome to the cyber cage. How's that? Yeah. It's the Cyprus cage. Yeah. Well, amazing scary. Agassi emerging foods is the top recommendation from Dr bell legal for the Los auction concentration largest entrees hice about a protein, the most varied entrees as well. The longest food story light nothing like legacy foods. And if you place, a regular dealer, you get twenty percent off and free shipping. Do get Versi foods for your supply for preparation and get it from legacy foods. Contact Dr Bill Diggle for the lake traumatic dot com. Go to the shop by products lake and dropdown down. 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So where's this going go further in the article? Because we're now into the second segment here. Do you think Donald Trump or any of his people like Mick Mulvaney r where this pushing five network? You think is aware of it when he's wants to drop. Borders is working on trade deals countries, visit as euro head to discussing today that some of our weapons systems can be undone by five t capability can also be used as a direct weapon. Or right weapon. Right. So yes, it's rather complex and deadly thing that we're sliding up for people. I'm very concerned when everything from across massive under the coming in ten years, April twenty twenty nine to nuclear war chemical biological. But the thing of most fearful of Zima as beast, and they I system or digital control right, down to where your body is and even near intentions of your heart thought, it'd being read by some system. Now, you know, people's that will Nolan Olancho just from your preferences that you actually unmasked when you make purchasing an Amazon, which, by the way, as another tentacle of the beezus, people don't realize Amazon is using, and so as LeBron levers using to determine exactly what you really like to buy, and everything will be in their system. You won't really have if they would press all delete your cash disappears. You don't have any currency that can buyer self and it's not coming from, by the way. Every time you send in a sample of your DNA to accompany, the promise anywhere your ancestors were your building. Their database. Well, see, when I went to orchid national eb nine thousand nine hundred prophecy club. I had guys that are listening to prophesy club and this might talks because I took care of the people working in nineteen ninety four ninety five hundred virtual world project, which is at street for species of primary note of the actual market obesus which, by the way, is coming from America coming from Brussels, or Johannesburg, South Africa or Beijing. It's coming from the USA we're leagues hit everybody else. And most genius guy billion was a crisis Seymour Cray in Colorado Springs, made to create supercomputers and the primary node of the systems and other sub no else for in Whitehall England cells etcetera, and Jakarta, Indonesia is at tree, or force base level securities in our at, and they had created digital model of earth and everybody in it down to a digital GPS Ford into model up to even vertical dimension enemies, every building every roadway everything and what they wanted to create an inch. Net of things where in digital space, they know exactly what you're doing. In real time. They wanna know in real time, what shows you're watching, what sandwich reading what part of the house, you're walking around. They wanna know everything, and they want to have what a very calm Nissen's to totally control your, the air building step by step by step. The cyber cage levers layer of this. When you create a world where your refrigerator is electrically monitoring, and sending back to a central computer how much milk you have left, it isn't just to make sure you have enough milk. I mean that becomes a portal through which they can enter every other computer interface, like your main banking, computer. Exactly. In fact, but people understand factors on Silicon Valley last year, one of the episodes talked about that. But the people realized the last twelve fourteen years every appliance as special tracking chip in to actually shut off. So we had Dr oleo Hanson from the incident. Four years ago. I'm gonna get back on just talking to my friend. Dr Sam melamine. We're getting Mr. Stecher develop. The stature is the block pollution in your home and low frequencies with the set's rise capacitors and meter which I have the pollutant inside your house is much worse than the pollution outside. Right. When people need to understand where is step by step by step. And this is even during Trump's presidency, which is doing lots of good things with economy and other things, but he's completely unaware or collaborating. We mostly basically anywhere the man is a business genius. But he hasn't understand digital control. The future world doesn't understand Christian eschaton. He doesn't understand that this income down. Like, like house of, of disaster, and we're not going to get seventy or warning people. Preach, we're gonna get almost a warning before the damn thing comes onto us. So, for example, next October, first of us year next year, little lower airway October. First twenty twenty. You don't have a world compliant visual ID reliably, you can't find anywhere now that was dreamed up during the second term of George Bush junior, who another devil like devil father, and the meanings around like you know. His vice president who actually ran the presidency will off of his gate. Compatriot doing exercise, whatever 'cause you remember, George Bush, junior's, a weird guy. He's genie was our first cyborg president. He had hundreds of staff, by the way, Dick Cheney's a real smart guy, winning stream evil. This guy is in the first person who had put amounts to mechanical heart, I mean board half human half machine. Right. Then multiple arts plans to on top of that. Mobile now understand what's going on here people. And you're not gonna hear this. You're gonna you're on FOX Tucker Carlson Hannity, whatever that I had a good talk this morning with Ken Klein, we're gonna just more video this weekend. I support Trump I want Trump, but I want I want to have a motto motto talk. Now, a lot of people say, well, who do you think you are? You wanna talk Trump bull. There's areas of knowledge that I have doesn't have and screwing up these screwing up when he's pushing five you never, which is the fire layer of the market and be system like me bre. He's screwing up recycled water talks fighting wall way. Yeah. He's very Weiwei. And he's starting to going to proceed things, for example, this thing that happened in the strait of Oman. Right. Right. This video. You can see the markings of somebody other than. Iran was doing this at the same time, the Iran injure meeting with the straight of horror movies, but it's just the Ondon it was just beyond gifting is the Gulf of mind. And so, and luckily, Trump kinda got the message that maybe he was being messed with or screwed around with to try to suck them into another stupid war. Now. People don't understand this. But I have contacts inside Saudi, Ron, you not only pulled up most of the day, we also pulled out men. We felt most that we put the shod ran and that was put on by the NSA the no such agency in the sad, and by the British Intel people how to put him in there and then when decide they're gonna pull him. They actually put the I told how made even copies audiotapes for people even Tony Ronnie military to step down, so they wouldn't riot or stop the eye coming into the square in Tehran, people not realize that we're meddling everywhere in the world, along with the British, and that the globalists' are moving basically, like, for example. What's going on here right now with with Facebook? It's just another tentacle of this species from the GIS run by the shadow government of the world, call the United Nations, and the, the, the ghost of the empire of the British that's what's going on here. The on is running the world and it runs to Intel agencies in its banks and. And the tentacles of social media companies and labor is just another example of their final steps to try to get total control the population, and they've already predicted this about two or three years ago that within a razor time w to hack into your cortex and your kid can play a game like Jumanji by putting on a helmet and interfacing. So we can go, you desire space. I'm not kidding. You people's Dr deal you're making that up. No forty one years ago at UCLA when I was going to work on enrolled, demonstrates you brain Bank. And electron microscopy him and all lab with Dr Tourtelot and UCLA DARPA wanted me to work on hacking human cortex for the alphabet of the cortex Obama put in hundreds of millions of dollars to various corporations here in California across the US and overseas, actually do it. They're putting in billions of dollars to actually hack into you in cortex thoughts. John, the Japanese Chinese say they think they've got something like that. Interface directly to your cortex rate now. And they actually came out just yesterday. I thought on the news on drudge that one of the tech companies has actually device that contain people disabled are L S, and actually control their computer by movements. Well, they had a mockup forty-one years ago nineteen seventy eight at us at the VA hospital, Tanta, Monica Bill for Dr Tourtelot of an F fourteen fighter with a liquid nitrogen cooled magnetron account to convert thought Jarkko onboard commands to fired four inches jet by thought. So they were way ahead. But they want somebody like me, who's talented mathematics, and the I ever doing research for almost half a century, I know things that are scary as hell not going to share what I do how to build a dam beast. Dr deal, you think yourself look I just have abilities. Okay. And what I see happening is, they're crawling step by step by step toward Thome control of the entire population of. Earth is scares the hell out of me that people don't take this, even under Trump. Now, you got leftists or call a demon ramps at me, Dr judge Pirro, says the same term, but they wanna kill babies want open borders, and all the other crap there, there's no waiting to get himself elected even if the polls Packer were saying there, you've got a nine point to head. That is such B S isn't it? All these, I mean, creating polls whose first done by the liberal media for their own purposes. One of just to invent news, whenever they need it, another is to push poll to change people's mind. What they traditionally do is they will lean heavily in favor of the most leftward candidate until oh, twenty four hours or so, before the election. And then they will suddenly issue maybe one unnoticed but accurate poll so that for the next four years, they could say, oh, well we were accurate. You know what they were trying to use poll propaganda? All critic pack must mean the devils media. I mean all the media so left is, is in Trump should start licensing, CNN, MSNBC, and people. Jeff Bezos, and the Washington Post should be doing per Faulk in an orange jumpsuit he shouldn't be walking around as is a mega millionaire. The idea that people don't understand this, that freedom of the media, which means Facebook and Twitter should be suitable. And I think under Trump in the next few months, when he gets the Horowitz, and they over reports would you're gonna find here. Is that the tax against the department of Justice, the FBI these agents like, steal from five is the ultimate problem is information control? And a lot of this was taken often in the Patriot Act after nine eleven remember Patriot Act was being built for five years before nine eleven happened. Did you know that it was a battalion attorneys writing the Patriot Act five years before? Eleven happened, which was announced by his father. George Bush's father ten years to the day before and security officer for the World Trade Center. Towers was Marvin. Bush, George Bush's brother didn't people know that do they, they don't know. No, you're just a verses ears said, urine idiot, and you're gonna diet. Okay. You can spit on me and curse me and which the devil takes eagle out, but you know what? I'm not gonna shut up as a I learned to speak and said that to three I asked questions that make adults cringe and I'm never going to be four because four year old shut up. And I want people understand that we bringing people like you in faction. You know what I'm saying is true? It's not BS as wanna bring on people like Joseph back in the next hour where I've John w spring, about the whistle blowing about Naci line. And we've got against Trump. He doesn't yet understand that we're sitting on hypersonic cruise missiles that we don't have missile defense against he doesn't realize that you're on in Syria have bioweapons bio preparation to by the Russians, when Soviet Union fell, he doesn't realize that although we may destroy nations, we're going to be destroyed to. I mean what I see coming in America is not good. Now, the reason why I believe the primary group that probably did these attacks in the Gulf of a mon- Russians is because their prime raising their freaked out about is than if Trump gets a second term his face forces, missile events, will make any of their missiles systems of Russia and China completely obsolete and any their proxy nations like North Korea Venezuela, and you're on. And when they become obsolete. Not the conventional forces gone. But Americans control the new world order through their proxies, like libra, which is basically a proxy of the NSA. Okay. That's what it is. People have understand. The new order is the United States in proxy, cooperate or Britain. And the United Nations. We, we are the enforcer of Lucifer control system, called the new world order America, people don't wanna hear that, though. Think americans. Right. Just look, we do a lot of really good things we surprised more humanitarian aid anybody else under his by ninety five percent but we're also the control of the world. We have seven hundred plus basins. We control the world finances. That's why I went Trump makes deal with Tynan says you gotta come to the table or else Chinese are having a fit because they realize they either succumb to Donald Trump or their economies dead. I know every month companies are leaving China like crazy, because just because Trump saying he's not going to work out a deal. They're leaving people in all that about China. Do they? Guess what? Trump is a lot more power than you think he has. And so does America. These other countries are starting to get the message. 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Photon therapy in Fred light far in air extremely important for pink control relation Najib oxide group, profusion, and sim cell activation and the Dutch in the site. A doctor Bill is for pain control for regeneration techniques, organ regeneration, and for stimulation of stem cell activity, this amazing limit photon therapy, this year, we'll probably have additional vice therapy during the phases lights to obtain machine. Contact Arthur built at neutral medical dot com. Triple eight two two eight seventy one he'll prescribe providing can helpless generation healing and pink control. Nothing like limit photon therapy for easy therapy. For your is your paid, your joints regeneration of organs. Detoxification of the body, get a little info time machine from darker, build eagle Neutra medical dot com. Triple eight to seventy one stay well with Dutra medical. And welcome back. Expand on this New York time reported this story. And I think it's pretty telling isn't it? The New York Times is talking about this. What do you think what are they saying about it? Well, they're saying a lot of the same things, I'm saying pricing enough. But today in an audit by Mark Stoler? He's a fellow of the open markets institute. He said that the global currency is a bold, bad move for Facebook. It's not really that great investment idea. And perhaps that's because many people are saying it isn't even worthy of the name crypto currency because it doesn't give people privacy, if anything it makes their life more even more of an open book to Facebook that theoretically, soccer Burgas is do whatever you do with this new crypto currency will be open to the government. It's not. It's not. When was it call it a naked currency, where he'd be totally digitally naked to the cyber state. Yes. And you won't have any real money that you could walk away with, you know, even sweeten now which was the great God. In terms of telling people were going, cashless, they had hold banks that deal in case at all. And yet about two three months ago sweetness you to statement saying because of the possibility of war and other regressive instability, you should have some real cash on hand. You shouldn't rely just on the credit from our banks. Trying to eliminate credit cards effect almost everywhere you can't even get in many countries, even in America deposits by check sent to you. Now. They do electric funds chance for to your Bank account. It's a government, of course done many things to freight new off case. For one thing, if you go into your Bank, and you withdraw any unusual amount of money in case, the Bank is required to report that to the IRS and to fly you as a gauged here, banks deliberately spies on you, and as required to the government, number two all kinds of police departments across the country have asset forfeiture policies. So if you have any amount of cash on you, they will see the case they will charge the cage as a suspect in a crime, and we'll not charge you, so you have no legal standing nice to clear, your case to be criminal. And then they put the owner. S on you. You prove that you legitimately owned this case money. And some people can't and some people can't, but they'll put you through hill. Try to get it back. Here's the two models that I wanna come compared to wanna get your response to the two models are the world's models. We're an animal, we're intelligent animal invention. They wanna create a cast from of cybernetic genetically, enhanced you like the X men. Gods model is we're a collective organs. We're not only individuals but we're connected we connected to each other. We're empathic about twenty percent of health providers from sample. Doctors, nurses, and whatever are so empathic. They can actually feel the patient's pain and understanding and pray for them and has positive physical affect now. If you're psychic, it means you're Astro lie in years, rope, you actually are open to a higher plane of existence. And we are all actually, although we're separate individuals were all part of a large organism when Jesus comes back. He's coming back to marry us collectively as his bride, which means let's say a million years from now, we are spreading across star systems in the cosmos, that bride will be trillions or quit ratings of humans and descendants are further advanced as demigods, but be the bride, and the most I got incapable of doing evil because his spirit will be fused to our existence. We will not come into the idea of doing anything. Against the will of God. That's what the marriage supper is now. It's gonna come after time of great tribulation. Because right now the title versus beheaded over temporarily to Lucifer by dealth because in fact at the sacrifice of your shoe Jesus at the cross. The title was given back to mankind. But Satan used every kind of banking another tribulation trick to fool the human race into believing the things like the Rothschilds and the Federal Reserve system and now the internet, which, by the way, is five or six the call symbols to control the population of earth. Now, the nation of America was supposed to conceived by surpasses bacon zeal, Jim McLean. Elizabeth, I probably was a wizard and had an IQ the estimated over two hundred. He's very smart all, or some of Shakespeare's plays. Yes. Right. This guy had an IQ. We estimate over two hundred. Now, this is part of the reason why, you know, his his, his mother's mother grandmother. Was beheaded because she was a smart lady who came against eating aids. All right now, what happened to the survey bacon wrote a book called the voyage document, which basically prophesied the coming of the new Atlantis. Now, these ancients had all these ancient documents the Vatican, but many libraries like Andrea, and there were the world, and how the hell high of the culture was around the planet, the culture deteriorate, significantly after ancient wars, and collecting solar, and things that happen to the planet earth, and much of the planet went back into decay and the dark ages. But the fact is that people like him want to prosecute return of Atlantis and MU the two major buyer's went to war in ancient times. And in fact, what people don't understand. Is that, that these high level Mason's a lot of them are all over the world, by the way, by the way, it includes George did Donald Trump's father, and I have Evans dump Trump himself is probably not a very well participating Mason. But his father was a. Scottish, right Mason. When the seventeenth level, you take the ineffable name of God, and accepted, y'all along, y'all way the creator God Baal, the do God of fertility and property, and Cyrus ago, the underworld of those names names for Lucifer people don't know this. They don't realize every single high level government on earth is run by some kind of secret order doesn't matter of China, even chance, humanist Buddhism, whatever. They're all have secret orders. They don't care. What book you worship bug? Whether it's the bag of Gita the Ranchi of book the book of the dead, the bible, the Torah it doesn't matter as long as it's some form of holding book people. Don't grasp this do this, and our world run by Lucifer genetic Mason's. Do they know they don't, by the way, if you'd out there wasn't Atlanta's contemplate this tax in their mythology believes that they were descendant from an ancient lost continent called Oslo on. Landis, does it actually wants to Bermuda. And these other things, you'd actually see giant flocks of structures built in the ocean floor to the ocean floor foul. Okay. So there changes occur now, every so many thout tens of thousands or quarter million years. There's a major in call listen verict just junction with across the years moves on the mantle one of the things might classify context homey, back twenty five years ago is in the fifties and sixties minister, getting tortured sealed imaging from Spacey. Look at what's called gravitons imaging to pick up submarines under the ocean or whatever started looking across the earth, and realized they could see the mineral content the structures like underground tunnels and everything all over the planet, and they also realize that their structures inside the earth that were built tens of thousands of years ago, people don't know this. They write the national physical year in what was it nineteen fifty seven was drilling? It's Mojo trying. Thrill through the cry. I took care of John Seattle, whose fills Niners Fred working in sodium cooled nuclear reactors tunnel with Bechtel corporation, making underground cities. I took care of the guys working out. So I noticed firstly not second hand and they would tunnel under average from seven to eleven miles per days, who rock one hundred twenty foot cross section was a sodium cooled nuclear reactor and lay. Try radiate track vacuuming notes had a vacuum track five capable in the ceiling. All right. And they primary place to build these cities was in dormant magma dome. So when across the food on the mantle hotspot feeding, the magma guard, Phil, yeah, the Ford of to twelve cubic mile size diet. Do you place to put in a city grant matrix by telling back and forth and grading a matrix? These are all over the damn world. I mean there were building at the time twenty five years ago. One new underground city at the rate of seven. We every seven weeks in America everywhere. North Korea, China Russia, all over the world is these cities. And if you actually go back to places like Turkey you can find these underground Caesar ten twenty thousand years old that are giant. There's tunnels running all the way down the entire spine of South America. Underground tunnels, I talked to Jonathan gray. He's been inside them. He's action on our show. Every second Wednesday people need to realize the real world that we think, exists in a world that does exist completely different when Jon Allen, when it fills tunneling in Baja California, which is also the US, Canadian American border in Mexico. They broke into a tunnel system and they actually raise the rocks and tells virtually dental are tunnelling systems, we have now create this hardened going up city and tunnel for that were three hundred to five hundred thousand years old. So the world is a lot different than what people think isn't it? Well, there are underground rivers lava, too, by the way Craig Smith and I deal with a lot of these topics, including the internet of things. What it implies book money around the, the machine, if any like an absolutely free in postpaid copy. I mean understand your free, you can pay twenty dollars Jeff basis Amazon, or you can get this absolutely free, and we'll pay the postage and everything not cost to a penny. Just call eight hundred six three zero fourteen ninety two year, Columbus, sail the ocean blue and fool, the natives because he could predict a an eclipse, and they couldn't eight hundred six three zero fourteen ninety two of course, he was not dealing with the Mayans the Mayans, also understood eclipses and have their own clips tables to so he would not have shocked them, but he was dealing with the more primitive Caribbean. Drive time. The point is these wisdom. It's gonna make you wise, wisdom's thing is going to save your mind, body and spirit, for example, when wisdom left the body of politics of the ancient Israel, these God was drew, grace from them end up with judgement. We didn't straws judge wisdom to regarding your physical body because you're gonna just let your doctors get away with surgery and chemo and stuff. They're going to kill you. When you don't understand your different toxic world with five network now that it's toxic to you might have Kanji in your got Biomed and, and insects and birds that fall into the sky, you gotta realize the people running, our world are devils, ender ignorant, and they're or they're just like Donald Trump. They're led by people like mauve, Amy and people around him in corporations want to make a profit and kill us, and even craft or even press example way to, to musing down critic, thanks committee was going to have these debates on different topics. And they've been telling us how climate is a big topic. They've just refuse to have a debate on climate among there. Candidates because it would be so obvious. They didn't know what they were talking about. And they were utter fools, if they tried to do that they just act off. Meanwhile, poll wise they are turning to Elizabeth. Warren of all, people God help us, and they're, they're holding these strange hearings into slavery reparations topic unto itself court today. One African American came before the committee and said, these reparations idiotic. They're not good for black people. Don't do them and the whole audience booed him because they'd already spent. But what I wanna see instead of raising the minimum wage, I wanna have government have VAT and work out the cost of living and allow, for example, right here in LA. They're starting to get a kind of a clue that these people have street groups, we have the doubters including veterans of, you know, they've got post traumatic stress, right? We've got drug addicts and need to get pushed into drug therapy against their own will, and we got mentally ill, it shouldn't be on the street. Right. And if you did that you take care of the problem that you wanna have housing. You'd have a social system for health care, for example, pay doctors hourly wage rather than per fee. Get rid of malpractice, get rid of state licensor that have a licensing. Authorities government don't force vaccines. A lot of people have Tommy allows to actually have innovative care based on just doctors Vince time with you, for example. I do what I do telemedicine care charge for my time, and I'm not hard timekeeper, what I charge an hour often spend three or four five six seven hours of people. But I do everything I tell people I do the but tests imaging. Studies review and everything. The problem is the is system can be easily fixed and ever social safety net without socialism. The problem is the global want control. These are control freaks people like Liz, Liz warrant, Nancy palsy, carry Cory Booker. These people aren't trying to make America better or great or doing anything for the people. Tell us that they're number one plan in for healthcare would outlaw private healthcare. So it all comes back to the government. Right. So what you're saying is they want to remove your atonomy your ability to live longer, and well, and I know working socialize systems. We'll get into next Joe six pack it gives you don't believe it. I'm going to have some stories for you. Next hour, thank you low amazing program today. And for the matrix.

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Democracy Now! 2020-12-10 Thursday

Democracy Now! Audio

59:37 min | 2 months ago

Democracy Now! 2020-12-10 Thursday

"Hi i'm amy goodman in this time of covid. Nineteen climate chaos and historic elections. You count on democracy now to stay focused on the issues that matter. Most we count on you to support our independent journalism. If everyone who tunes into democracy now gave just ten dollars we could cover our operating costs for twenty. Twenty one really. That's all it would take. Please do your part today by visiting us at democracy now dot org stay safe wear a mask save lives and thank you so much from new york. This is democracy now. Two hundred seventy million people marching toward starvation failure to address their needs a hunger pandemic jor the impact of coping as global hunger surges amid the covid nineteen pandemic. The world food program is awarded the twenty twenty nobel peace prize. We'll hear part of wfp head. David beazley's acceptance speech then. Look at joe. Biden's decision to pick tom sack to head the us department of agriculture again. Then to this patient of innertube ice warring and i has had warned is spiraling out of control of cooling impact on civilians. The ethiopian government's blocking international observers into tigray after ethiopian prime minister abiotic med launched a military offensive. That's displaced tens of thousands of civilians. It was just a year ago today. That the prime minister won the nobel peace prize. I believe this is a way of life. Full move this and destruction is now on the verge of a civil war all that and more coming up. Welcome to democracy now democracy now dot org the quarantine report. I mean he. Goodman the united states recorded three thousand one hundred twenty four cove. In hundred deaths. Wednesday shattering every daily world record since the pandemic began one hundred. Seven thousand people across the united states are hospitalized with the disease. Also a record and more than two hundred twenty thousand new infections were reported in just twenty four hours more than a third of us residents live in areas where intensive care units of either filled to capacity or are running critically short of icu beds forecasts published by the centers for disease control and prevention predict as many as twenty three thousand new cove nineteen hospitalizations day could follow the christmas holiday weekend unless public health measures like social distancing and mask wearing are widely adopted in alabama former republican state. Senator larry dixon died. Saturday of covid. Nineteen at the age of seventy eight. His widow who also tested positive reported. Her husband's last words. Were we messed up. We let our guard down. Please tell everybody to be careful. This is real and if you get diagnosed get help immediately. He said and then died on capitol hill. The house of representatives approved a one week extension of federal funding in order to give more time for lawmakers to reach agreement on a coronavirus relief. Bill senate republicans have failed to pass a new stimulus package since the passed three trillion dollar. Heroes act last. May germany reported twenty five thousand corona virus infections wednesday. A record with over one thousand deaths and just the past two days chancellor. Angela merkel pleaded with germans to limit social contacts over the holidays as she called for a new lockdown to stop the spread of covid nineteen. It's abbas is it hurts me. It really aches in my heart but if the price of these niceties is that are fatalities are now at five hundred and ninety people a day. Then this is not acceptable. And so we have to take the german chancellor's plea came as several european countries. Hard hit by a full wave of covid nineteen have shown significant progress flattening their infection curves after reimposing. Tough new lockdown measures in the united kingdom. regulators have warned hospitals against administering the pfizer. Biontech covid nineteen vaccine to people with a history of strong allergies after two people had reactions to their jobs on tuesday the first day a vaccination in britain and northern ireland the uk has enough doses of pfizer vaccine for eight hundred thousand people and has ordered enough to vaccinate twenty million more people. Meanwhile canada's approved pfizer's vaccine could begin immunizations as soon as next week in the us food and drug administration vaccine. Advisory committee is holding an all day meeting today to review the pfizer vaccine depending on how the committee votes the first. Us doses could be delivered on friday here in new york governor. Andrew cuomo promised state officials will not share the immigration status vaccine recipients with the federal government. Cuomo said quote if undocumented people don't get vaccinated it compromises their health and it compromises the whole program unquote in the united arab emirates. health officials. Say a large clinical trial of china's sinopharm vaccine shows. The two dose vaccine is eighty six percent effective at preventing cove nineteen and appears entirely effective at preventing severe disease. Public health officials reviewing the claims cautioned. They need more information about how the vaccine trial was conducted. Attorneys general from forty six states joined the federal trade commission wednesday in a pair of antitrust lawsuits against facebook saying the social media giant used its monopoly power to crush smaller rivals and snuff out competition. The lawsuits call on facebook to spin off. What's up an instagram. And are demanding limits on future mergers and acquisitions by facebook new york attorney general letitia. James announced the state's lawsuit wednesday by using its vast troves of data and money. Facebook has squashed or hindered what the company perceived as potential threats. They've reduced choices for consumers. They stifled innovation and they degraded privacy protections for millions of americans president-elect joe biden has selected catherine tied to serve as us trade representative if confirmed by the senate. She is who is african. american. Who is asian. American will become the first woman of color to hold the cabinet level post as the top lawyer for the ways and means committee. She pressed the trump administration for stronger labor protections in the us mexico. Canada agreement on trade. She also prosecuted several. Us disputes against china at the world trade organization in related news. Joe biden has formally nominated retired four star army general. Lloyd austin to be defense secretary austin who would make history as the first black defense secretary spoke alongside biden. Wednesday america is strongest when it works with his allies over the years. I've worked hand in hand with our diplomatic colleagues and partners around the globe and witnessed firsthand. We're able to accomplish together. austin now. Serves on the board of the leading defense. Contractor raytheon is a partner in the venture capital fund pine island capital alongside biden's nominee for secretary of state. Anthony blinken austin can only be confirmed if he secures a waiver from congress due to laws designed to preserve the civilian control of the military several democratic senators including richard blumenthal tammy duckworth jon tester analysts with warren have indicated. They would oppose granting a waiver. To austin blumenthal said quote a waiver of the seven-year rule contravenes the basic principle that there should be civilian control of a non-political military unquote three years ago. Seventeen democratic senators voted against giving away her to general james mattis when he was nominated by president trump. The trump administration appears set to move ahead with a twenty three billion dollar arms deal with the united arab emirates. After by patterson effort in the senate to block the deal failed critic said the arms deal could further destabilize the middle east and worse than the humanitarian crisis in yemen. The deal includes the sale of f thirty five fighter jets reaper. Drones and other military equipment may by raytheon another. Us weapons manufacturers philippe nazif of intern. Amnesty international criticized the arms. Deal saying quote. Today's vote could be the first act in a domino effect which ends in human tragedy is country provides capabilities which risk being used to injure and kill thousands of yemenis libyan's and their homes their schools and their hospitals in iraq's kurdistan region at least eight people have been killed over the past. Week as security forces clamp down on protests over unpaid salaries. The semi autonomous region is facing financial crisis tied to corruption plunging oil prices due to the covid nineteen pandemic in eastern afghanistan gunmen shot and killed television journalists model on my wand as she was on her way to work in the city of jalalabad out thursday making her at least the tenth afghan media worker killed this year. My ones driver was also killed in the assassination. No group has claimed responsibility in. The taliban has denied involvement in ghana the incumbent president now now kufo was announced the winner of a contested election which has led to at least five people being killed and related violence since monday. Earlier today. ghana's opposition rejected the election results and vowed to take steps to overturn it. It was the third time. President kufo faced off against former president. John mahama for the presidency. The national oceanic and atmospheric administration n-o-a-a warns in a stark new report that greenhouse gas emissions have radically transformed the arctic. In just the last fifteen years the two thousand twenty arctic report card warns of dwindling sea ice accelerating arctic wildfires summertime temperatures topping one hundred degrees fahrenheit and rapidly melting permafrost that's releasing vast quantities of heat trapping methane gas on the whole. The arctic is warming three times faster than the rest of the globe. The state of new york has announced plans to divest. Its two hundred twenty. Six billion dollar retirement fund from most fossil fuel companies. The new york state common retirement fund is the third largest public pension fund in the united states. New york state controller. Tom donna police said the fund would divest from the riskiest oil and gas companies by twenty twenty five and decarbonised by twenty forty. The decision follows years of organizing by the divest new york campaign which was launched after hurricane. Sandy bill mckibben co-founder of three fifty dot. Org hailed the decision. This is one of the really great. In a moment. This is the biggest pension fund to divaesque. It comes from the state that is at the heart of the global financial system. That is it is smart money and it comes after the lawyer for of the controller to engage with these oil companies and try to knock some sense into president. Trump has asked the supreme court to side with texas attorney general. Ken paxton a lawsuit. To overturn joe biden's election. Victory paxton sued the states of pennsylvania georgia michigan and wisconsin and has asked the supreme court to block the states from voting in the electoral college. Seventeen republican attorneys general have back paxton's extraordinary lawsuit trump's last ditch effort to overturn the election. Results come ston and several other. Republican attorneys general are set to meet with trump for a private lunch today at the white house. All fifty states and the district of columbia have now certified. Their presidential election results on monday electoral college voters will meet in their respective states to form cast their votes for president president. Trump's top campaign. Attorney rudy giuliani left. Georgetown university hospital in washington wednesday after four days of treatment for covid. Nineteen giuliani told new. York radio station. Wabc receive the same drugs. President trump got during his battle with the corona virus and october giuliani special treatment. Followed similar care. Administered to trump allies chris christie and ben carson both of whom received experimental antibody therapies for severe cases of covid nineteen the drugs produced by lily and regeneron are in such short supply. That many states and hospital systems have set up a lottery system to determine who will receive them meanwhile jenna. Ls another trump campaign attorney. Who worked in close contact with. Giuliani has tested positive for covid. Nineteen federal officials are investigating. Hunter biden focusing on his taxes and business dealings in china. Investigators had not disclosed any new information about the probe until recently because of justice department guidelines barring overt actions that could affect election. Hunter biden maintains he has done nothing wrong. In minnesota the minneapolis city council passed a budget. Today that redirects about eight million dollars from the police department. The funds will go towards violence prevention mental health response and other services but does not reduce the number of police officers and maintains new hiring targets. After mayor jacob fry threatened to veto any staffing reductions. the budget is a far cry from the counselors. Pledge this summer to dismantle the minneapolis. Police department at the height of the racial justice protests following the police killing of george floyd in california the freshly sworn in los angeles district attorney george gazon announced plans for sweeping changes to. La's criminal justice system during his inaugural address this week. A skunk called for ending the death penalty ending cash bail for minor offenses and reducing the prison population by quickly resentencing prisoners who are serving excessive terms. He also promised to end harsh penalties for children arrested for minor drug offenses goods experimented with drugs. But the painful tooth is that the disadvantage hint. That gig cod tend to go to juvenile hall while kids in wealthier communities tend to go to recount. George gascon is a former police officer who previously served as the district attorney of san francisco. He ran as the progressive alternative to eight year incumbent. Jackie lacey who critics say too often sided with police and had come under fire more recently after her husband pulled a gun on black lives matter protesters earlier this year. Johns hopkins the nineteenth century businessmen and namesake of the prestigious hospital and university in baltimore maryland. Enslaved at least four black people before the civil war the revelation made by school officials. This week was based on newly unearthed census documents and counters the popular narrative. That hopkins was an abolitionist in other education. News connecticut has become the first state to require. High schools. Offer courses on african american black puerto rican and latin next studies starting in twenty twenty. Two connecticut governor ned lamont said quote increasing the diversity of what we teach is critical to providing students with a better understanding of who we are as a society and where we are going he said and in breaking news. A judge in lebanon has charged lebanese caretaker. Prime minister hasan job and three former ministers with negligence in connection with the devastating august fourth explosion at the port of beirut. The explosion killed over two hundred people. Injured seven thousand and left more than a quarter million betas residents homeless and those are some of the headlines. This is democracy now. Democracy now dot org the quarantine report i mainly goodman in new york joined by my co host nermeen shea. Hi nermeen good morning and welcome to our listeners and views around the country and around the world we'll just before our live broadcasts. Today the world food program received the nobel peace prize in an online ceremony due to covid nineteen restrictions for what the nobel committee described as its efforts to combat hunger for its contribution to bettering conditions for peace and conflict affected areas and for acting as a driving force in efforts to prevent the use of hunger as a weapon of war and conflict on quote the world food program is the world's largest humanitarian organisation dealing with hunger and food security. It's now warning. The combination of conflict climate crisis and cove nineteen could push two hundred seventy million people to the brink of starvation. The executive director the former south carolina governor david beasley accepted this year's nobel peace prize award on behalf of the organization from its headquarters in rome on behalf of the secretary general of the united nations antonio guiterrez our board. Our sister agencies are incredible partners and donors in on behalf of nineteen thousand peacemakers food program including those who came before us and especially those who died in the line of duty and their families who carry on and on behalf of the one hundred billion people. We serve to the norwegian nobel committee. Thank you for this great honor. Also thank you. for knowledge. In our work of using food to combat hunger to mitigate against the destabilization of nations to prevent mass migration to in conflict and to creates the ability in peace. We believe food is the pathway to peace. I wish today that i could speak of how working together we could end world hunger for all the six hundred and ninety million people who go to bed hungry every night but today we have a crisis at hand this nobel peace prize is more than a thank you. It is a call to action because of so many wars climate change the widespread use of hunger as political and military weapon and the global health pandemic. that makes all of that exponentially worse. Two hundred and seventy million people are marching towards vacation thing to address their needs. We'll call a hunger pandemic which will join the impact of covert and if that's not bad enough out of that. Two hundred and seventy million thirty million depend on us one hundred percent for their survival. How will humanity respond. What tears me up inside is this this coming year and millions and millions of my equals my neighbors. Your neighbors are marching to the brink of starvation. We stand it. What may be the most ironic moment in modern history on the one hand after a century of mesh tries in eliminating extreme poverty. Today those two hundred million of our neighbors are on the brink of starvation. That's more than the entire population of western europe on the other hand there's four hundred trillion dollars of wealth in our world today even at the height of the covy pandemic and just ninety days. An additional two point trillion dollars of wealth is created and we only need five billion dollars to say thirty million lives from. What am i missing here. A lot of my friends leaders around the world have said to be. You've got the greatest job in the world saving the lives of millions of people. Well his when tell them. I don't go to bed at night thinking about the children. We saved. I go to bed. Weeping over the children could not save and when we don't have enough money nor the axis we need. We have to decide which children eat and with children. Do not eat with children. Live with children die. How would you like that job. Please don't ask us to choose. Who lives and who dies in the spirit of alfred nobel as inscribed on this metal peace and brotherhood. Let's feed them. All food is a pathway to peace. Food is the pathway to peace. That's world food program. Executive director david beasley accepting this year's nobel peace prize award behalf of the organization from its headquarters in rome today. International human rights day. When we come back we look at the hunger crisis with ricardo salvador of the union concern. Scientists will also ask him about president. Elect biden's pick to head the us department of agriculture which could play a key role in feeding millions of americans facing food insecurity during the pandemic. And then we'll look at the crisis in ethiopia. Stay with us. won't Richard carino's birmingham sunday performed by the university of california riverside chamber singers arranged for chorus by gene glickman. Lifelong activists in music professor. Jean passed away last weekend at the age of eighty six. This is democracy now democracy now dot org the quarantine report. I mean he goodman with no shake we look now at the growing hunger crisis and how the world food program this year's nobel peace prize recipient projects two hundred seventy million people may be pushed to the brink of starvation amidst the combination of conflict climate crisis and covid nineteen here in the united states group feeding america prediction. More than fifty million people in the country could experience food insecurity before the end of the year including one in four children. We're joined now by ricardo salvador director of the food environment programme with the union of concerned scientists. Welcome to democracy. Now it's great to have you with us. Can you start. Ricardo by responding to the world food program winning the nobel peace prize today and the comments of its director. David beasley saying food is the pathway to peace. Yeah well first of all. This is a very apt recognition for the organization. However i think the executive director beasley wills who agreed that the best circumstance would be that. There'd be no need for an organization like the world food program. What it is doing heroic. Because it's essentially delivering emergency food to populations have no recourse but really need to be asking ourselves. How is it that in the twenty first century win the planet as a whole is producing almost half again as much in terms of calories that we need to feed everyone that there are some people bidders such dire circumstances is he described so we must always do that work. We must support that. We're we must congratulate. The people been devote their lives to do that. But i think a more important calling is actually to prevent the incidence of hunger on the planet. Which is entirely doable. And to your question. The formula that food is the way to derive piece actually should be more properly understood in reverse a question of why we have so many highly people on the planet. Winning there is no need for that is that it is a deliberate decision that some human beings make in order to appropriate the resources of others or as in the case of one of the hot spots on the planet right now for hunger which is yemen it was a deliberate strategy to disrupt the food system specifically to weaken the country in the pursuit of the war between proxies saudi arabia iran. And so it's important to remember. That hunger does not always happen because of natural disasters which is a mental model that most of this fall back upon. It is often the result of things that we actually do to each other deliberately ricardo also today when a beasley was speaking the head of the world food program. He said that food is the pathway to peace. He's also pointed out in a a piece in the guardian that even before the pandemic in two thousand nineteen twice as many children died of malnutrition and hunger than have died in total from the pandemic so far that is over. Three million children died last year from hunger and malnutrition. Can you talk about what you think. The underlying causes of this are you hinted at earlier. What are the problems with the global food system that creates this kind of systemic hunger in certain places be happy to lay that out the most important thing to understand about the modern food system is that it is a creation of about the last seventy years and it is a business model it is a wonder of global logistics and it is not a philanthropy it caused a great deal to invest in the production the processing the distribution transportation and logistics all the blinking lights that make it so that for those of us who have economic and political power that food system conserve our needs it literally can deliver a on our whims in an instant of most of us per deliberate strategy of the food system. Just within arm's reach of anything that it can manufacture and deliver but note the qualifications that i just described you need to have economic and political power in order to make the food system sir view now that system does not serve everyone when we cite statistics like the ones that we've been hearing this morning about the million are hungry another way of hearing that say the global food system that relies on wealthy people to be able to interact with it actually does not serve hundreds of millions of people on the planet and the reason why these people are not served is that you provide your food in one of two ways. It's very simple. You either grow it and produce it for yourself. meaning that you have access to land. You can apply your labor and entrepreneurship to produce your own food or else generate cash income from some other activity and you interact with global food system. That does it all for you. If you're hungry than it means you have no access to land orioles. You're not able to apply entrepreneurship to produce your own food. And you also don't have access to the capital to the cash that's required to be able to interact with the food system so the questions are why is it that some people are not able to produce in their own backyards on their own land enough to feed themselves and the answer to that is that often. It's the folks interacting with the food system that second category of people that i mentioned that are the explanation. Those of us that enjoy cocoa coffee tea. The products have most of the tropical. Part of the world are actually utilizing. Tropical land are actually utilizing the resources of other people in our mind we believe in such theories as comparative advantage. We're actually trading for these artifacts but in fact what is happening is that most of the time we're appropriating the resources very vulnerable economically desperate people that are not able to fight back against millionaires that are investing in land leases in order to produce industrial crops such as jetro for biofuels or to produce a luxury crops of the global north and. So it's very important to understand that. As i mentioned at the outset these are deliberate. Human decisions tactic tactics that looked like investment decisions to other people but in fact actually have the perverse result of eviscerating and making other people hungry in different parts of the planet. Could you talk about that. Actually in the context of let david beasley also said these staggering figures four hundred trillion dollars of wealth in the world today. An additional two point seven trillion dollars added a over just thousand nine hundred at the height of this pandemic the connection between inequality and the kind of resource appropriation. That you've been speaking of the allied of humour statistics to that. So for instance of globally the value of the system approaches five trillion dollars It is a very high value ad business proposition to take the raw products that most of us would know what to do. So for instance Raw corn ross leading or livestock. And turn that into the edible bites that most of us expect from the food system. They were accustomed to those of us. That have only known through system of the last seven years. No only those ethical bites by and large and so it's very profitable system and that nearly five trillion dollars that i described Says things are going to stay this way And so this means the people on the planet who are displaced who formerly owned land and produce for themselves but have been displaced for banana plantations for cocoa plantations for tea plantations for a bio-energy plantations. And so on. These are populations of people that do not have the political power often. Don't enjoy the support of their own governments. In order to assure their food sovereignty in their own well-being prime example of this is the continent of africa. The minority of us are accustomed to grab For stereotypical image of somebody suffering from hunger by going onto the finding images of district people on the african continent. We're conditioned by those images to think of the continent as a basket case when it comes to economic development and agriculture production the continent of africa. Not only could feed itself. It is currently producing more calories than needed to feed its own population. Just one country sudan could be a breadbasket breadbasket for the entire continent but what is actually occurring is that governments are making land lease deals with foreign companies or other nations namely china so that the production of africa is literally appropriated to meet the needs of other countries that have the capital to compete for that land and for the production of that land against the interests of native africans. And so this is just another instance of the principle that i keep repeating. The hungered does not just happen to people. it isn't just. The climate change has occurred. It isn't just that there's been a temporary catastrophe. Such as a typhoon a hurricane it is that we deliberately make decisions to deprive other folks of the factors of production that they require to take care of one of their pyrenees which is to provide for their nourishment so it's a matter of power demanding of whether there is a democracy for people to be able to fight for their own rights within their own countries. And so the abstract notion of can be translated into very deliberate powerplays That we all can interact with that. We all can shift ricardo salvador. What can the pandemic teach us about. Trading hunger the pandemic is an instance of disruption that has been global in this particular instance but Let's go to one of the hot spots of hunger in the world right. Now that i've mentioned already the country of yemen. It is a civil war that is proxy war being fought by iran and saudi arabia Gone on for five years. The united states is a part of this war On the side of saudi arabia backing saudi arabia providing armaments providing moral justification. It is a country that would not be able to provide for its own. Food is primarily the country so eighty percent of its food is imported if you disrupt the economic system there as the war had done prior to the pandemic then that means that people are going to be vulnerable ruby actual flow of food but the pandemic has actually exacerbated that to the point where essentially the eighty five percent of food that has to be imported to meet. The demand of the internal population has been disrupted just logistically. Just because of the war. Food cannot get in and so there tools that you don't have access to food. One is the one that i just described physical access. And i've given you an example of a place where decisions made by people. Let's go to war and let's disrupt the food system of yemen so that it can be vulnerable and we can win the war there so an intentional act or the other way that you cannot have access because you don't have the capital human. Have the cash. And so the the fundamental thing to remember always in these situations is you must provide access to the people can actually meet their own needs and one of those two ways. The pandemic itself has actually exacerbated existing vulnerabilities oliver planet where people were on the razor's edge of food sovereignty and survivability. Often this is tipped him over the edge and it is a curtain not only in the global south it is actually something that exists within the global north. So they are they are populations. The size of say sudan fifty million total population. That is the number of food insecure people embedded within the united states. I wanted to look now. Speaking of the united states about at how president elect joe biden's pick to head the us department of agriculture. The usda could play a major role in that issue of hunger feeding millions of americans facing food insecurity during the pandemic. And how the incoming administration response to the climate crisis ricardo salvador you recently co-authored an op-ed and the new york times headlined goodbye. Usda hello department of food and well-being you wrote this before biden's vp pick former iowa governor. Tom ville sack as his secretary of agriculture. Instead of ohio congressman marcia fudge who he chose to head housing and urban development environmental civil rights had urged biden toothpick fudge who's african american to head the. Usda citing her dedication to preserving its anti-hunger programs like snap that supplemental nutrition assistance program. Which makes up about half the budget as many as one in four americans us. At least one of usda's food aid programs fi just supporters included south carolina congressman jim clyburn and other key backer of biden during the primaries who said quote. It's one thing to grow food but another to dispense. It and nobody would be better at that than marcia. Fudge biden chose ville sack who became ceo of the us dairy export council after he left government to group back by the dairy industry. If you ricardo salvador could talk about the significance of the. Usda and what has been ville sex role. I mean he ran it throughout the obama. Two term tenure. Yeah will. I note that. I should make is that. It's been reported widely in the media that that will be the pick of the administration. I wanna note that there's been no official announcement of that so that there's still hope that that decision could be influenced but to your point. There would be implications of this. We are living in a historical moment. It isn't just that the pandemic that we've been discussing his disrupted the food system as well as other systems across the planet set. We're also in the middle of an attack on democracy around the planet. It is also that we are living at a time when the public at large is beginning to doubt the foundations of modernity which is the scientific approach to things and also we are at a time. There is a massive racial reckoning which is connecting the history the foundations. Today's modern economies to exploitation and this historical moment any change in administration is an opportunity to strike in a new direction. So obviously going back to the secretary of the past is not the way to strike a new direction. That is status quo. I need to be cleared that while knowledge. That is a very difficult job and bill. Snack did a good job as one could expect. During the time that he was in the blemishes Administration have to do with the issues that have to change about the department There was manipulation of data and reports that his administration issued purporting that african farmers have been better served during his administration. We now know that was not true. And by the way the significance of this is that the department that is actually had to settle legal lawsuits for billions of dollars acknowledging that they have actively discriminated against african american and native american Latin x and women farmers and ranchers. Who does that leave that. They've been preferentially serving since it'd be an established in eighteen sixty two. The farming population in the united states is dominantly white it's unnaturally. It's ninety six percent white and so in the twenty first century. You can't have to toossion with the profile left serving preferentially of a very small sliver of the entire population. Its original re-met was to be peoples department and this was at a time. Eighteen sixty two. The date of its founding Win the majority of the population where and when there was a significant number of people that derive their livelihood front farming itself so it didn't make sense it at that time. Your primary stakeholders would be farmers. But it's twenty twenty one in the united states nominally. Two million farmers two million farmers Still ply that trade. We all depend on them but the country is three hundred twenty million people and we all have a stake in the food system. it determines whether we're healthy or not. Ed determines whether we're susceptible to diseases like the pandemic ends so the stakeholders in. Usda are all of us. that a doesn't stanford agribusiness is the way that sectors of agriculture normally behave. And this is a secretary. Mr vilsek whom i respect but who has come from four years of working for agribusiness. Have you just noted and so. That's not the profile of somebody is going to be able to be independent business and serve a much broader set of public interests which is listed We all have a stake. In having physical and economic access to a nourishing system that is equitable. Not only in terms of who gets to eat but also in terms of who gets to farm. Who gets to participate in the business of food and agriculture and ricardo before we conclude you point out in that new york times piece The question of food insecurity in the us ten percent of households were already a food insecure before the pandemic that number has now doubled. You also say that. Nearly seventy five percent of americans are clinically overweight or obese making them of course more vulnerable to covid one thousand nine hundred addition to other health problems. So could you explain the difference between food insecurity and hunger and what this phenomenon in america. Which of course in the us the richest country in the world what it reveals about the food system here and the failures of the usda as it's been constituted a clinically. You're suffering from hunger when you have caloric deficiency or some other nutrient deficiency that is affecting your ability to thrive It will stunt go to children for instance and this is one of the ways in which we actually measured. That hunger is occurring hybrid. Food insecurity is ramp and has just as profound effect We define that as basically eat percentage. Were time that you've been worrying about where your next meal is going to come from. And if you're in that population then obviously this is gonna take major mindshare and you will not be able to flourish. Because the primary concern is how you're going to be able to meet your your nutritional needs your food needs and so the fact that in a wealthy country like the united states We should have a parts of the pandemic about ten percent of the population and now about twenty of the population that are dealing with food and security should be a national shame. The situation just should not occur. Now what it reveals an answer to your question has to do with who these people are when you look at who they are. One of the things that you discover is that they are disproportionately. What in the united states. We called it. The people of color this means other than the descendants of northern europeans That settled the country a few hundred years ago. Just to summarize Almost glibly history but this population distribution represents is that the modern structure of the nation is laws. It's government its business. Models were essentially set up for those settlers and their descendants and everybody else here has history of either having been here being displaced or else having been brought here in order to perform brutal menial labor and so some set of the population over generations has been having access to land access to government programs access to credit exits are the best education and building their wealth and wellbeing and another set of the population. His experience exactly the opposite of that being driven off of land their ancestors experiencing genocide people not having access to government programs to loans credits to real estate They only get access to second grade education or second rate education and so therefore what that means is are losing wealth across generations. So if you go back to the formula for hunger that i described earlier this tracks poverty and so the poor people in the united states are disproportionately people have colored the quake poverty rate in the united states again prior to the pandemic runs about nine percent. The the poverty rate among people of color in the united states is double of that at least double Of that and so this is where you find primarily the majority of the hungry people in the united states. It has to do with the history of the nation and as i mentioned earlier. We're living at a moment and racial reckoning and we need to overcome that history by directly addressing the inequities that make some of us poor and therefore make some of us especially susceptible to food insecurity and to hunger. I'll just repeat these are the results of actual human decisions decisions appropriate. Somebody is somebody else's land to kill people to drive them into reservations to enslave people to make some people who are essential for the food system to work undocumented so that we can exploit them and abuse them and these are things that we can change and that we must change. Well this is an ongoing conversation and ricardo salvador. Thanks so much for being with us. Director of the food and environment programme at the union of concerned. Scientists recently co-authored an op-ed in the new york times which we will link to headlined goodbye. Usda hello department of food and wellbeing up next our guest says ethiopia is on. The verge of a civil war will talk about what's happening in the tigray region. Stay with us sleep in seventy. This is the hill nhs thing. Jackie finches slated man dead and low. Glenn all done you see free when the sun comes up by greta morgan the system agassi now the quarantine report. I mean he goodman with their shaef a year ago today. The ethiopian prime minister abbott was awarded the nobel peace prize for ending the two decades state of war between ethiopia and eritrea. With many hailing a new era of peace in the region. We turn now to look at. How just one year later via meds military has displaced tens of thousands of civilians in the ongoing military campaign in the northern tigray region. Thousands of died since ethiopia declared war on the tigray people's liberation front more than a month ago. At least one massacre has been reported earlier this week ethiopia rejected calls for an independent investigation into the violence. With a top government. official saying ethiopia. Quote doesn't need a baby sitter. This comes amidst a communication blackout and his ethiopia admitted federal troops fired at and detained you and workers in the northern tigray region for attempting to enter areas. They say are forbidden on wednesday. The u n high commissioner for human rights. Michelle obama spoke out about the conflict. Describing quote gross human rights violations this equation of nato is. i think it's really warring bottle title and i has warned. It's spiraling out of control with appalling. Impact civilians greg in self fighting is reportedly continuing in spite of government claims to the contrary elsewhere in there are numerous reports of ethnic profiling of tyrians rans including in harry's we have report of dismissal from jobs including the civil service harassment of rain journalists and hate speech against decrees well for more. We go to london where we're joined by associate professor at keele university school of law in the united kingdom global fellow at princeton university in two thousand nineteen. He nominated for the nobel peace prize. His recent peace and aljazeera is headlined. How op meds ethiopia first. Nationalism led to civil war. Welcome to democracy. Now it's great to have you with us. You have changed your views in this. Last year of the manual nominated for the nobel peace prize. Who won last year. Can you talk about the situation. The new york times headline today on the front page says finish him ethiopians on the run. Describe ethnic slaughter talk about what's happening some footed that if you'll be over the course of the last two years more from a moment of very all high degree of hope and optimism envision of transformation into a total sued war that threatened to destabilize not only the country but also the border a whole region. i think a number of people who saw a way in weightings were changing into be win. The prime minister came into power. Had exactly the same views that i had that this was a very close formation of figure who is committed to the idea of peace of consolation of justice because he consistently talked about these ideas he moby night them You know literally every speech that he gave you the first two months of coming to office and the I think commitment that he made to strike a deal of some sort with editor to end the water at that time. Most of us thought that that was they. Reversely move that deserve it. Recognition of some sorts. But obviously there were. I think with the benefit the inside can say the that we didn't order the laws that i think. The pie minister himself wasn't quite clear about terms of some of the structure of challenges and opportunities facing the country uniting the that an ideological difference between himself and in the to grab people's liberation forms led to this war. I think shows that s- wasn't clean with the prime minister. Actually hide acid principle policy of owning out and violence as a needs Input go dispute. I could you talk. Would you give us some historical context for this conflict. I mean the the great people's liberation front the day dominated for decades the ruling coalition in if ethiopia they constitute only six percent of the population. What is the source and origin of the conflict between the a central government and the tigray people of the difference between the two is primarily political in the sense that there was trouble over power from the moment when the prime minister came to office and then that difference over the cost time evolved into an ideological defense. Oh win. the prime minister came to power on the back of the oromo protest movement that catapulted him to the office of the prime minister. A that meant that the journey that the a hot into politics kicked one in and teepee wasn't particularly happy with the way in which the prime minister changed some of the teams to remove some official soft lift for particularly the fact that the government wanted some key members of pm to be held accountable for crimes of the past so those political differences over the course of time yvonne would into an ideological spreads. And this is something that most of us did not fight cleanly in the sense that the prime came to power. He seemed to be someone who believed in the kind of multi federal arrangements that existed at the time in that country. Kind of affirmative action system put into place to regrets the inequalities of the past but as time has consolidated more power signaled that intention to centralize power to move towards more unitary kind of system where regional governments regional States would have less and less quality compared to center. Now people live having been pushed from the senator and now They wanted me so the fact that you're gonna opponent me is threatened. Gave the lifts. I'm ideological pas in terms of taking on the federal government because that is something that is supported by the majority of people in the south particularly audibles so that is where the conflict between the two to four and over the course of time the prime minister then winning collision party the quantity that he dissolves the quality of that did you to the foro. Ethnic-based parties the party that he's finished in place. That quality is what we call a party to the party that does not have a distinction within. Its but it's part of the time that he's incompatible with some of the predominant moral skill organizing the mobilization that existed in the country so so many people play question the viability of that kind of started at least especially its ability to win democratic election. pound is that new party. Teepee lifter feuds. Tweet that part. The prime minister moved a few individuals who were cutting from live from the carbonate and then the prime minister. Some months later decided to postpone the election win. The election was postponed. They wouldn't go ahead and hold the election. Because it's mandated. Governments was doing condition. Form the light the government's off the engine and then the two great talk show. That would not that you'd miss you. So you can see how those differences difference differences leeann tweeden cds of events ultimately leading to imitate from case. Our right now. Of course we're in the midst of the covid nineteen pandemic. Could you talk about what. The effect of the ongoing conflict has been on the health care system in the tigray region and of course the fact that the highest profile to gran abroad is the present head of the world health organization. Dr tedros who has been accused by if he obeys a military chief of siding with the tigray region think fortunately the pandemic descent seem to be having the same level of impacted. This having here in the western part of the world mainly because this has to do with data issues of this quarter debate as to why the pandemic is not having impact in. Africa is in the northern hemisphere. The pandemic itself is really more something that he's discussed much in the public domain. But the fact that the soir be prosecuted in complete information block house in the Hospitals and health centres regional states have not received any supplies and be really out of emergency supplies. I think that is certainly having considerable impact on the ability of health providers to provide care for those who are but need that is view that is being expressed by humanitarian agencies working specifically on a issues including the icrc. We're going to have to leave it there but we will certainly continue to follow the situation. Sister professor kill university school of law speaking to us from london. This is democracy. Now i mean goodman with nermeen be safe. Wear a mask.

united states ricardo salvador Usda David beasley pfizer biden Hunter biden new york nobel peace prize award four hundred trillion dollars tigray Facebook joe biden arctic David beazley tom sack ethiopian government centers for disease control an Senator larry dixon three trillion dollar
Driving Transaction Costs Down to Zero ( w/ Jeremy Allaire & Raoul Pal)

Adventures in Finance: A Real Vision Podcast

1:04:32 hr | 4 d ago

Driving Transaction Costs Down to Zero ( w/ Jeremy Allaire & Raoul Pal)

"Jeremy great to get you on. Surreal vision thank. You awesome to be here Listen before we get into the meats this. I'd love to hear if your journey into crypto. How the hell did you get. Yeah it's a it's a great. It's a great question You know my background is is in building kind of internet software platform companies and you sort of started in the early nineties and the mid nineties in the of first generation of the commercialization of the internet and was very focused on how to build essentially like the tools and the infrastructure for building the web and and did that public company merchandise. Another public company was see tear there and then kind of the next generation was really working on basically creating the platforms that were necessary to television. The internet sort of like we're doing right now and and built out a another company called break cove which we use wilburs nursing or the there you go. So you're a customer of mine and built that outgrew that took that company public and in two thousand twelve not long after truck breaker public kind of went down. The rabbit hole in crypto. And now the interesting thing for me is that you know all of the things i've worked on in my career. There's a thread that runs through it. All on the threat is basically what brought me into the internet in the first place. Back in nineteen ninety. Ninety one was the realization that this was a open network that could connect to and that basically the protocol layer of the internet was also a set of essentially open protocols open standards and that that distributed or decentralized structure was incredibly powerful and back then i was i was like okay. This is gonna disintermediating media. This is gonna descend media. Communications the way that softwares distribute. It's all going to move to the web all these kinds of things and the same kind of thing with with television like why are people dependent on like birds in the sky or physical plant into a home to distribute television like open protocols decentralize distributed infrastructure on the internet. It's going to mean everyone can be a television producer distributor et and so that that's always animated everything that i've been interested in. I also happen to have studied kind of international political economy global macro other things longtime ago. And so i've always had a kind of interest in in kind of the global financial system Comparative economic systems and after the financial crisis. In two thousand eight. I i kinda went down the rabbit hole of i wanna more deeply understand central banking. I won't understand the the way the underlying kind of currency system works and that was just like at a personal level. I was i wanted to get into that so twenty twelve when i kind of got interested in bitcoin specifically like connected all the dots for me. It was like okay. This is like the next logical infrastructure layer of the internet. It's another layer. That's mitt psych missing layer of the internet and my interest in sort of like the impact. This all this stuff can have like on global political and economic system was very profound. And so i just couldn't help myself basically. I just went deeper and deeper and deeper than in the new twenty thirteen Decided to actually step out running a public company and founded a co founded a circle and so that was kind of journey there. And i think a lot of the ideas that that we've been pursuing since founding the company are starting to really materialize. So what was the vision when you started. I mean i actually go into the crypt sogeti. The same point because i was in europe at the time. We almost lost the banking system. That was soon after the financial crisis so cyprus and i started looking into creighton wealth. Safest spank and that friend of mine came to me and said actually even snooker bitcoin data so when you started circle what we trying to do. So interestingly what we're trying to do and we started circle is more or less. What we're doing now and it's it's been an interesting journey to get here and so like if you go back to the earliest like blog posts when debuted the company. And i i you know it's funny. I look back at like the the first thing investor materials. We created back in the spring of two thousand thirteen. Our belief was that it would become possible to essentially take what we think of as as traditional money. I e like the liabilities of a central bank and represent that as digital currency and transact it on public public blockchain's we call them now but transacted as almost like a new protocol layer for how you know fiat could be stored and exchanged and transact and you know we envisioned a high kind of hybrid. fiat crypto model. That could make that possible. And the belief was that that would become possible and that issuing other types of assets on top of this infrastructure would become possible that you'd be you'd have program ability of those asset so essentially the idea that like a dollar or euro would be like a native data type on the internet. An mp three or text file or j. peg and that it will become programmable and so back in early twenty thirteen a lot of people in the in. The bitcoin community were really excited about the idea of smart contracts. It brought a lotta people in. It was like whoa. If this is like a a a new global compute engine that's trustworthy tamper proof and you can deploy code to it and then you have like these underlying financial assets that you can interact with. That's like super profound and like you can imagine actually recreating what we think of is the financial system on top of that. So that's what got drew and the first product we created. Actually it was a consumer facing product That took dollars euros pounds and allowed them to seamlessly transact over the bitcoin network and so we use bitcoin as essentially like us An open salman layer but the user number knew it. It was like i m dollar and i'm gonna be up to what is essentially a bitcoin wallet. We managed all the underlying treasury liquidity stuff to make that work but it turned out like doing that on top. Bitcoin was. I don't want to say it was the wrong idea. But basically bitcoin preserved its position as like a digital gold. And you know. There was not an impetus in the bitcoin community to focus on transaction throughput. Scaling on on kind of being a a payment system basically and and there was very little interest in expanding it in terms of his program ability with things like smart contracts and so a lot of things that we wanted to do. Just didn't this weren't possible. Bitcoin at at in late two thousand sixteen was quite expensive. It's still relatively expensive to transact with and so basically In two thousand seventeen said okay. A theorems here is kinda production beta. It's kind of in a good place that you could actually build like a you know what we now call stable coins but you could build essentially like a fiat protocol layer on top of it. And so we envision that and we that led to the creation of us dc and Which we lend launched in two thousand eighteen and and that's grown a lot so now today like there's essentially like these new standards for fiat digital currency that are kind of private sector led i e these sort of regulated stable coin models. Uscc is by far the biggest in terms of playing in that regulated space. And and now it's becoming possible to basically transact instantly globally extremely inexpensively and the ideas of programmable money have arrived as well having defy is programmable money it's people basically saying how do i. How do i write. Financial markets in code played on the internet and then stable become a really critical part of that as well. So we're we're seeing a lot of the early things that we envision becoming possible starting to happen so who the main uses cowardly of us dc. I mean yes when we launched it with queen based so coin. Based during a consortium with us center consortium which governs sorta usd and that's actually to be expanding a lot In the in the coming year or two but the bootstrap use cases. I like to call it. Was your trip. Capital markets basically so in late two thousand eighteen or mid mid to late twenty. Eighteen people wanted a transparent audited complianed liquid redeemable dollar standpoint. I not a yeah. I mean that's like the the the the bootstrap use case was okay. This is gonna be a better. You know a better way to do this. And you know it's not it's not the roach motel. It's you know it you know you can get in and out of it and you know. Circle offered a really really straightforward institutional service for getting for utilizing it and coin based obviously offered a really compelling retail way to get in and out and it was always just worked it was it was free to create it free to redeem it and so it sort of grew in that use case and through. You know if you look at like lay twenty eighteen into like twenty nineteen obviously like the crypto markets weren't as as robust as they are right now but you know things things were adoption stable cancers growing and so it it just got listed on tons of exchanges every wallet decided to support it. Stadium started supporting it so the whole ecosystem really adopted it and we did a really good job of that. Hundreds of companies started. Just saying okay. We're adding support for this and and that sort of ties into the next piece. which is you know. We very early on focused on working with developer teams. That were building. What is now defy right. In the defy movement in in late two thousand eighteen was really nascent and but by summer of twenty nineteen like stuff was getting deployed. Like compound was out there. You know the you know number of other things were out there and and so you know i was just like as a as essentially a dollar market infrastructure for crypto capital markets like just being being great dollar market infrastructure and then secondly it was. Okay now this is actually a the what people wanna borrow. Inland and utilize In in defy markets and then obviously twenty twenty defy has exploded. us's been a huge component of that and and obviously cryptic capital markets have exploded. And it's grown a lot in there but what was fascinating was we were seeing you know interest in. Hey this is actually like once he will start utilizing it People realize like. Wow i have digital dollar that i can transact on the internet. I can transact with anyone with no counterparty risk at the basically with a final salomon in seconds for a fraction of the cost of what we think of as traditional international money movement and people are waking up like this is actually a really good payments in settlement medium. So that's been one of the big stories for us. In twenty twenty is tons of different types of businesses that are now saying this is a better way to store value transmit value etc and one of the big themes for example. Is we've seen these incredible interest in demand from latin america from africa from southeast asia. Where it's dedollarization might be the theme if you want to think of it that way but you know these sort of digital currency dollars are really attractive as well both as a store of value relative to say what their currencies are doing You know we think a big point as the as the main store evalu- kind of scenario for crypto and it it obviously is is the biggest But dollars are also pretty interesting story value in a lot of cases to and nobody can get enough dollars. I mean you know. We've got problems alone. I've talked about this. I don't know if you're familiar with your of course very ambitious new york Essentially because be created outside the banking system and distributed globally ran. Right now most of the european banks will lend out that dollas donald japanese will stall the dulles and the right and you're dollars obviously played a really critical role on historic played a really critical role in capital markets activity and hedging. But like i think stable coins are going to are gonna eurodollars never moved into transactional currencies right. They didn't really move into the hands of users. Enter transacting with them. Not stable queens. Are you got a smartphone. You got an app. Peer to peer boom. You're up and running and you know what you you get rid of the banking sector out of the middle right which is where the velocity of money dies right right right. Yeah now. I mean so. It's it's So that that's been part of story. And i think for us like going this year. I mean yesterday grew enormously last year. eight hundred percent year on year. We started the year with like four hundred fifty million in circulation. We ended the literally right around midnight on the thirty first at four billion. us dc in circulation. It's we've already. We've already seen almost nine hundred million issued in the first two weeks of january. And so you know it's it's it's really interesting and the technology is getting to a place where With like what. I call kind of third-generation blockchain infrastructure. Where you're able to transact usd see on blockchain's at you know half half second like five hundred milliseconds or less with salomon finality at a fraction of a cent To to transact those and with you know some of these third generation blockchain's have capacity to support tens of thousands of transactions per second. You start to say wow okay. You could actually move like fulsome. Capital markets over to this and you know folsom retail scale payment activity as well on so. I think that's one of the things that were really looking for as we go forward. Is this getting integrated into into more sectors of financial activity. And what's happening is defies giving a ilk of so much like much like the eurodollar market. Okay you're the market goes further out but you starting to get still very nascent totally. Get the price of money. Internet money is entirely absolutely. Yeah so i mean we. We're we're we're very very we're paying attention to that. We actually have a a high yield digital count product. That's launching a this quarter actually. It's institutional is for businesses so if you're a business and you got cash you can convert your cash the sec put it into Yield markets and. We're we're giving you basically eight and a half percent for term product and upwards of around eleven percent for tenor based products. And that's basically putting dollars into stable coin into these interest rate markets and that's from corporate treasury perspective really attractive right if i'm a corporation and i'm sitting on working capital like what i know. How bad am i willing to allocate to essentially these new these new risk markets in. What is that. What is the counterparty risk because the euro mulkey is obviously a bunch of participants. so it's a relatively spread. How's it working this. The way this product is is being rolled out is. It's through a strategic partnership that we put together with genesis and genesis within digital currency group. Genesis is is obviously one of the biggest crypt primes out there. In genesis capital is the largest institutional lending a provider You know in in in the world right. Now in crypto lending space. and so. What what you're really doing is you're basically saying there is a high quality You know Underwritten institutional borrowing base. That's out there that are active market participants in digital asset markets and you're effectively lending to them And these firms in their i mean their counterparts are many many of the top institutions players in the market. The the cost of capital may seem high when you say. Oh wow okay. It's a ten percent cost of capital. But you know the market participants are making significantly more than that. And so when you. You're what you're really doing. It's almost like pass. It's a passive way to participate in the digital asset markets. It's a you know an interest bearing pathway to participate in these markets without buying the underlying bitcoin. So it's an interesting. It's an interesting space. That's emerged around. That i mean that's effectively. What defy yield is too But you're you're dealing with more retail participants in that case and ken institutions actually put on the yet or are they certain to us firms like kurt to try and get it kind of shoehorn in because it's not easy even though to you and i say coins pretty straightforward. But it's it's not so the good news here is that you know there are more and more public companies with stable coins on their books and so you know the big accounting firms are now that there are you know. There's more and more clarity around how to treat these as a as a as a financial asset i mean. Obviously even the you know the guidance that came out just last week from the occ basically defining these usd see like or dollar stable coins as electron extort value and that's very very important as a classification And so all these things are making are part of progress towards it. The acceptance not just from a record keeping perspective and acceptance with as a settlement medium as. Well so let's talk a bit about. Occ guidance what. What's your take on it. I think it's i think it's a major wonder shed event and you know i think there there are a few pieces to. I think the first is it. Follows on the heels of the presidential working group A sort of policy recommendations on dollar stable winston the united states which came out just before the holidays and that really had to do with saying kind of arrangements that are are created for the issuance and operation of dollar stable. Coins need to meet a set of expectations on that. That presidential working group kind of you know Those recommendations that came out very closely matched to house. Center consortium operate so that was good just in terms of the what i think about is the governance risk management compliance other things that go beyond this the occ guidance Is getting kinda like very specific. It saying okay. If you are a bank in the united states financial system you can utilize stable coins as payment infrastructure. You can issue them yourself as well. So you can participate in issuance But but you can utilize it as a payment infrastructure on par with ach on par with swift on par with debit network rail's and a defines how to classify and think about it as like electronic stored value medium and it's specifically provides a whole set of guidance on using using this on public blockchain's and so it it is elevating public blockchain's like the bitcoin network the ethereal network and other public networks to being market infrastructure for the mainstream financial system in the united states. Which is a huge deal. And this is like you know. I think this is This is significant and ladders on the sec guidance that came out in late december as well which basically after three years. The sec finally clarified that broker dealers can self custody clear and settle digital assets. You around kind of custody rules. Transfer rules and so on but it clarified that how how broker dealers can do that. And that also includes saddling essentially these digital assets as securities transactions on public blockchain's and. So we now essentially have the sec end. The saying public blockchain's are effectively a settlement infrastructure for securities and cash like instruments in states. That's a big deal That's a really big deal And i obviously like the markets responded a lot to that Because i think you know banks canal lean into this right so banks can lead into whether it be cryptic brokerage or you know. I wanna custody. Bitcoin or prime broking all of. That's coming absolutely and and you know. And i think it also means like things like us dc can be utilized now the payment settlement infrastructure for for just straight up payments and And also as a payments infrastructure tied to other securities as. Well which is. I think really were stuff started to get a lot. More interesting as the demand for telemedicine grows so does the need for connective five g. Meets that meet. Qualcomm focused on giving doctors and patients superior security rich five g. Connectivity learn more at qualcomm dot com slash invention age. you know. i'm getting confused. Where the the regular money center banks are going to fit into any of this equation can understand the investment. 'cause they'll always find ways of making money they'll be priming this stuff that we making markets. They'll be involved. Yeah you know the average bank. I mean it looks like the writing on the wall super false for them. Now i mean defy being pulse of medifast part of it i just i just. I do podcasts where i did one earlier today with them. Robert leshner the co founder and ceo confidence and It was interesting. I titled at defy and self-driving thanks and And the idea was actually from. Brian brooks who just just not. And he wrote this editorial for the financial times or this week's got sola the advent of self banks and people. It's sort of like you know. A machine governs an interesting market right. It's totally transparent is totally on the internet market participants in see the risk management cloud remains men. The all all the rules how it works but it just runs itself it runs itself and that's profound. That's really really profound. And that's one building block which is collateralized kind of lending and borrowing right But i think this is this is sort of. There's this inevitable march forward where more and more functions of what we think of as banking can become autonomous machine mediated kind of things on the internet and i likewise you know things like stable coins Our view and this has been you ask a question earlier about what was concept when we started the company. The belief was that once you had con- like fiat digital currency model. That could work on on the public internet on these open. Networks that effectively it would drive the the cost of moving values. Zero just like the cost of sharing a piece of text is zero or the cost of having a peer to peer video. Communication is zero like the internet in these this architectures and open protocols drives the cost to zero so the that was the belief. Is that when you got to amal. On internet like model for money it would drive the cost zero and so when you think about money center banks or you think about you know the the entire stack of firms that are making money from extracting tolls in in payments right. There's a vast non actually trillions of dollars of value. And you know. I you know you gotta pick your time frame rate because it's very easy to believe you're hype and all this stuff and But i think you know it was like when i started breakover in in two thousand and four i was like televisions. Gonna move the internet. You're you're not gonna have cable. You're there's an infinite number of a video channels every company in the going to be doing this and you're able to do any device right and back into those for like broadband was barely out the gay like the technology was was really nascent and people could say yeah. Yeah yeah whatever like i. I went and met with ceo's of comcast and other big firms and was saying this is. What i can happen is kind of like you know but but here we are right. These things take like ten years ten years. Isn't that long. we're just talking about two thousand and thirteen. It seems like yesterday and the pace of this is really fast. So i think that's the interesting thing is like we'll we'll see this kind of intense commoditisation happen over like a five year tenure period where the margin that exists in in what we think of as payment and settlement will will come in dramatic. What is your your margin. What is what do you make money in that process of multilateral. Yeah so i mean there's a there's a few things i mean. I think you know know. I is You know were and We believe a few things so one is like the what we think as treasury infrastructure Which is like the core infrastructure whether a company or financial institution like treasury infrastructure is going to become entirely. Native leaders will currency in botching base and That's what we built. We build essentially like treasury infrastructure for the intern. And we offer that as a subscription you know Companies can can come on can get pass subscription and get access to this new kind of banking and treasury infrastructure and Think every company in the world's going to want to do that you've been you can also might treasury them easily absolutely. Yes yes and show that then leads into other things like which is you know how. How can we help. Businesses utilize working capital better participate in these different types of new markets. That we're going to exist that are built up on this infrastructure and make that a really seamless process for companies. And so over. That alone is sort of this. What we think of platform banking right. The platform banking business model is sort of what we're going after. But very where digital currency blockchain's are at the center of it as opposed to the legacy financial system. And i think leads to the other piece which is over the long run. We believe that more and more things that what that that we think of as what corporations do treasury you know their governance that you know equity itself as an instrument You know debt contracts. So many of the things that go on we'll move to be digital assets on blockchain's in this and we wanna be helping play a role in that transformation and we think that there'll be lots of interesting ways to monetize that i'm even interesting in thinking through. Will corporations exist as we understand them. Cor- corporations created one legal entity that really something like exxon should be should make a token in the upstream revenue. The data ring. The i dunno corporations are gonna exist. Her this is a is something. I've been thinking a lot about and then what what is a corporate form. What are these nucor performs robert from compound like comp token is a community owned protocol that generates cash flows that has voting and governance for its development in evolution. Like what is that like is that that's not a corporation. it's it's on chain thing and you know there's ultimately has to be interaction with the the the the corporate legal system in different ways. And so i think one of the things that will be interesting Jurisdictions kind of figuring. Out some of that. But i totally agree. I think that the nature of corporations changes this. This technology shift is in my opinion. A it's sort of like the gutenberg press or the invention of the joint stock corporation the birth of copper markets. All these kinds of things. It's that big. And you know these things. Play out over decades right. But i think you're gonna see more and more experimentation in these. What i call new corporate forms. Whatever we end up calling them which do involve this these layers of token ization transparency governance access to revenue streams in different ways at a macro level. I love it because it gives us more opportunities to seek value and to invest in different things. Yes you're going to create tokens at a p music streaming rights liberties on influences on different parts of what we understand corporations. Yes millions of absolutely. I think it's so much. I mean i is the you know. The internet is is good at a lot of different things. One of the things. That's really good at is is supporting the development of longtown markets. And would when you think about you ebay when it first came out right no one could have conceptualized that people would have you know individuals with things they wanna to sell. Could that there'd be a marketplace that can actually support that beanie babies or whatever it is that the long tail things no one ever thought that you could basically take. You could monetize people's intention and attention with advertising right. I'm a tennis instructor in tallahassee. An i can find my customers In an efficient way with with a marketplace in the marketplace that exists. And the same thing that you go down the list in terms of content and obviously like the mega-scale marketplaces are amazon alibaba. And there are not. I think people haven't yet realized that we're going to have long tail capital markets and people. You know the russell two thousand or nasdaq whatever. These are gonna look tiny in comparison to the capital markets. That are being created right now and this tug innovation seem right will fit into that like people there will be. It will be viable to efficiently have capital markets at that very long tail. And what's interesting is once. You tokens everything. We move away from bones credit stocks commodities. You go into something which is called a token. let's say they will have different attributes. So what you've got is a hyper complex world. Which means the other side is. You could generate alpha again. Well right now yeah this. This is a really complicated world. And you're seeing these asset managers in place. Kind of value picking tokens. Everyone's yeah it's not and then making enormous returns this. No it's a nascent. I mean i think the defy know kind of liquidity pools on all these different tokens with. Am's are really interesting world where you have people saying. Hey you know there's a market for you know this niche token against east or against what whatever it is and there are people who are willing to stand in that be liquidity providers and realize significant returns. And so you know it's sort of like it is this kind of creation of of available markets and a lot of people used to say. Well you know private company private company stock is is is illiquid in. There's a reason why these companies don't go public and and so on but in a world where you have you kind of long tail markets with this kind of incentivize infrastructure. You can imagine you know. Markets existing for for things that would at face value appear to be extremely extremely thinly traded. You can also composite them into sets and composite them into a essentially bundles and people can can kind of you know sort of the layering of these things but that can be that can also lead to to very efficient outcomes as well it. It's just a really interesting to see where that's all going. The other thing under pick your brains about is the central bank digital currencies because that's the next big elephant that's coming it's been. Ecb probably in the clearest of all about what they're trying to do and curry now he's at the bs as many clear that there some people are gonna choose programmable forms of money others are going to choose a state sent central bank stable hunting for want of a better word yet. How do you think this plays out. Because it's going to change everything. I keep explain to people. This is gonna change everything from fiscal policies monetary policy of behavioral economics. And every what are you. What do you think about this. Yeah you know. I mean i got a lot of thoughts on this. I think The the first is i would never bet against the open internet and what i mean by. That is that You know the the the the velocity of technical innovation on public internet infrastructure and blockchain during sample that when public internet infrastructure. And the the the the kind of innovation curve that's happening with digital currency in that environment when you think about where it could be two years from now five years from now like it is it is going to rapidly. Rapidly bypass what any government could ever do. It already is and that to me. The notion that large or small national governments are going to stand up. An infrastructure maintain it infrastructure and evolve and infrastructure for digital currency that That can keep up with what's happening with the public internet and with private sector activity I just don't buy it It would be like saying you know the government Should should've built You know all of the communications infrastructure of the internet that we use today that the government should have built you know email. It should be government administered email system. Like it's just not viable and so i think the internet the famous famously. Marc andreessen sort of software eats the world. I think sort of software and the public internet each the world. And so i th and that is what chains and stable coins on the things are really layering on and so in in that world. I just don't believe that you're going to see The federal reserve in the us treasury is that just talking about the united states right now it just does not seem tangible to me that they're i like stand up and operate this infrastructure. Would they just a stable coin and use your infrastructure presume Said this this gets into you know ultimately you've got you've got a few things you've got kind of sort of standards and and public infrastructure. You've got financial intermediaries private sector financial intermediaries and then you've got like risk management supervisory mandates and monetary policy. Down down down there as well right and so you kinda go across those things then you say okay. What is likely to be what achieves scale and so my view is just look at the history of electronic money. The history of electronic money is not a bunch of governments building. Shed the history of electrons. Money is consortium of private financial institution actors getting together to develop standards for interoperability amongst their ledgers. You will That's what's swift is when we think about in general like what we think of as the most widely adopted sort of electronic money. It's cards right. It's credit cards. Debit cards tetra. Water card networks card. Networks are consortiums of members that defined set of technical standards and interoperability and governance. Around this. And it's not like you know when when when card infrastructure emerged that the fed said. Wait a minute no no no no no no. Yeah because we do cash Or or whatnot. Like we need to go build that we need to go build all that infrastructure. Not at all. I think what happens is regulators. Say okay if if the if if the private market establishes sound standards we wanna we wanna maybe oversee some of those sort of systemically important market utilities or systemically important payment systems or other things and what they care about is underneath. Okay what is the underlying You know is this is this what is this. And and what what are the supervisory standards that need to be rounded and management. That need to be around it and so it maybe that over in the future you know. As as center consortium grows as uscc grows as more banks and others get involved and more people are issuing this that the fed says okay. This is this is fine as as dollar digital currency standard. But you got you know. This has to be kept at the fed or it has to sit inside of these supervisory famous. I think that's what happens. I think and then and then like the pace of technical innovation is going at the speed of the internet is not going at the speed of you know software engineers or ibm people that the government hired or whatever you think of. In other words there is no fed coin. Yeah it's the private sector because it does same thing. But the market's driven by fred traits while liquidity needs to regulate american. Yeah and you know. I mean just to give you a little bit of insight in this so we started center consortium circling coin base is now going to grow into a much broader consortium. We david booth just came in to to run senator towards him. David spent his career running capital markets for for state street and then nineteen years j. p. m. running currencies capital markets. You know huge amounts of infrastructure. And then he went to be the ceo of c. l. s. international bank is the largest bank in the world that no one knows and see. Ls tim is a consortium of seventy of the most critical financial institutions in the world that represent the biggest currencies in the world and it provides the clearest salomon infrastructure for those institutions in for major fiat currencies and it clears two trillion dollars a day and so when we think of like dollars in euros and all these things like this is a this is a private sector consortium infrastructure that is supervised by twenty three of the of the most significant central banks. So he ran that for six years. He's now running center. Consortium this is going to grow. And i think public blockchain infrastructure combined with arrangements like what center is doing can become you know deemed as like systemically important infrastructure and we'll work with regulators on this over time so i i think that's i'm seeking somewhat selfishly in that like i. I have a view to this that that were involved in as a principal. But i also really genuinely believe it. And i think the thing that The most exciting thing about all of this. It gets back to the comment you made. Which is like programmable programmable assets right if we just are looking at this as like what is digital cash or or or you know what is a payment system. It's that misses the whole point of all this right. The whole point of all of this is that you've got tokens ation and you have smart. Contracts and you have the ability to intermediate an enormous amount of interesting commerce economic activity through this this public compute infrastructure and that's like changed the world in change the nature of corporations and changed the nature of economic activity. And like we want. We want to see that stuff emerge and the real question is is does. How quickly does this become something. That's like tax better is sort of the the kind of mark people talk about like technology needs to be taxed better and then society just says this is what i want but how do you sold the central banks problem because from what i understand that listening to many central banks beyond method essence. Well they won't programmable money to say you need to different interest rates in me. I want to stimulate. You wants to you know that kind of behavior incentives that could be tied once you've got this if it's all private sector. How does the federal central bank do that. How do they get what they need. Ounce of the system they can merge monitoring fiscal which is really. I mean this gets. This gets into deeper deeper. You know like for example if if If digital currency units can be one and commercial banks can custody this and you know can can operate with it and you know the fed decides. They're going to go buy treasury bonds or they're going to go you know effectively inject money and the the commercial bank participants in the scheme can issue new. Us dc or whatever it is you know on that like it can. It can work with the existing fiscal monetary policy but not doesn't work already right because it seemed lost money collapses advice banks that will impede in certain ways. Whether it's regulatory impairment or perk shrimp. I we're we're gonna go deep on on bigger ideas here. But like i i think. One of the compelling things about crypto One of the things that drew me into this gets to my armchair political economy stuff which is the concept of full reserved banking and the concept of A governments from a fiscal perspective that are bound by full reserve banking systems. is also a very interesting idea and you know if you go back to the great depression and the chicago plan. The chicago plan which was very much informed by economists who you know are in the von mices tradition and who who look at sound money principles and you know what what are the fundamental risks that exist with the way that that money in commercial banking would argue for that if you have the discipline of four reserve money That it will sort of in a sense. It enforces a safer fiscal policy Yeah although my fear is humans being humans they'll just recreate a derivative markle ever again. I mean humans will take leverage wherever they can get it in any way shape or form. And if it doesn't exist in the bank level ill exists knicks lab in the balkans court trillion dollars. Yeah i hear you. I hear you yeah i mean look and i think that's right Pity old i guess stepping back from all that just in coming back to the basics of of if you have what we think of is fiat digital currency units. I think that the what is effectively. Like the underlying capabilities of sovereign with respect to that. Like we're going to see different approaches to that for sure and at the at the kind of protocol album the technical standards level the way all this stuff works like that piece which is the innovation of like the transact ability the inefficiency And the program ability like in some ways those are decoupled. I realize there's some. There's some interplay there but to some degree. Some of those can be decoupled support for this podcast comes from progressive. What would you do with an extra eight hundred dollars. Buy a plane ticket. Pay down your student loan. Treat yourself to those shoes. You've been eyeing with progressive. You can find out drivers who switch and save save an average of seven hundred ninety six dollars on car insurance get your quote online at progressive dot com and see how much you can be saving national average annual car insurance savings by new customer survey to save with progressive in twenty nineteen. What do you think europe's gonna do with this issue digital currency and then use the existing rails. So how how are they thinking about it. I mean i know they preferred to have more control over the system What do you think you know. I i am up fintech. Said they won't fintech. And i think this is one where the market is just going to move way faster than the european central bank and the end. That's unusual yet. I mean so. I just i think this is sort of a general belief that i have. Which is that the velocity on. This is really really fast The benefits are going to start to compound really really fast and market participants whether they be businesses or individual consumers or or financial market participants will will start seeing those and and what i again i. It's a little bit like what i said about. Say what might happen in the us. I think that will emerge and then and then the european central bank will have to respond to that too. Okay all right. This is reality. We're gonna make sure we it safe and sound we can supervise it versus what they're saying right now. Which is none. We're going to build this. We're gonna launch this. I mean just the interview this week. With with madame lagarde was in five years. Okay so five years. What's going to happen in five years in this space. I mean come on right. So i mean what is that. Is that a bunch of engineers working for the european central bank. That are gonna build this in five years. Like what is that. So i think or a good point. I think that the market moves way faster and and then they'll they'll have to really react to that and that's okay that's okay. So how do you think. I mean christine. The gob talks a lot about bitcoin. How do you think. I see regulation as an acceptance if the building and digital layer that regulating. People like yourselves economies. Its existence that okay this this this this collateral reserve lia- and that's fine right right. Yeah i mean. Look i mean. Let's go talk about bitcoin because know my own long-term view is that Is israeli a couple of things i think one is that the adoption of of commodity money digital commodity money that includes bitcoin include ether in that and there will be other commodity digital moneys z. Cash whatever you wanna put their but the that super attractive non-sovereign With its with its inherent digital properties that there will continue to be enormous demand. And that's gonna grow grow grow. I think governments and central banks are gonna prove on the balance sheet. I think governments are gonna subsidize. Its its creation. I e like infrastructure for validation mining. That is where we're headed. And that's going to get bigger and bigger and bigger. And i am am now very much a believer in alternate reserve currency status in in some of this. So i think that's that's very real at the same time you know. It's not like governments are going to give up. On their sovereign currencies. Many governments around the world will will link what what is happening is globalization itself was part of this and you you sort of you look at like trade settlement currencies in sort of how that accounts for how much economic activity in all this sort of stuff like digitisation and the internet. And what is what we think of now is like public boxing's that is going to accelerate that very very fast and it's gonna lead to some complex decisions amongst government actors as to. Okay you know. What are we using here and i think there will be. I mean look i. maybe i'm too much of a globalist and an optimist. But i actually believe that there will be attempts to create synthetic goal digital currencies that that are that are based on a basket of constantly rebalanced reserve currencies and i ultimately believe. Bitcoin is part of that basket. I have exactly the same view. I also think within it to be a member of that that was strictly money supply unit with two money supply growth right but other looks like a pseudo totally currency totally totally. The ratio of the fiat bat basket to bitcoin will evolve just like we had a goal dollar peg right so you might cause my view on. This is simply if you're a brazilian brazilian company making commodities selling them to china but economy and your whole business goes up and down into the dollar is nonsense or the us twenty five percent of gdp an eighty percent of all world trained untenable so we can create commodity basket currencies also which stable nature. Yes exactly so. We're totally on the same bait. That's exactly coming tell you want to pick. It brings about two contentious things now one is. How's this thing play out. Yeah i mean. I think like people are very nervous about. Yeah let me look. There's there's a lot of different pieces here right so you know as everyone knows right. What a lot of people considered to be like the bugs as it were are. Actually it's features so the fact that it's opaque offshore unregulated you know sort of outside the reach of us banking regulators value at least and I is like this dollar shot banking system. A lot of asian money likes that right which is needed for. The world's you know there are people like that in of itself like there is a market. Need right it's filling that market need. It's also feeling very explicit. Mark needed just happens to have like the orderbook liquidity depth in bitcoin markets in asia. Like it's just it. It is in that place because it was the place in sort of has has you know. Uscca is eating. A lot of shares uscca as share has really grown and will continue to grow because a mainstream financial system for everything from payments in salman to houston in financial contracts on things. No one's ever gonna build that on top tether in my opinion And so i think likes tablespoons like us to see will grow grow and if you look at the percentage of economic activity in market activity. That's going to be denominated in in stable Dc vs in something. That has those other be. I think the you know the things like adarsh. David quinlan see will represented a much much much larger part of the the ultimate activity. The open question is like is there. Is there an attempt at like intense legal and regulatory enforcement On something like tether. That is an unknown right. I mean i mean. We certainly know that they're they're increase and stuff. But like i mean who knows i. I don't want to speculate on that. No and if it is being used for let's say chinese capital flight right. You don't know who's incentivize. Maybe the governments who are incentivized. Keep it you know. You don't really know the players. So do you see. There is a a theory that goes round of some sort of catastrophic failure. Risk within this you can send by that. We just think it just loses its share over time and there's no big in the end semester continues to grow in absolute numbers and i and i think But i think over the over. The mid to long-term in terms of its ultimate market. I to get will be smaller and i i. I don't like to speculate on on the books and records issue. Like i don't know i mean i i really don't know and i i know there are many significant market actors. That really depend on and do and and do find a trustworthy. And i expect that. Don't know this but i would expect that. Tether is probably transparent about the books records with some of their counterparties as well they may not be with everyone but So i'm actually personally not overly concerned but i want to raise it because it's a big question that goes around. I think i think is as open as they can be. And you know it's relatively okay. The other one that's contentious but is interesting is exile. Pay anything that plays out. Because that's sort of annual space as well into different parts of your space. Yeah i mean. I guess sort of to exactly i mean i've always believed that the the the payments layer is going to be things like stable coins in that at one on more generic public chains And and and the like I think that that play out. I mean in terms of our peers the security. I am not a lawyer here. So like i don't i don't really know i mean that's gonna be a long along but i forget the legal stuff because none of us know that it's exactly as you said you know. Do remittances moved stable coins. Yeah yeah absolutely no doubt no absolutely i mean my my very strong view here is that you know the sort of if fiat backed digital currencies that that are especially ones that are kind of built around kinda standards and governance and can be widely adopted. And that's absolutely going to be the dominant mode of transaction nother question for us about the new developments in the lightning network things like strike. And i'm not sure you've seen bottle pay that's coming out of the uk super entrusting. What do you think about. Lightning layer and how that might work for you. Will i think. I think we've always we've been tracking this obviously really really closely and i think Bitcoins getting really close. Both lightning and other expense ability. -bility where you could issue. You can see that ran over the coin infrastructure rights so at the moment that that becomes really bible will be will be there obviously I think that's you know Chain agnostic essentially. We are totally chain agnostic and in fact earlier in two thousand twenty roll out essentially a multi chain governance framework for houston and houston. She has now issued on algren. It's issued on salona and very very soon it will issue on stellar and they're going to be many more blocks so there's a public blocking that has the capabilities to support. Uscc protocol and it can meet sort of security and and sort of some of the features that used to see has in terms of how it is administered operates than the nearly should be there at the way. I like to think of it is like your digital dollars. Should be cross platform like just like your digital music like if it should be interoperable and everything's be interoperable. Everything should be cross platform to pretend that we know like which public infrastructures are going to be. The ones that are adopted. There's a lot of competition there. It's like operating system and there's me more of that and so Our commitment is that used a she should be able to be available in interoperable on on many many chains. Were continuing to roll this out. And you've seen interoperability in the beginning from the whole career has been that right jack. It's been exactly looking at that and figuring out now does elicit together precisely precisely a lot of people. Don't believe in it. I mean there's the whole next few supply. But i'm gonna win. It seems obvious that there's going to be a number of players who they are or how it's going to evolve right but there's going to be a lot of fun in that presence lakes. jeremy look. That was fantastic. Really really interesting. I think people will have lancelot and goes up to date on all of this any other things up on the horizon that we should be thinking about. What about the new. Sec chairman. gary gansler. I i like gary gansler a lot. I i know gary and he you know the Actually co taught Mit course on. Blockchain stuff. I was one of the guest lectures in his course. So what i know about gary is. He's super smart. He's spent a lot of time looking at at this technology in this space and the issues in it I think he cares about them. A lot I think he's also a strong regulator He he he's not. He's not at the whim of anyone in so i think he's. He's a strong independent chairman. so i think that's really good. But he's also. I think. Probably thinking about the competitiveness of the us financial sector The advance in these technologies any thoughtful about risks. And so i think he's excellent choice for for the sec chair. I think you know they'll be dramatically better engagement. I think with the sec. With the crypto industry than under chairman clayton. Clay final question. It's the thing that i've been. Observing is the wall of mummy. What are you saying on your side of the fence. Because sons wasp. Everybody this in everybody's kind of wide-eyed without my god we're having conversations with a lot of interesting thought the equation. I completely see it and enter the to so so one of the one of the offerings we have is what we call institutional training programs which is basically if you're in an institute trading firm of some sort and that could be everything from a family office to like the biggest electronic markets firms world. We want to offer you. Great downmarket infrastructure were digital world. We have a whole program. Enroll people watch them on our platform. Give them access you know. Api's and stuff that's really growing. I mean so so. We're seeing just a lot of new new firms that are kind of coming in and so that to me is a strong indicator And i think the second is you know we have We have this waitlist that we put out for this. You know high yield digital dr count phonics and we had over three thousand companies. Sign up What's fascinating about it. We haven't washed this thing And what's fascinating about it. Is you know Insurance companies reese Banks brokerage firms acid near registered investment advisers. Like just down the list people who are interested in how to get yield. Obviously but also. I think it's a it's an interesting measure because you know the way i like to put it as their back holders everywhere and and you know. There's a lot of people who are really committed to and personally even invested in crypto and they working companies all around the world and they work in financial institutions all around the world. And they're all saying. Hey boss we gotta get involved in. Hey we ought to be allocating to be a part of our balance sheet to this. We should be putting dick to balance sheet reshape putting these approximately balance sheet. And so we're seeing that's like another institutionalization and we're seeing We're seeing it be very interesting to see to see over. Twenty twenty one. I think that the the big news of this insurance company that engine or this asset manager like that will be. There'll be a it will be irrelevant. It'll be i it'll just be like you know bickerton ubiquitous. Yeah we're we're on the way there so a funnel final question then. Because i got me thinking about okay. So let's say we bring all the the insurance companies balance-sheets into this and the pension funds who need yale's yields are going to converge to write ju interest rate markets. Right to lose yield pickup overtime. I mean look. I mean that. That's like the efficient market theory. Right and so it's sorta like pick your timeframe. And how dynamic and fast growth are these markets in and how much essentially rb exists in. And how's that are priced in house. That flowed through right. So i mean that's that's sort of the question and so when when people ask. Are these yield sustainable. My view is over the long run now clearly they'll converge but how fast and in what form and then the other thing that becomes interesting in my view. Is you know if the borrowing markets for stable coins as an example. Start to you really as it has become utilities for every day salman and transactions then the kind of borrower profile shifts to more like commercial bars and and so yes that would also bring the curves in line right. So it'll be interesting to watch. Just it's just so fascinating. Brilliant termi really really appreciate it on with my pleasure. Thank you so much all right side cat.

occ sec salomon us us dc Uscc us center consortium treasury dollas donald blockchain mulkey genesis within digital currenc genesis capital Qualcomm Bitcoin roach motel Robert leshner
The Shaky Ground Edition

Slate Money

48:16 min | 2 years ago

The Shaky Ground Edition

"Slate. Money is brought to you by Cigna. Remind your employees to schedule their two thousand eighteen annual checkup. Encourage them to learn their four health numbers and take control of their health to learn more visit Cigna dot com. Slash take control Cigna together all the way we have a favorite. Ask. Our partner is conducting a survey. It would be grateful for your help and answering a few questions. It will take less than ten minutes of your time and your participation help support our advertisers. Please go to slate listening dot com to complete the short survey. Now, thank you. Welcome to the shaky ground edition of sleep money or guide for the business and finance news of the decade. I think we're gonna. We're gonna take a big picture view of things right now in case you hadn't noticed, which I'm sure you had it is the tenth anniversary of Lehman Brothers going bust. 'em we, by we, I mean me Felix salmon of axios and Anna Szymanski. Hello and Emily peck of the Washington Post Washington Post and Huffington Post which rhymes and the Huffington Post joined by the expert on all things financial crisis. You literally wrote the book on it was called shaky ground, three shaky ground to all the devils are here. This is the one and only Bethany, McLean welcome back angst for having me Bethany. Wrote four books and the running joke is that will cool shaky ground at the first one was about Enron, which famously collapsed. The second one was about the entire global financial system which famously collapsed. The third one was about finding Manfredi MAC, which famously collapsed. And fourth one is about tracking fracking, which is all about basically taking a bunch of shale rock and making it collapse. We home not quite collapsed. We hope dot quite collab-, get into the subject of earthquakes when we talk about your new book which is called Saudi America, such truth about fracking and how it's changing the world. So we're going to talk about that because it turns out that the whole fracking industry in a weird way grew out of the financial crisis. And we also obviously we are getting into about the future of everything because Bethany McLean is the only person whose mother enough to be able to. Custody that is clearly a joke. It's true. We love Bethany. She's amazing. But first we have to do some remembering and you really did write. The book is called all the devils here is really good about the financial crisis. We know I think people forget with hindsight, just how crazy things got was the end of two thousand. As so when you look back and with the hindsight of having talked to everyone who's involved. Do you think that we dodged a bullet or did we get get straight in the head in like caused the complete destruction of the global geopolitical system. Well, that's settled tutor. That's that's a big question. I think it's I don't think there's any way. I'm not sure that I wouldn't want to go back and hit rerun and not bail out the banks in see what happened. I think there's enough of a chance that the dire predictions of those in charge of the financial system at that point, like Hank Paulson that it would have resulted in the total destruction of society. I'm not sure they're right, but I think there's enough of a chance that they're right that I wouldn't want to go back and hit replay and choose a different path and see what happened. But but the problem is is it's both possible that they chose to do the right thing, and we needed to bail out the financial system and that it was horribly unfair and an absolutely awful thing. And the problem is both those things are true at the same time. I think. Just had a piece basically saying this that the technocrat so Poulsen banenky guidina they did the sort of technocratically correct thing to do, but they had zero political now and they utterly failed to sell it on a political level and that failure was way more consequential than anyone could have ever imagined. I agree with that with one big exception, which is I don't think there was a way to sell it and make it palatable. It just is completely unpalatable no matter what kind of glossy put on it. It's the proverbial lipstick on a pig, right? We had to bail out the financial system. I don't. I don't think there's a good way to sell that to people couldn't. There have been a better. I don't know. Couldn't there have been a better way to bail out the financial system like Barry ritholtz you were just talking about? He has one of these. He has opposed, I think today or yesterday, that's like ten minutes about the financial crisis in one of the myths is that the bailouts had to happen and they had to happen the way they happened. And he said, no, you could've. Taken the banks that could've done like a managed bankruptcy or something you've nationalized. I mean, couldn't there have been a better way to do the bailouts? I don't. I don't know. I give people credit for trying to do what they thought was right bound by the limits of their own their own view of the world, right? Because we all are, and I give them credit for trying to do what was right, but I absolutely agree. The consequences of the way things were done, and I'm not sure. I'm not actually sure there was a better way, but the consequences are terrible. And I think I think it's resulted in a real cynicism about corporate America about the financial system that ten years later has not gone away. I agree. And I think that if you look at what happened in Europe, where they tried to be much harsher on the banks, it ended up with a worst consequence. If you look at where the European banks are today compared to the American banking system. Well, when talking about the consequences for the banking system, the consequences of the banking system and fine with looking about the consequences that like Trump really? Yes. Although one, I would say the consequences for the banking system deuce certainly have an effect on the. Economy, and I think it is definitely true that there is a the lack of faith in institutions is clearly tied partly to the financial crisis hundred percent. Does that mean that the financial crisis is what led to Donald Trump? I think that's a bit of a jump really. I mean, I feel like this seems to be received wisdom. I suddenly believe x. thing, what isn't it? Obvious that the complete disillusionment and lack of faith in institutions is is what caused this kind of nihilistic, but it will down, you know, Alexa chaos monkey to happen. I mean is, oh, am I missing something? The reason I say that is not because I'm trying to say this financial crisis wasn't horrible. I'm not saying that at all. I'm just saying, because if you look at what's just happened in Sweden, if you look at what's happened in Germany, if you look at Brexit, I think there are a lot of factors that are leading into this rise of nationalism and populism and I don't think it is all just about five. Finance, although it was a global financial crisis, and the financial crisis was if anything worse in Britain than it was in the United States. I'm gonna argue a slightly different point which is that the up in mortgage credit, the explosion of mortgage credit in the run-up to the financial crisis was used mostly to mask the underlying economic weakness, which is the real problem because most of the risky mortgages that were made, which is why this is never been homeownership issue. By the way, a little side. Most of the risky mortgages that were made were refinancings and cash out refinancing so that people could essentially live off their homes and drain their homes of equity in order to be able to supplement their spending. And so that ability for people to live off credit helped mask underlying weakness and was a salve over underlying income inequality. And I think that's the real problem. If you look at the my favorite shot of the past ten years, which a little plug here, I am going to put in my new newsletter which you can please scribe to sign up axios dot com. It's called axios edge, and I'm going to have a shot in it. All of. US household debt as a percentage of GDP over the past ten years since just before the crisis. And it is Bethany says it was rising all the way into the crisis. It peaked at about ninety percent. And since then it has been on a steady downward decline and that's Plumbly a good thing. We're having a de leveraging which we needed, but the consequence of not being able to borrow a bunch of money and spend it is that people feel poorer than they did pre-crisis even if the incomes have even gone up a bit. One thing I've been thinking about an antecedent of this episode is just that there's so much debate about the Bank bailouts where they fair, where they not could they have been different cetera, et cetera. I don't see a lot of conversation about what could we have done for the homeowners or the mortgage holders are the people that you know were foreclosed on. I mean, they got a lot of attention at one point, but these people are still struggling. I mean, remember him and hope. Hampton harp were not great, and there was a lot of help given to the financial institutions in in very little help given to regular Americans and. Income levels are pretty low. They barely recovered. Six wealth is still American's. Wealth on average is still lower than it was in two thousand seven. I mean, why wasn't more done for those people? This is a great question for Bethany. Clearly Hampton hot. These, these sort of half hearted attempts to help homeowners as rather than the lenders would massively insufficient and and milk toast was that a way to direct bail out funds at individuals who owned homes rather than to thanks was ever possible. So I don't think so. I wish it were possible because part of what was so horribly unfair about this whole thing is that banks got bailed out and people did not write that is awful. It's it's terribly unfair, but then you get into the details and you say we'll was there a way to bail up people. Remember that's what gave rise to the tape party. In many ways was other people being angry that their neighbors might actually be bailed out as early. That's literally what gave rise to the. So it's not like it's not like the country wanted this to happen and people to be bailed out and the banker said, no, no, no, we get the money. Country was in one to the exception of Rick Santelli. It was it's way more controversial than that and really hard to figure out how would you feel if you were struggling to make your mortgage and you could make your mortgage payments and your neighbor next door was overextended and couldn't make they got a bail out and you didn't because at some point you'd have to draw the line, right, and figure out who it just when you try to really figure out how would you have done this in a way that was fair it it man, does it kick. The problem was that people like Neil cash Cari and Tim Guyton we're trying to do it in a way that was fast. And if you try and do it in a way that's fat, as you say like you, you run into a whole bunch of edge cases and horrible decisions, and you wind up doing things which which pair and then you draw the line. You said, I can't do that because it's not fair. A my view is you. We would have been much better off certain on the political level in the society. If we done some unfair bailouts of individuals because Gardiner's we didn't a whole bunch of on bailouts of banks. I mean, that was there was no problem with with fairness and bailing out the banks. The one time there was a problem was Leeman right? We didn't imbalanced lemon because there were like too many bailouts for the banks. Let them just go under and see what happens. And then it was like, well, look what happened. But that literally attitude literally, I wanna say, sixty minutes later, they. They said, well, we combat out Lehman, no mobile apps and then sixty minute. Faith. They, oh shit. We need to bear a g. You also have to remember that after they didn't bail out Lehman, both the New York Times and the Wall Street Journal wrote favorable up ads about how made it was that the government had not bailed out Lehman, so it's not like these. The little crew of Paulson and guidance in banenky did this and everybody said, how could you have done this? They did this and everybody said, great. We're so glad you did this. So there are some complicity there that that we all have to be. I don't have complicity is the right word. I'm a member of journal op-ed page. I can tell you. I feel entirely. I think this if we're talking about the position of the normal American and where they are now, I think this goes back to something Bethany. You're saying that the financial crisis amplified issues that were underlying in the economy for years. If you wanna talk about the growth of consumer credit, it went from about four percent in the forties to close to twenty percent in two thousand eight. And this is just a consumer credit. If you also look corporate credit, we live in a debt fueled society. We live in a consumption fueled economy for, and a lot of that consumption has been fueled by home equity loans, not even just in the two, thousands, but confronted go back to talking about in the seventies this happening. So we have underlying issues with how do we sustain a standard of living than Americans are used to when we don't produce as much as we used to when we don't have this in terms of actual goods that were exporting if we don't, we aren't as competitive as we used to as. We used to be yet. We still want the same standard of living. Of course, we do. How do we achieve that? We've achieved it through debt, fueled growth. We don't know how to achieve that standard of living without having debt field. And then in the past decade has been a story of de leveraging both at the household level and the financial institution level, if not at the government level, and the result has been this wave of populism if people saying, well, you know, my standard of living is not going up like it used to a now. I'm going to, you know, try out of the plan. There isn't a lever left to pull one lever that got pulled was women going into the workforce, and that helped a two income family. Could you better than a one income family? Even if that income, those incomes relatively stagnant, and then we had the lever to pull there probably others missing, but then we had the lever to pull of consumer credit such that the way we all think about money has become, can I afford the interest payment? Not. Let's think about this giant lumps on the debt out here that I have to. I have to pay back and that levers been. Old. And so I'm, I'm not sure what levers we have left pole at this point. And so it's not surprising that there's some widespread disillusionment sleet money is brought to you by Charles Schwab. What is shrubs modern approach to investing. It's a word winning full service and low costs its transparency about how much you're paying in fees and commissions. It's offering some of the lowest costs in the industry, including four ninety. Five online equity trades backed by a satisfaction guarantee. So if you're not satisfied for any reason though, refund the fees and work with you to make things right. That's why they call it the modern approach to investing. So ask yourself, are you getting low costs and award-winning full service? If not, maybe it's time to call Schwab Charles Schwab own your tomorrow. Visit Schwab dot com. Slash money to learn about our low costs satisfaction guarantee and award winning service. So that is the perfect segue to. This amazing source of free money that the American economy has suddenly found itself sitting on top of and one of the great one of the most surprising passages in your new book is about the growth of manufacturing in the petrochemicals industry and then plastics, and then cracking and things like that that there's like one hundred and thirty billion dollars of new chemical plums making. I didn't know what they make like polyethylene and refined, whatever it is, you know, it's like that line from the graduate, right? Like the future is plastics, and this is an this is all happening in America because the cost of petrochemicals in America is like half the price of the is in in Europe and other places in the world. And the reason that it's so cheap is racking racking. And so yes. When did this start? How did this happen? So like I talked to a lot east to call this character in my book, Aubrey mcclendon who's one of the great characters in in American business. One of those larger than life characters that come comes along love and hate him. People do plenty of both, but I'm used to call mcclendon the most important man in America, and he meant that with some degree of hyperbole. But what he was getting at was that if mcclendon was right about unleashing this tidal wave of natural gas that would make us a low cost energy environment that it would change our economy for going forward. It would make America low cost place for all of this manufacturing. And that's, that's indeed what happened and that's in some ways, the positive putting aside the environmental question that's in some ways, the positive side of the fracking, boom, because it has created a lot of jobs and industry in America that wouldn't otherwise be here, but there's a problem, but there. But there. Again, setting aside the environmental issues, which are huge and I, I really don't. I don't want to gloss over them too much because like the number of earthquakes in Oklahoma has gone up like four hundred times. It's it's a big issue, and I feel like environmental issues alone sufficient to be very, very skeptical if this entire fracking industry at the risk of being cynical. And I'm going to say in a world where we all were Hydrocare we all need hydrocarbons at, right, right. At this point in our history, the environmental issues aren't going to be what dozen fracking. What might is this simple fact which I found really interesting because despite the fact that fracking is changing the world, reshaping geopolitics, the industry does not make money, it's never produced free cash flow, Rick cash flow. For those you who aren't financial is the stuff that you need to live on. That means you don't need to go out and raise more capital from Wall Street. And so I think if any just minutes isn't that the best kind of industry for the economy because it's not taking out dividends for self, it's not may. Making those of money for itself. All of the goodness in terms of economic activity is going straight into the economy as a whole. No made immense amounts of money for the executives and the private equity firms who have invested in it. So. There, there's, there's really a big, gee, those look like have lost a huge amount of money. And some people have may have lost a lot of money, but a lot of people have made a lot of money. If you look at, I was trying to do this. I haven't finished it, but the number of sports teams owned by fracking billionaires. I mean, there's, there's a lot of them at this point that I that I really believe. I thought this, this conundrum or this, this dichotomy was part of the reason I wrote the book. I was so interested in this. How can you have this industry that is reshaping so much and yet it doesn't make money. And I think you bring up a really interesting point in the book that a lot of this actually has to do with what happened after financial crisis and specifically having extremely low rates interest rates. So I quote somebody in the book saying that the real enabler of the frac of the fracking revolution was the Federal Reserve because the Federal Reserve, obviously cut interest rates in during the financial crisis in the wake of it to try to spur economic growth and that made debt available to fracking companies at a pretty low cost. And it's led to this huge avail. Ability of capital. And since capital to me is the key ingredient in fracking. It's not chemicals, it's capital. I don't think this whole we would. We would not be producing the amount of oil and gas we are fit. This is actually like a complete vindication of the of the power of monetary policy. They what we needed to do is cut rates to boost economic activity in this country. We cut rates and everyone was like, well, why do I care in terms of like the the, the infantry on my credit card, whether it's twenty, nine percent or twenty eight percent. It turns out that the that rate cutting caused hundreds of billions of dollars of economic activity in this very important part of the economy wed. Now, we just discovered this week. I mean, really is the business and finance use of the week. The US now produces more oil than any other country in the world more than Saudi Arabia, modern Russia. But and there's one thing you talk about in the book which is the goal, has always been energy independence and fracking getting close to there to energy independence, but actually, energy independence might not be such a great thing for the United States, right? If you so I came away with this, the the, the takeaway that that this whole thing that we've been shitting for this notion of energy independence, which every president since the nineteen seventies has talked about is this grand goal of policy is actually pretty much an illusion today forget about it. Although it's an important argument, the the fact that this industry is is on shaky ground, doesn't shaky ground floor. It doesn't. It doesn't actually make money, but this whole idea is pretty suspect anyway, because the price of a barrel of oil is set globally. It set by events way beyond our control way beyond anybody's control. It's not like the nineteen seventies when America could control the price of a barrel of oil. So. It's what people pay at the pump for their gas is going to be shaped by global events, no matter whether how much gas in producing people concentrate a little bit too much on the cost of a gallon of gasoline is like the most visible pricing of of hydrocarbons that we see on the side of the road, and we have to read. Glenn two people really wanted to in terms of, again, going back to this whole light the way that the economy has been reshaped by racking. That's like, that's the least of it, really. I mean, as you say, most of this is actually a gas story Rodman oil story, and you know, to to sort of contradict myself on the environmental front gas involves many Fuoco emissions than coal does. So if we moving from coal to gas FIC good for the environment, some controversy about methane lakes that, but will put that aside since this is it. My book is explicitly not an environmental, partly because partly because it's a mini book, but partly because I really, I guess I believe that if something is going to undo this at probably going to be the financial ramifications, William me because that's the bid, which I don't really understand that you know all of the fracking companies in fracking operations. They have, you know, geological stacks and they have capital stags and the cow and geological sex are very complicating. The capital taxi, even more. Complicated, and there are people who own the companies and their people who've lent secure designates them. And then there's people who've lend unsecured against them and and all of these people are constantly jockeying to find that position in the, you know, pivot and all the rest of it. And it is entirely possible that the people who own the equity will get wiped out. And then the people who on the debt we'll take over the company and why does all of that kind of capital jockeying matter? Why would it matter if that would defaults in the equity swaps in the death owners took over the company because if you don't have constant infusion of new capital into this business it, it's an open question how much oil and gas we would actually be producing because the companies can't fund their own way. They have to constantly borrow more money in order to keep producing oil and gas, so that spigot get turned off and there'd be no more capital for financing this than we wouldn't be producing more oil than Saudi Arabia and Russia. So the question is, is how much would it how. Would it decline if companies had to live within the cash or they could produce if they couldn't, if the spigot shut off, what would that do to production numbers? And if you're looking at a period where we may be seeing increasing rates, that becomes a much bigger question not only because of the interest that these companies are gonna have to pay on their debt. Right now, the spread between high yield and investment rate is pretty small, but it also you point this out in the book in this, I think this is really, really smart. Is that because we've had really low rates, a lot of pension funds have had to shift into alternative investments because they can't get the same return on fixed income instruments. And so as a result, you've had just a wall of money coming into PE and hedge funds that are then investing in these fracking companies. That's exactly right. You just said it better than I could say it, so I'll leave it Elliott at that, but that's true. And the reason the whole daisy chain sounds a little bit too cynical, but the reason the whole thing has worked is that publicly traded fracking companies have been valued, not on a multiple of the pot profits they produced, but rather animal. Couple of the acreage they on. It's a little bit like the old dot com days when companies that weren't making money were valued as a multiple of eyeballs. Because in the absence of prophets, a traditional measure of value, you have to turn to untraditional measures. And so you've been able to take a fracking company that doesn't produce prophets and sell it to a publicly traded company. And the people who funded the private equity team that funded the the, the the, the company that got sold makes a lot of money, and the executives make a lot of money, but that still doesn't mean the whole industry is is is profitable. So what's going to happen when the whole thing falls apart? Because I mean, it's just seems like it's a matter of. I mean, the one thing we've you definitely from your book is the this entire industry is so STA cast dick and unpredictable every single time anyone makes a prediction like it goes the opposite direction. And so as Emily says, like, we're one hundred percent certain to get some blow up at some point. What happens when when have we had one, we have one, not so long ago at so far. The the fractures have defied every attempt to kill them, which people saw Saudi Arabia's policy in two thousand fourteen and fifteen is definite attempt to kill the US Rackers. They've been far more resilient than even their proponents dreamed, and a big part of that is at the capitol supply has dried up. So as well, somebody said to me while Wall Street was there. I actually got a little bit humbled by this book because I came away saying, you know what? When I look at the history of this thing and then more broadly, the history of people have tried to even predict oil prices. Everyone is always dead wrong, so I don't. I don't. I don't actually know what's what's going to happen to be. It was just important to say if we are beating our chests about American energy independence and how great we are and how we're now producing. Let's at least look at what what could really undo this and tried it. And then maybe our perspective shouldn't be so myopic in so short term about, look, how much we're producing. Maybe we should have a longer term perspective that takes them the industry's real weaknesses into account. There are fracking bail out ahead of. You know there there. I mean in a in a weird way, there kind of was a fracking bail up because when oil prices collapsed in two thousand fifteen in two thousand sixteen the like a hundred and fifty companies did go bankrupt, but the bankruptcies were far less than were predicted in part because the capital supply didn't shut off. So you can almost view the Federal Reserve's continued low interest rate policy as a bail out of fracking companies. I mean, there is a, you could argue there's a national interest in keeping these companies alive will that that has a question that has woman of quick soon. That's a question that has come up. Would you want to subsidize their production? I actually don't think you you, you would. And the reason why is that this ties into kind of conservation argument to, but thus far there still is no substitute for hydrocarbons in certain areas of life and why are we so eager to drill it all out of our ground and export it and sell it to other countries? What? Why is that? Why is that so great when we we might need it ourselves one day at low prices. I mean, especially at low prices. Why is there this need for immediate gratification? Get it out of the ground salad. Why? Why not think long term. I mean, this is America. We don't know. That's the problem right. Sleep money is brought to you by the business platinum card from American Express with the business platinum card, you'll earn membership awards points on virtually all business expenses and turn those points into anything from new supplies. Two flights find a calm space to get in the right head space with access to over one thousand airport lounges worldwide. Let platinum help you find that hidden gem for the best working Lynch in town or enjoy a few hours of meat time after face time with clients with guaranteed four PM late checkout at over one thousand fine hotels and resorts worldwide. That's the powerful backing of the business platinum card from American Express. Don't do business without it terms apply to all benefits, visit American Express dot com, slash explore platinum for more info. But let's do that. Let's talk about love. These segues because this is this is I think the key change that I have seen. You know, in recent years it has become more obvious in recent years to me is the, you know, we when we had the technocrats in charge when we had guy, never Nike and Summa's and Poulsen, and they were trying to make decisions that were in the longtime best interest, not only of the country, but as the global economy and the the rise of populism and nationalism. And all of these other things has shortened time horizons enormously and the people not making decisions on the basis of, you know, multi time horizons anymore, that making decisions on the basis of like how, what is the effective my tweets going to be in the next thirty minutes and. Fa me, that's the scariest legacy of the financial crisis going forwards in times of like how the world is going to operate. If we have a bunch of if the world is basically a bit like a bunch of five year olds, playing soccer in there will late chasing saga bowl, and then not trying to be strategic longtime about it. That's going to cause massive like deadweight systemic losses for decades to come a my wrong about this. I just wonder if you are over estimating how well thinks function previously, I was gonna say. If you look at the history of even say just monetary policy and how it was always just kind of reacting to what had just happened. Expectations of what maybe be was going to happen right around the corner, and then they were always wrong. So then they overcorrected and then under corrected what we're seeing right now in politics definitely seems super sped up. I just don't know if in the larger financial system, if it's really that I'm looking at trade, especially, but I'm going to focus on a slightly different area which I think is a problem for all of us and for the financial system and that's pensions, right? Which have been chasing returns in high risk areas like fracking, precisely because the low interest rates make it even more difficult for them to meet their obligations. But part of that has been this very short term attitude on the part of politicians, which is let me promise people, all sorts of goodies that I don't have to pay for today that have to be paid for down the road and that attitude which has been in place. I don't know. Eighty seventies is landing us in a really big pick. Title today so that that to me would sort of undercut this notion that we were once really good at planning for the long term. And now we're really bad. I think politicians have made horrible decisions in their own short-term best interests that are coming back to bite doesn't. I think they've done that for decades. I. I mean, you can even go back to essentially postwar even sixties economic policy. All it's because it's based on politicians wanting to get reelected, always has been, always will be, and I think you're totally right that right now, nobody wants to do hard things in. It's understandable in especially at a time when you don't have significant wage increases. It's very hard to say, well, we're now going to cut pensions or we're going to have to increase contributions. Nobody wants to do that. Nobody wants to also if you're working with unions and it's understandable that they want higher wages, but then unfortunately, what tends to get to happen as they say, well, we won't give you higher wages now, but will increase pensions all this things down the line and then the can't pay for it. Right? Yeah. It seems like there's a lack of imagination when it comes to solving or economic problems, but I was reading a lot of their. Maybe hundreds of financial crisis look back and look forward pieces on the internet right now and Hasso I year, I compiled a small list of things that people say might cause the next crisis, and I'm gonna just say, I don't think it's right. Any of these are right, but I'm curious what you all think corporate debt one thing cyber attacks, emerging markets, the shadow financial system. In the is shadow is shadow lending that was different somehow and and Trump. So those are the things that I think you should keep going and keep going and going and going in Daming everything you possibly can. Because the one rule of crises is that it's always what nobody saw coming up. We've talked about everything that could possibly be possible, then maybe we'll prevent. In terms of that, that's two different types of Dez. I, I wanted to what the distinction here, which I think is a useful one between. A Bama has a market crash. I mean, obviously, this stock market to super frothy right now, the stock market could easily declined by fifty percent or whatever. And that would be bad for people who hold Stokes, but it wouldn't be a financial crisis. We had that in two thousand and it wasn't a financial crisis. You could have a bunch of debt defaults and similarly, like people who own bonds would lose money. And that would be bad news probably be worse than the stock market crash because you know, that defaults away. You know, they people in a place where you have a little bit less risk appetite, even then it's more or less rich people losing money. What we the thing, which causes a financial crisis. When normal people, you know, lose money that I had. I was like, none of this involves people losing their homes, which exactly worst thing, right? I think I think the the cyberattack thing Israel, like if there were a major like Chris. Pooling of the internet in the United States that could cause unbelievably enormous damage and repercussions and also going back to one thing. You mentioned corporate debt that actually is somewhat interesting because totally like global debt to GDP has been relatively stable since two thousand fourteen. But if you look since two thousand eighteen to now nonfinancial corporate debt has like more than doubled, and it's not only that there's more of it. It's that a lot of it is to issuers who have lower credit ratings. Now, some of this has to do with China if you're looking at global, but this this is it's racking. Yeah, it's racking me in the US it's almost entirely some of it. But again, if I, if I can plug my axios news at one more time because it's launching it's gone. I have a shot of leveraged loans which is basically junk crates, it loans, the amount of leverage lens out that has hit a massive, all-time highest twice as big as it was pre-crisis. We are now over a trillion dollars in love. Those that happened. I've discovered this on April twenty eighth 2018. We have a trillion dollars. That's, you know, that's more than the amount of subprime mortgages that web prices, half of. I'd saw chart on back and they called it shadow lending, right? Because it's not feel owes banks. And that's one of the reasons I don't think it's stemming risky is because it's not being held by banks as long as the banks safe. We probably at, here's the thing. I think it's a lesson of the crisis that hasn't really been been been learned is that if you look at the crisis and how it happened, remember Paulson number danke saying it's contained it's contained subprime. Mortgage losses are small enough that they're contained you know that actually numerically turned out to be true. The subprime mortgage losses were nowhere near as big as they were forecast to be. The losses actually were manageable. And if you go back and he tried to say step by step, why did this crisis happen? There's no proof that the math major in may can embrace and say, this led to this and this was causal in this led to. This are lots of correlations, but what happened in the end was panic. It was panic. And so when you look at all the numbers and try to say, well, here's why this isn't big enough to do this. You know what? It doesn't always have to be that that big because in the end, right, it's confidence and the. Wrote of credit is confidence, and that's that's the Okri also in age of mark-to-market accounting. It doesn't have to be that big because if you're assets, if the if the market says they're worth nothing, if that's not if it's completely untrue, it doesn't matter when you have the Mark monitor. It's like about what happened, that layman's. I mean, that's right. Your trading partners start to believe their assets aren't worth what they're Mark debt. It doesn't even have to be true. Exactly. And this was what was really having financial crisis. It wasn't just the size of the subprime mortgages. It was the fact that was happening as you were doing this borrowing and then you were using some of those assets as collateral with another institution. And then that was kind of daisy chain defend. That was what really caused it. So it's not just the overall sizes, but for me, you know, going back to the health caused the financial crisis thing. I think fundamentally the single biggest problem, and we saw this, especially after Lehman went bust was the no one really believe no one had any certainty that any Bank with solvent you had no visibility into banks, balance sheets, those good reason to believe, especially if you monk to market the virtually every Bank in the world was in. Often. And if the banks win Sovan Bethany says like all of the all of the financial connections in the world basically fall apart a nen, you panic and then things get as bad as we saw on possibly even worse if that hadn't been the out. And I might be a little bit pollyannaish, but I just feel that in the wake of Basel tree and various other banking reforms and banking, just generally becoming a lot more boring since the crisis, the win, not going to be there anymore. That even if all of the frac is go bust does not huge amounts of fracking debt on banks, balance sheets that would cause people to worry about the seats Banking's probably right. But I, I think here's here. There's an another risk out there that you guys complexity risk, right? Remember we've all kind of forgotten about j. p. Morgan and the whale and this thing that nobody understood that that they didn't even even Jamie diamond. The best CEO banking CEO in America, arguably didn't see happening. And suddenly it was what a five billion dollar loss, a seven billion dollar loss. And even after the fact when people tried to explain to me how this credit. Riveta of index thing tied to various corporate credits malfunctioned and why that could lead to a five billion dollar. I, it's crazy stuff. We just saw another one with those this week in Norway. This e you emissions trader in no way, ran up like three billion dollars trading carbon credits in Europe. What complexity risk. Last thing I'll say though, just going off little bit looks what you're saying. I do tend to think that there really have been big changes that were made post the financial crisis. And if you look historically when you really have the type of real crises that really hurt the economy, it's following appeared where people think there is no risk like, this is what this is, what always happens. And we have because we had such a massive crisis. We do not have people acting as though there is no risk. And so I think that because people are so cautious, I think it's hopefully going to be a long time. This is why people call it the most hated Bill muck in history because everyone is just no one's happy. No one's like we're making money always just like this is this is gonna end in tears, and so long as people think that way, maybe maybe. I mean, we did go from the great depression through to the financial crisis. What was that seventy years without? You know, a massive Bank bailout. And so, you know, maybe I don't know. I don't know that those massive recession in nineteen fifty eight, which no one even remembers. We can cope with that. I was thinking just American just regular Merab. Americans just don't have that much to lose anymore. On which cheering. Silence around. Sorry. Slate. Money is this week by late stream. Livestream is the place you go. When you are carrying a balance on your credit cards. You know you shouldn't be carrying bouncing God's book. All of us do it. Sometimes those credit card bills can be just slightly more than we have lying in the Bank. And so it rolls and it rolls and rolls and. Really, that's up. If you find look back at the amount of money you spend interesting. It is way more than it should be and you keep on thinking to yourself, does go to be a better way that is a better way what you do if you pay off your entire credit card balance with a simple loan from light stream the simple loan from light stream plus you weigh less than you're paying credit card company. It can cost you as low as five point eight, nine percent API if you use water pay, which makes it super easy, and you can save hundreds or even thousands of dollars and lower your interest rates is something very sensible just by moving that from the credit card company to light streaming critic, Hudson great ways to pave things then not great ways to borrow money. So use your credit card payment mechanism. Do not use your credit card borrowing mechanism if you need to borrow some money. And if you have a balancing your credit card, then you by definition of. 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Eleven eleven million, which is the barrels of oil per day that the US is producing in July and August, according to our energy information administration making us the world's biggest oil producer. My number is ninety two percent, which is ninety two percent of the time on analysts calls. It is men who are speaking according to this delightful analysis that was published in Bloomberg yesterday. And before you say to me, but Emily, most of the people who speak on analysts calls like it's CEO's in analysts are majority male, true. But in the analysis they also looked at for how long men speak versus the women who are on the call. And the meant speak a lot longer. I was gonna say because it takes mental longer to say what they wanna say it just like hearing themselves. I think it's because I was thinking about it and like people will say, oh, it's like a gender thing like women are like this like that. But I think it's more about who has the power and people have the power tend to just go on and on a bit longer. No one interrupts them. I was just gonna say, do they have a breakdown of the people who ask questions versus woman? I'd have to look. I don't really care. I well, pretty sure. It's probably mostly men, although would say, interestingly on calls for a lot of like Russia and Ukrainian companies, you get a lot of female analysts saying, just really, yes. CFO is one of those jobs which is just way too male and the people who speak the most schools always the CFO. So let's just like a lot more female CFO's just name isn't Erin Callan we won't be speaking of leaving thinking of leaving. Thinking Liman my number is two hundred billion. This is my. This is my attempt to troll. Anna again. Two two hundred billion dollars is the size of Turkey's suffering well-funded. We know that techy headed offering wealth fund turns out of the techie has a suffering wealth fund its assets, and mostly Turkish companies or stakes there in. It's been kind of wondering around in circles and going sideways for a bunch of years now, but never do not worry about that because guess who has just been placed in charge of Turkey's two hundred billion dollars often wealth fund Mr.. Type at one himself. Have placed in twelve in judge of the sovereign wealth fund said, what could possibly go exactly. Although that least they're central Bank finally raised, right? It's not going to be enough. Oh, he should play next week or when is when are they coming on? So we have, yes, we talking a sovereign wealth funds like Amazon is going to be on our show. We're going to have. Yeah, we're gonna have like in the animals of corrupt, sovereign wealth funds. There are many, but there was one above all others which was just the most with curiously corrupt Sovan wealth fund where basically every single penny that it number one borrowed late node. The whole point about on is that you use yourself and we'll borrow the money anyway, borrowed billions and billions of dollars, and then spent it all on some blow. Basically in Paris, Hilton. We are going to have this in in two weeks Beth in the, you know what we're talking about here. I am DVD MTV. And that's that's what it is. Maybe, I'm, we're gonna have Tom Wright who has just written the book on one MBBS a great book and it's coming out this week. So go out and buy billion dollar sale, and then we're going to get him on to talk about that next week. Anna, what's number nine number is thirty five percent. So up into this week, companies that had unfunded pension liabilities could make contributions, and they were able to duct thirty five percent of that from their taxes. But now that's changing to twenty one percent. Why? Because hacks rates have changed. Now, the reason this is interesting least to me is that in the lead up to this, you've had a ton of companies buying long-term treasury strips because it's good to offset their liability. So you've had a ton of money going into these long term treasuries. And there's been some thought that perhaps this is actually been keeping some like pressuring the long end of the yield curve, keeping it down. So not invited. So there's, I don't know if this is true. It out, but I thought it was a really interesting theory to see what will happen when that kind of artificial demand goes away. So I had no idea. I love that number. That's, that's awesome. Yeah. So when does it go away when the chain is like this week? This week? Okay. So if you suddenly see a spike in the treasury yields, you'll know why it is because Ana told you. I think that's it, then thank you. Bethany. Oh my God is always so amazing to have Bethany Bethany, McLean on. It's not often that we get to just cool up someone in Chicago and take come on our show in Brooklyn and she'll come all this way, but it so awesome whenever you do. So thank you for coming in. Thank you to max Jacobs for producing. Thank you for listening. Keep the emails coming slate, money slate, come. Subscribing to my Email newsletter had will spoke plugging food, but this is the best and we will talk to you next week on slate money.

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