1 00:00:05,270 --> 00:00:09,740 My apologies for a slightly late start, but it's for a very, very good reason, 2 00:00:09,740 --> 00:00:18,200 and that is that we are already filling the overspill lecture theatre that this is going to be livestreamed to so. 3 00:00:18,200 --> 00:00:25,430 So apologies for a late start and apologies for those of you who are sitting in on the stairs here. 4 00:00:25,430 --> 00:00:30,860 Don't tell the fun stuff, please, that we allowed that. 5 00:00:30,860 --> 00:00:36,560 So let me introduce myself and then introduce the evening's events. 6 00:00:36,560 --> 00:00:38,120 So I'm Denise loosely. 7 00:00:38,120 --> 00:00:49,760 I'm principal of Green Templeton College and we are host to the Somchai Allow Professorship along with the Department of Economics. 8 00:00:49,760 --> 00:00:54,650 So I'm just going to say a few words about sunshine law and the professorship, 9 00:00:54,650 --> 00:01:01,340 and then I'll come across to your chairman for the for the evening, Vincent Crawford. 10 00:01:01,340 --> 00:01:07,160 So Sanjaya Law was one of the world's most pre-eminent development economists, 11 00:01:07,160 --> 00:01:16,160 and he had a 40 year career here at Oxford University when he conducted pioneering research on the impact of foreign investment. 12 00:01:16,160 --> 00:01:21,590 The economics of multinational corporations and the emerging the emergence of 13 00:01:21,590 --> 00:01:29,450 technological capability and industrial competitiveness in the developing world. 14 00:01:29,450 --> 00:01:37,070 It's a great honour for us that we host the Sunshine Law professorship. 15 00:01:37,070 --> 00:01:45,380 It's very relevant to Green Templeton College because of our interest in human welfare, 16 00:01:45,380 --> 00:01:57,380 human welfare with a human face and increasingly our interest in evidence informed decision making, policy making in relation to human welfare. 17 00:01:57,380 --> 00:02:05,240 So development economics is one of the topics that's of great relevance to Green Templeton College. 18 00:02:05,240 --> 00:02:20,330 The Sunshine Alone Memorial Fund was established in 2011 and sponsors a visiting professorship here at the university to honour Son Giles legacy. 19 00:02:20,330 --> 00:02:28,760 For me, it's very special because I actually met Sunshine Law when I was working some years ago in the World Bank. 20 00:02:28,760 --> 00:02:34,490 He was a senior economist in the World Bank and we're talking about in the mid-1980s, 21 00:02:34,490 --> 00:02:39,860 and I was doing work for the World Bank on the social dimensions of structural adjustment. 22 00:02:39,860 --> 00:02:45,800 So it's an especial pleasure for me to to be here this evening. 23 00:02:45,800 --> 00:02:53,360 The professorship, which has already established itself as one of the most prestigious visiting positions in the field of economics, 24 00:02:53,360 --> 00:03:01,670 promotes innovative theoretical and spiritual scholarship in the areas of San Giles Ross Sunshine's research. 25 00:03:01,670 --> 00:03:12,980 I would say it draws on his intellectual legacy, but it also was established in order to celebrate his life and his friendship. 26 00:03:12,980 --> 00:03:23,450 We're extraordinarily grateful to Rani Lal and the family for this continued support and for the honour of a fellowship in Sunshine's name. 27 00:03:23,450 --> 00:03:32,060 As I said, a college which cares deeply about human welfare, it's really relevant to us. 28 00:03:32,060 --> 00:03:46,490 We have had a number of very distinguished sunshine law professors, professors already Dani Rodrik, Paul Krugman, Pinochet, Avinash Dixit said. 29 00:03:46,490 --> 00:03:51,290 And this year, we're really, really pleased to welcome Kenneth Rogoff. 30 00:03:51,290 --> 00:03:58,760 And I'd like to say how nice it is to have him and his wife, Natasha, coming to Oxford. 31 00:03:58,760 --> 00:04:03,290 We are seeking future Sanjaya law professors. 32 00:04:03,290 --> 00:04:15,770 So please, we are open to suggestions. So if you have any ideas, I'd love to talk to you about that after after this evening's panel. 33 00:04:15,770 --> 00:04:25,280 It's now for me to hand over to to Vincent, who will make further remarks about Sunshine Law and will introduce the topic and connexions to the web. 34 00:04:25,280 --> 00:04:29,260 So thank you. Thank you very much. 35 00:04:29,260 --> 00:04:42,370 Some. I'm a professor of economics here and a fellow of all souls, and I've been associated with the foundation for the last couple of years. 36 00:04:42,370 --> 00:04:49,030 As Tony said, Sanjaya Lau was one of the world's leading development economists. 37 00:04:49,030 --> 00:04:56,170 He had an enormous influence, which I can see clearly because I wasn't here in time to meet him. 38 00:04:56,170 --> 00:05:08,410 I saw him from thousands of miles away. And his influence extended to a number of areas in international trade and development, but more generally. 39 00:05:08,410 --> 00:05:15,850 His work shows a strong interest in issues of governance and which I think 40 00:05:15,850 --> 00:05:21,820 Will will be touched on in today's discussion in a number of different ways. 41 00:05:21,820 --> 00:05:23,770 So in particular, 42 00:05:23,770 --> 00:05:36,580 industrial competitiveness and globalisation and the importance of having stable institutions are things that he emphasised in his work. 43 00:05:36,580 --> 00:05:44,440 What I want to do now is tell you briefly a little bit about our speakers in starting with 44 00:05:44,440 --> 00:05:50,530 the panellists and then continuing with Sanjaya while visiting professor Ken Rogoff. 45 00:05:50,530 --> 00:06:04,510 And then I will turn it over to to Ken to start off the discussion, and then the panellists will give partly rejoinders and comments of their own. 46 00:06:04,510 --> 00:06:09,100 We basically gave them free rein in developing topics. 47 00:06:09,100 --> 00:06:20,950 One of the main intellectual contents of a panel on Trump and omics is what are the topics and and and I think we will see by the end of the evening, 48 00:06:20,950 --> 00:06:28,400 the Trump and OMICS touches almost everything that's important in modern developed economies and also when the rest of the world. 49 00:06:28,400 --> 00:06:33,130 But let me let me let me just tell you a little bit about our panellists. 50 00:06:33,130 --> 00:06:38,680 First. John Mulva is an official fellow of Nuffield College and professor of Economics and also 51 00:06:38,680 --> 00:06:43,840 a senior fellow of the Institute for New Economic Thinking at the Oxford Martin School, 52 00:06:43,840 --> 00:06:52,090 part of Oxford University. He is mainly in applied macro economists, but he's also known as Angus Deaton, 53 00:06:52,090 --> 00:07:02,350 the two thousand and fifteen Nobel laureates better half in that he co-authored some of the most important papers that Angus wrote, 54 00:07:02,350 --> 00:07:06,790 and he did one thing that left me totally green with envy. 55 00:07:06,790 --> 00:07:15,940 Namely, one of his papers with Angus was selected by a panel as one of the 20 best papers published in the 56 00:07:15,940 --> 00:07:22,780 America that kind of review over the last hundred years in part of its anniversary celebration. 57 00:07:22,780 --> 00:07:32,470 And that's a very great distinction, a great accolade from his peers and and and also, I think, 58 00:07:32,470 --> 00:07:37,330 points him somewhat more in the direction of the things that he's going to be talking about tonight, 59 00:07:37,330 --> 00:07:41,050 which are as much microeconomic as macro economic. 60 00:07:41,050 --> 00:07:48,460 Any case, he's a he's a leading expert on on financial markets and their effects on the real economy, 61 00:07:48,460 --> 00:07:52,450 the effects of credit market liberalisation on consumer debt, spending, 62 00:07:52,450 --> 00:07:58,150 mortgages and housing markets, international inflation and exchange rates and growth. 63 00:07:58,150 --> 00:08:02,800 He is a fellow of the Econometric Society and of the British Academy, 64 00:08:02,800 --> 00:08:08,890 and he's a very frequent speaker at universities and institutions around the world. 65 00:08:08,890 --> 00:08:14,200 I will ask you to introduce to to to to welcome them all when I'm when I'm done 66 00:08:14,200 --> 00:08:19,150 so that we can sort of pull the applause and maybe reach a higher crescendo. 67 00:08:19,150 --> 00:08:23,620 Let me introduce Martin Wolff next. 68 00:08:23,620 --> 00:08:34,780 He's the chief economics commentator at the Financial Times, which people like me recognise, I think, as the world's pre-eminent newspaper these days. 69 00:08:34,780 --> 00:08:41,140 He is an honorary fellow of Nuffield and a former member of the UK government's Independent Commission on Banking, 70 00:08:41,140 --> 00:08:45,940 which which a few years ago basically considered. 71 00:08:45,940 --> 00:08:50,110 Consider the issue of banking regulation in great detail. 72 00:08:50,110 --> 00:08:58,150 He is, in my view, one of the world's most perceptive, measured and yet still influential economics journalists. 73 00:08:58,150 --> 00:09:03,460 He always tells you what he thinks clearly and carefully without trying to push your buttons. 74 00:09:03,460 --> 00:09:14,810 And nonetheless, he does manage to push your intellectual buttons more effectively than people who who tweet at night. 75 00:09:14,810 --> 00:09:20,510 Couple of couple of quotations, Larry Summers called him the world's pre-eminent financial journalist, 76 00:09:20,510 --> 00:09:26,450 Paul Krugman has praised his keen sense of observation level had an open mind. 77 00:09:26,450 --> 00:09:34,340 He's the author of many books, including Why Globalisation Works and then Shifting Gears a Bit Fixing Global Finance. 78 00:09:34,340 --> 00:09:42,590 He's won many prises for financial journalism, and he was awarded the CBE in 2002 for his work. 79 00:09:42,590 --> 00:09:47,840 Finally, Ken Rogoff, this year's law visiting professor, 80 00:09:47,840 --> 00:09:55,700 is Professor of Economics and Cabot Professor of public policy at Harvard and sometime chief economist at the World Bank. 81 00:09:55,700 --> 00:10:02,330 He is one of the world's leading experts on international finance, political economy and macroeconomics. 82 00:10:02,330 --> 00:10:08,990 He's a senior fellow of the Council on Foreign Relations and a member of the U.S. National Academy of Sciences, 83 00:10:08,990 --> 00:10:13,370 which in my country is a very great distinction, 84 00:10:13,370 --> 00:10:23,030 usually reserved for people of Nobel laureate stature and and also of the American Academy of Arts and Sciences, 85 00:10:23,030 --> 00:10:29,390 which is also a good club but much easier to get into than the National Academy. 86 00:10:29,390 --> 00:10:40,460 He won the Deutsche Bank prise in financial economics in 2011, which is a great distinction, is probably best known for his book with Carmen Reinhart. 87 00:10:40,460 --> 00:10:50,240 This time is different eight centuries of financial folly, which is an economic history of financial crises over the last couple of millennia. 88 00:10:50,240 --> 00:10:53,270 He has a new book out The Curse of Cash, 89 00:10:53,270 --> 00:11:01,280 which he will be talking about on May 16th at five p.m. in the Gold Bank in theatre based on based on the book, 90 00:11:01,280 --> 00:11:10,490 the title of the talk that he will be giving is India's Demonetisation and the case for reducing cash in advanced countries. 91 00:11:10,490 --> 00:11:13,640 Let me close by telling you a story that's never been told, 92 00:11:13,640 --> 00:11:20,960 at least publicly before which he just I just discovered that he also remembers that he gave me permission to tell it. 93 00:11:20,960 --> 00:11:29,870 It's 1978. We're in Chicago. We and a whole bunch of other MIT graduates have been through a rather gruelling meeting 94 00:11:29,870 --> 00:11:36,500 of the Allied Social Sciences Associations for days in rooms with the curtains closed. 95 00:11:36,500 --> 00:11:41,450 At the end, we pack and get ready to go to the airport. In fact, I remember we were at the airport. 96 00:11:41,450 --> 00:11:48,770 The hotel was at O'Hare Airport. We opened the curtains and we discovered that while we were in our meetings, 97 00:11:48,770 --> 00:11:54,920 three or four feet of snow would fall in and we weren't going anywhere any time soon. 98 00:11:54,920 --> 00:12:00,080 And I managed to snag a hotel room. Nobody else could snag a hotel room. 99 00:12:00,080 --> 00:12:02,390 I just was lucky to get there first. 100 00:12:02,390 --> 00:12:11,720 So we packed about eight or 10 MIT graduate students and recent PhDs in this one room, and we passed the time waiting, 101 00:12:11,720 --> 00:12:19,220 watching the snow fall and talking about things like overlapping generations, models and what things really meant. 102 00:12:19,220 --> 00:12:30,560 And after a while, our interests began to flag, and Ken perked up and said, Why don't we play chess? 103 00:12:30,560 --> 00:12:37,160 And it was known that he was he was a very distinguished chess player when he came to MIT. 104 00:12:37,160 --> 00:12:42,350 People knew he was a grandmaster and one of the top ranked chess players in the country. 105 00:12:42,350 --> 00:12:50,090 But we also thought the idea was insane, and we looked at him as any one of you would and said, But can't we don't have a board? 106 00:12:50,090 --> 00:12:59,480 And he said, Don't worry, I'll play all of you at once. I'll remember the positions, and don't worry, I'll tell you if you won. 107 00:12:59,480 --> 00:13:04,160 So I'm like most of us. 108 00:13:04,160 --> 00:13:07,580 There were two distinguished careers he could have pursued, 109 00:13:07,580 --> 00:13:14,840 and we're very lucky that he chose to become a grand master of economics, as well as a grand master of chess. 110 00:13:14,840 --> 00:13:31,030 So let us start then by welcoming Ken Rogoff, who will speak first and. 111 00:13:31,030 --> 00:13:44,410 Sorry, I'm just trying to think about the. Anyway, thank you so much, thank you to Martin, John and Vincent for participating in this panel. 112 00:13:44,410 --> 00:13:52,360 And of course, it's a great honour to be the Sanjaya Alal visiting scholar here at Oxford. 113 00:13:52,360 --> 00:13:58,540 I want I'm going to come to a little bit about his work later, but of course he was the scholar scholar. 114 00:13:58,540 --> 00:14:03,190 I'd like to tell you that we're here today to talk about a presidents president. 115 00:14:03,190 --> 00:14:14,320 I'm not sure yet. I guess it's an open book. When I picked the topic, I thought we would know a little more about what Trump and omics was. 116 00:14:14,320 --> 00:14:24,070 But that's OK. You know, it's even more fun if you can speculate. I have to say I've I've never met Donald Trump. 117 00:14:24,070 --> 00:14:31,210 I have. I did fly on Trump Airlines some couple decades ago. 118 00:14:31,210 --> 00:14:35,740 I don't know if it went bankrupt or got sold or what, but I think it was. 119 00:14:35,740 --> 00:14:38,710 What I distinctly remember is called Trump Airlines. 120 00:14:38,710 --> 00:14:47,140 You went to the Trump airline building, you got on the plane, it had Trump magazine and you even got a Trump chocolate. 121 00:14:47,140 --> 00:14:56,710 And the my other encounter a little bit was I had a nineteen eighty eight paper with Jeremy Bulow about sovereign debt. 122 00:14:56,710 --> 00:15:02,650 And we had a calculation in there that Evancho, Trump, his wife, 123 00:15:02,650 --> 00:15:16,510 then had spent more money redecorating their New York apartment than the value of Bolivia's debt as a way of putting it in perspective anyway. 124 00:15:16,510 --> 00:15:23,230 You know, as as I think, I think as we're probably all the speakers will note, 125 00:15:23,230 --> 00:15:27,610 it's not so obvious that there is a Trump Banamex or that it's really evolved. 126 00:15:27,610 --> 00:15:35,980 There was a very distinctive Reaganomics, whether you liked it or not and Clinton nomics, and I think there was an Obamanomics. 127 00:15:35,980 --> 00:15:40,060 And I should say, I think he was a he was a great president at an economic policy. 128 00:15:40,060 --> 00:15:45,340 All three of these maybe Trump and omics is a version of Reaganomics. 129 00:15:45,340 --> 00:15:55,120 I don't think we know. I think what we do know is he comes into office with essentially no policy experience, 130 00:15:55,120 --> 00:16:04,090 not having expressed any particular policy interest over the years when we don't have a track record of what he might have thought. 131 00:16:04,090 --> 00:16:12,550 He chose a very idiosyncratic and narrow network of economic advisers, which let's mind you, got him elected. 132 00:16:12,550 --> 00:16:22,900 So, you know, politically, he was very savvy. But that also gives us a little guidepost to what what he might want to do. 133 00:16:22,900 --> 00:16:26,650 He has. I think it's important, particularly if you're British. 134 00:16:26,650 --> 00:16:33,700 Maybe you're not as aware of this. I mean, he's really not a Republican, and I don't think the Republicans regard him as a Republican. 135 00:16:33,700 --> 00:16:40,270 And I I would guess he would have been just as happy running as a Democrat if he could become president that way, 136 00:16:40,270 --> 00:16:45,790 as his his views are, you know, we could call them eclectic. 137 00:16:45,790 --> 00:16:48,430 And of course, were there many things to talk about? 138 00:16:48,430 --> 00:16:59,260 But we're here to talk about economics, and I'm not talking about temperament, but his, you know, his economics, I guess, is still an open question. 139 00:16:59,260 --> 00:17:08,920 I think the good news of coming into office without a clear idea of what you want to do is that it's very malleable. 140 00:17:08,920 --> 00:17:14,170 So you see all these articles about Trump's going to do this and Trump's going to do that. 141 00:17:14,170 --> 00:17:18,640 And I don't think he knows what he wants to do exactly. 142 00:17:18,640 --> 00:17:22,150 And so it's something that he's still feeling his way out. 143 00:17:22,150 --> 00:17:30,190 I have noticed that some of the more extreme people in his campaign have been somewhat sidelined. 144 00:17:30,190 --> 00:17:35,650 One of those is Peter Navarro, who runs the National Trade Council. 145 00:17:35,650 --> 00:17:46,440 He actually has a Harvard Ph.D., and I pulled around to find if anyone would admit to having supervised him and I couldn't find anyone. 146 00:17:46,440 --> 00:17:52,960 I and I did, but I did. I did ultimately research it further, and it seems like Richard Cave is much staff. 147 00:17:52,960 --> 00:17:57,490 He was a very distinguished actually, and I looked at some of Peter Navarro's early papers. 148 00:17:57,490 --> 00:18:03,730 They're really not bad. I mean, I've got into the details, but it was about why he had topics like, you know, 149 00:18:03,730 --> 00:18:11,140 should we allow businesses to lobby, to pay, to pay, to make donations and things I thought were good questions. 150 00:18:11,140 --> 00:18:19,660 But his trade work is embarrassing. And you know you, you could assign it to your freshman economics course. 151 00:18:19,660 --> 00:18:25,750 If you know what is wrong with this paragraph where you got the basic identities confused. 152 00:18:25,750 --> 00:18:32,620 And. But he's been sidelined along with some of the more out there political characters. 153 00:18:32,620 --> 00:18:37,270 Kevin Hassett was recently appointed chair of the Council of Economic Advisers. 154 00:18:37,270 --> 00:18:41,920 And yeah, he he's he's certainly well respected. 155 00:18:41,920 --> 00:18:52,780 And this is a bit of a tangent, but I invite you some time to read his work on political correctness and campus speakers. 156 00:18:52,780 --> 00:18:59,410 It's a really wonderful way ahead of its time. But anyway, we don't know and you know that. 157 00:18:59,410 --> 00:19:07,960 And then just again, it's so hard to plan to know what to say, because if there was one theme in the campaign that I could point to again and again, 158 00:19:07,960 --> 00:19:11,770 it was that the North American free trade event was a really bad deal. 159 00:19:11,770 --> 00:19:16,360 Hillary shouldn't have voted for it. It's a disaster. It's ruining the American workers. 160 00:19:16,360 --> 00:19:24,160 And then suddenly, had I prepared remarks around that, he's like, Oh, well, it's OK, you know, we'll leave it. 161 00:19:24,160 --> 00:19:29,200 So it's definitely a work in progress. 162 00:19:29,200 --> 00:19:37,810 I'll come to Bernie Sanders in a second about that, by the way, but yeah, it's very hard to speculate what it's going to be. 163 00:19:37,810 --> 00:19:46,270 Let me start with sort of the elephant in the room which don't really centre on economic issues, but they have to be spoken. 164 00:19:46,270 --> 00:19:48,220 I'm not a political scientist, 165 00:19:48,220 --> 00:19:59,950 but I think we all believe that as events and institutions are very important and Sungai allows research emphasise this point. 166 00:19:59,950 --> 00:20:03,280 And I think if you ask what are people really worried about? 167 00:20:03,280 --> 00:20:11,380 Are they really worried that income distribution is going to be a little unequal or growth will be a little slower now they're worried about, 168 00:20:11,380 --> 00:20:17,590 you know, are things going to fall apart? Is there something really bad that's going to happen when you listen to people? 169 00:20:17,590 --> 00:20:26,620 So one issue for sure that I'm not going to talk about and I don't want to speak of lightly at all is the environment. 170 00:20:26,620 --> 00:20:30,610 It takes a day to pollute a river and 10 years to clean it up. 171 00:20:30,610 --> 00:20:38,920 So I'm told. Paul Klemperer is here who I know worked on the stern report and and others of you who may have as well. 172 00:20:38,920 --> 00:20:42,280 And so I'm I mean this. 173 00:20:42,280 --> 00:20:50,080 This is a very bad for the long run, and us was bad to start with and this is worse. 174 00:20:50,080 --> 00:20:55,360 And I think there are concerns about the Constitution, and that may seem like hyperbole, 175 00:20:55,360 --> 00:21:01,600 but I think there are many people who feel the Constitution may get tested in a way that it hasn't been before. 176 00:21:01,600 --> 00:21:06,050 I, although I've never met him, I have on. 177 00:21:06,050 --> 00:21:15,650 You know, been told on by reliable sources, who knows they actually had never visited the Lincoln Memorial before his inauguration. 178 00:21:15,650 --> 00:21:20,940 That's the one where he said there were a lot more people than the press would give him credit for. 179 00:21:20,940 --> 00:21:26,150 I don't know that he necessarily had any great knowledge of the Constitution. 180 00:21:26,150 --> 00:21:30,710 I mean, you know, he can. He can learn. But when you see things like, 181 00:21:30,710 --> 00:21:41,600 why don't we get rid of the filibuster so that you can pass my tax bill faster is the kind of thing that I think worries people. 182 00:21:41,600 --> 00:21:45,590 We already did that, by the way, with the Supreme Court justices. 183 00:21:45,590 --> 00:21:51,890 But the filibuster is something that is part of the checks and balances in the US system. 184 00:21:51,890 --> 00:21:56,120 I'm going to focus more narrowly on a particular economic issue the Federal Reserve. 185 00:21:56,120 --> 00:22:02,450 But what I mean, if you if you ask what's really scaring people, it's these big issues. 186 00:22:02,450 --> 00:22:05,540 Obviously, they're civil discourse. 187 00:22:05,540 --> 00:22:17,090 And you know, whatever he says, he really feels a lot of people felt the campaign was open season on sexism for sexism and racism. 188 00:22:17,090 --> 00:22:28,100 I think it's probably going to be very hard for him to attract certainly academics into the Trump administration because that's just radioactive. 189 00:22:28,100 --> 00:22:33,050 And and it may have broader effects on U.S. discourse. 190 00:22:33,050 --> 00:22:36,890 And well, you know, I thought the last one says war. 191 00:22:36,890 --> 00:22:44,360 I don't really lose sleep over that. But then you see the guy tweeting at 5:00 a.m. in the morning and you don't exactly know. 192 00:22:44,360 --> 00:22:49,580 Sometimes, you know, it seems a little unstable. 193 00:22:49,580 --> 00:22:57,680 And it's pretty. There's a pretty short window of when you push the triggers and everything, so people worry about it. 194 00:22:57,680 --> 00:23:08,000 OK. Of all these issues from an economic point of view is that the US is an amazing franchise, I'm going to emphasise that even more at the end, 195 00:23:08,000 --> 00:23:13,190 but a lot of it comes from these very strong institutions that the US, you have them also, 196 00:23:13,190 --> 00:23:19,190 of course, here and in the UK and in any way as the US inherited the institutions. 197 00:23:19,190 --> 00:23:22,820 And he was at Harvard before I left. 198 00:23:22,820 --> 00:23:27,860 But the great economic historian David Lown does really define this field. 199 00:23:27,860 --> 00:23:36,290 And Darren, I see Moghalu and James Robinson expand this work in a very important way. 200 00:23:36,290 --> 00:23:42,440 And so if you're thinking about long run growth, it's not really about US tax policy. 201 00:23:42,440 --> 00:23:47,570 It's not really about, you know, some nuance of what he's going to do, it says. 202 00:23:47,570 --> 00:23:53,090 Is he going to undermine these institutions that lie at the heart of growth? 203 00:23:53,090 --> 00:23:57,530 I'm not saying that will happen, but that's really the concern. 204 00:23:57,530 --> 00:24:05,420 I think the early returns are the institutions have been kind of strong and where people, you know, laughed at least that he's going to be Mussolini. 205 00:24:05,420 --> 00:24:10,700 He's pretty ineffectual of getting stuff done to institutions. 206 00:24:10,700 --> 00:24:20,210 The courts, the Congress have pushed back pretty hard. But there are ways, I think, in which the presidency has never been tested. 207 00:24:20,210 --> 00:24:30,320 I don't unfortunately think that some of the populism, which I think everyone refers to, is just a Trump phenomenon. 208 00:24:30,320 --> 00:24:41,810 I think it's fair to say Bernie Sanders would have won against Hillary Clinton and sort of an evenly contested Democratic campaign. 209 00:24:41,810 --> 00:24:45,230 That's just my opinion. But you know, he was he is. 210 00:24:45,230 --> 00:24:53,150 He's the most popular politician in the United States today who has a lot of the same views as Trump, 211 00:24:53,150 --> 00:25:01,790 certainly anti-trade and made a lot of young people who just are convinced the North American Free Trade Agreement was just the worst thing ever. 212 00:25:01,790 --> 00:25:09,320 They don't seem to know that we actually barely had tariffs on Mexican goods before the North American Free Trade Agreement. 213 00:25:09,320 --> 00:25:14,550 Mostly, Mexico took its tariffs off US goods in that agreement. 214 00:25:14,550 --> 00:25:19,670 And they I don't even know how much they really get that that's not China. 215 00:25:19,670 --> 00:25:28,370 And some of the bashing on some of the bashing on Mexico really reminds me of when you see two bullies in a schoolyard. 216 00:25:28,370 --> 00:25:32,090 They're always picking on others and not fighting each other. 217 00:25:32,090 --> 00:25:39,770 That's a little bit of the US and China dynamic and trade. And Ed Sanders is very much on that. 218 00:25:39,770 --> 00:25:48,720 I don't think they were terribly pro-immigration, and the Trump economic team has some good people, but some very weak ones. 219 00:25:48,720 --> 00:25:54,980 And the Sanders team had some spectacularly unimpressive analysis, 220 00:25:54,980 --> 00:26:05,780 very politically oriented people who just create a kind of metric results that give the answer that they want most. 221 00:26:05,780 --> 00:26:11,420 One of the more famous episodes in the campaign was Sanders released his estimates 222 00:26:11,420 --> 00:26:16,400 of what his plan would save on drugs in the United States on prescription drugs. 223 00:26:16,400 --> 00:26:21,080 He also wanted to legalise other drugs. That's not what I'm talking about. How much would it save on prescription drugs? 224 00:26:21,080 --> 00:26:26,600 And the estimate was bigger than the total expenditure on prescription drugs. 225 00:26:26,600 --> 00:26:30,320 And we can find we can find other things. 226 00:26:30,320 --> 00:26:34,640 But he's very popular and you know, he's he's another it's it's it's pop. 227 00:26:34,640 --> 00:26:39,080 There is a real, very strong thread of populism there. 228 00:26:39,080 --> 00:26:44,660 So let me narrow the focus a little bit to two areas more narrowly of economic concern. 229 00:26:44,660 --> 00:26:49,670 Having acknowledged that there, there's just a much bigger picture here. 230 00:26:49,670 --> 00:26:56,690 And one has to do with free trade and the other has to do with central bank independence. 231 00:26:56,690 --> 00:27:06,770 And let me just start out with this. So I mean, there are lots of issues with trade, with globalisation, with inequality. 232 00:27:06,770 --> 00:27:16,160 But I think I would summarise by saying that most economists agree that the right policy is to have pretty free trade, at least in goods, 233 00:27:16,160 --> 00:27:27,530 and to the extent that that causes dislocation inequality use the tax system to deal with that and the general principle economic principles. 234 00:27:27,530 --> 00:27:31,760 You always use tools which sort of are most immediately addressed. 235 00:27:31,760 --> 00:27:38,720 The problem that you're trying to have and not tools that are much more indirect. 236 00:27:38,720 --> 00:27:44,060 And of course, both Trump and Sanders have pushed back very hard against free trade. 237 00:27:44,060 --> 00:27:56,300 I won't get into the the Brexit debate, but I think in the United States it's much more focussed on just trade as bad as opposed to immigration. 238 00:27:56,300 --> 00:28:05,460 Trump claimed that he would. Bring back jobs to the middle class, these great manufacturing jobs. 239 00:28:05,460 --> 00:28:13,890 I've got news that cannot happen. First of all, they're not very many of them in the best state of the world here. 240 00:28:13,890 --> 00:28:17,160 Manufacturing is going to go the way of agriculture. 241 00:28:17,160 --> 00:28:24,690 If you went back to eighteen hundred, it's something like 80 percent of Americans worked in agriculture. 242 00:28:24,690 --> 00:28:34,560 Now, just a couple percent even less than that. And manufacturing employment is steadily declining, and it's coming from technology, 243 00:28:34,560 --> 00:28:38,970 not it's coming from globalisation, but it's also coming from technology. 244 00:28:38,970 --> 00:28:46,410 You can have a policy that brings back jobs for robots, but you're not going to populate the economy with jobs. 245 00:28:46,410 --> 00:28:49,620 It doesn't mean that there aren't things to do. It doesn't mean you want to. 246 00:28:49,620 --> 00:28:55,170 You know, having the middle class isn't important, but I don't think that's going to happen. 247 00:28:55,170 --> 00:29:03,810 I do worry that maybe like a small tangent, but let me take it anyway that some of this anti-trade policy really could have some horrible effects. 248 00:29:03,810 --> 00:29:06,120 And I'm particularly concerned about Mexico. 249 00:29:06,120 --> 00:29:18,330 I did go speak in Mexico recently and got interviewed on their TV and the person asking, Do Americans hate us again and again and again? 250 00:29:18,330 --> 00:29:23,730 And that's why you just like to trade with people who are like, you like Canada, right? 251 00:29:23,730 --> 00:29:27,580 You don't like to trade with people who are different than you. Is that what it is? 252 00:29:27,580 --> 00:29:35,040 And I explain that actually, in trade theory, the more different someone is than you, the bigger the gains from trade are. 253 00:29:35,040 --> 00:29:42,210 I don't I don't think that assured him very much, and I'm not sure how much it would usher President Trump. 254 00:29:42,210 --> 00:29:53,010 But, you know, the Mexico has done very well in developing a nascent its democracy and in trying to make things better. 255 00:29:53,010 --> 00:30:02,100 And there's a real risk that having a backlash to getting a Chavez like character with Lopez Obrador back into 256 00:30:02,100 --> 00:30:11,280 power and that that would certainly be a disaster for Mexico and probably pretty bad for the United States. 257 00:30:11,280 --> 00:30:27,360 The the Venezuela picture, by the way, is just incredibly grim and that that's, you know, it was only probably 15 years ago, 258 00:30:27,360 --> 00:30:38,580 2012 Chavez came in, you know, not not, you know, the end of the 1990s and there were, you know, it can happen very, very fast. 259 00:30:38,580 --> 00:30:42,980 I mean, this I think Mexico is ahead or Venezuela was at that time. 260 00:30:42,980 --> 00:30:54,750 If you can turn very, very quickly. Anyway, another another point about Trump that hopefully [INAUDIBLE] move away from is he's he's a dealmaker. 261 00:30:54,750 --> 00:31:04,170 I am told by people who think he's competent that you should read his books if you want to understand the art of the deal. 262 00:31:04,170 --> 00:31:10,320 I have. I have it on my Kindle, my iPad, but I haven't brought myself to read it yet. 263 00:31:10,320 --> 00:31:18,930 But this whole idea that you you negotiate good deals, Germany's has too big a surplus. 264 00:31:18,930 --> 00:31:24,840 Let's make a different deal with Canada actually trades kind of complicated, 265 00:31:24,840 --> 00:31:28,830 and you make a deal with one place that affects your deals with the other places. 266 00:31:28,830 --> 00:31:33,930 Oh, yes, you're going to find that out in the U.K., but you can't. 267 00:31:33,930 --> 00:31:42,990 You need to. You need to look at the picture as a whole. And I don't think he I don't think he has the right model here. 268 00:31:42,990 --> 00:31:50,620 If I had to pick one area where you could really caught, the president could really cause a lot of damage. 269 00:31:50,620 --> 00:31:56,590 Mostly by himself is Federal Reserve Central Bank Independence. 270 00:31:56,590 --> 00:32:00,220 So he was he was very critical of Janet Yellen during the campaign. 271 00:32:00,220 --> 00:32:06,310 She is the chair of the Federal Reserve Board. I think a lot of that was, you know, he just didn't like it, 272 00:32:06,310 --> 00:32:16,090 that the economy was doing better than he wished it did because that's reflected well on President Obama and therefore on on Hillary Clinton. 273 00:32:16,090 --> 00:32:21,700 And he told people, you know, it's really much worse than you think and everything, but is very critical. 274 00:32:21,700 --> 00:32:26,440 He didn't like it when the Fed wasn't raising interest rates. 275 00:32:26,440 --> 00:32:34,930 The truth of the matter, it's a very it's very unclear where he stands on this because I found things where he said he wanted the gold standard. 276 00:32:34,930 --> 00:32:40,630 There are other things where he is very populist. We just don't know where he stands. 277 00:32:40,630 --> 00:32:45,370 We do know he gets to replace a lot of the Federal Reserve board. 278 00:32:45,370 --> 00:32:47,830 I think there's something like five vacancies, 279 00:32:47,830 --> 00:32:56,440 and I don't think it's an open secret that some of the other the other couple are thinking of resigning anyway to not be associated. 280 00:32:56,440 --> 00:33:00,610 And he he can certainly appoint his own people. 281 00:33:00,610 --> 00:33:11,260 And we we also know that Congress is been undermining Federal Reserve independence that already began before President Trump. 282 00:33:11,260 --> 00:33:23,500 In fact, there are these crazy bills put in that that were put in place, which make the Fed pay over some of its profits for highways. 283 00:33:23,500 --> 00:33:27,580 And that that creates complications because there will be years where the Fed's 284 00:33:27,580 --> 00:33:33,760 profits turn negative due to rising interest rates or a declining demand for money, 285 00:33:33,760 --> 00:33:43,630 which which will happen. I tend to think that as someone who spent his life in construction, he wants to reduce interest rates. 286 00:33:43,630 --> 00:33:48,970 When push comes to shove, that's really what he wants. Well, we'll we'll see. 287 00:33:48,970 --> 00:33:59,110 My concern is that he brings to bear. He puts in his people, he brings to bear pressure, which suddenly so undermines central bank independence. 288 00:33:59,110 --> 00:34:08,500 That inflation, which we thought wasn't coming back at least the markets thought wasn't coming back any time soon suddenly might. 289 00:34:08,500 --> 00:34:17,140 I'm not going to try to talk much about tax policy. Let me start with health care where I don't know what's happening. 290 00:34:17,140 --> 00:34:24,820 You may have read that the House passed his health care, but he had to move it very far to the right to get the house to pass it. 291 00:34:24,820 --> 00:34:29,320 The Senate won't pass that. They'll move it back to the left and then the House won't pass it. 292 00:34:29,320 --> 00:34:37,750 And the truth of the matter is that they shouldn't want to repeal Obamacare, not because Obamacare doesn't have problems. 293 00:34:37,750 --> 00:34:42,460 It needs to be major adjustments, but because they'll own it. 294 00:34:42,460 --> 00:34:49,360 If they pass something, they'll pass something, they'll take a mess. They will pass their own mess and then get ownership. 295 00:34:49,360 --> 00:34:51,340 I'm not sure what will happen. 296 00:34:51,340 --> 00:35:01,660 You think we'll get a tax cut for it because that's red for the Republicans who he's working with and they're not all bad ideas. 297 00:35:01,660 --> 00:35:07,540 I have a lot of trouble understanding cutting the individual income tax rates because 298 00:35:07,540 --> 00:35:13,660 really looking at all the trends in inequality and with robots and the future of jobs, 299 00:35:13,660 --> 00:35:17,320 it's very hard to understand how we can move in that direction. 300 00:35:17,320 --> 00:35:25,180 Yes, I'd like taxes to be lower, but you know, at some system which probably has more significantly more redistribution, 301 00:35:25,180 --> 00:35:30,250 rather than less surely than our future, there are other pieces of it. 302 00:35:30,250 --> 00:35:33,940 The corporate tax cuts actually kind of good. 303 00:35:33,940 --> 00:35:39,730 Well, I'm their ideas out there, which are actually kind of good because I don't really know what's going to happen. 304 00:35:39,730 --> 00:35:44,560 Our corporate tax policy is a mess, and it could be made much simpler. 305 00:35:44,560 --> 00:35:50,260 The US has some of the highest tax rates in the world that could be brought down. 306 00:35:50,260 --> 00:35:58,930 There's an emphasis on having it be very important be territorial instead of worldwide. 307 00:35:58,930 --> 00:36:03,170 The US is completely out of sync with the rest of the world on this. 308 00:36:03,170 --> 00:36:09,600 Oh, that's actually could be something good. 309 00:36:09,600 --> 00:36:14,110 I was sure the last item I have here was coming. 310 00:36:14,110 --> 00:36:20,500 You must have read that if you took away New York and California, there's no reason you would. 311 00:36:20,500 --> 00:36:27,040 But if you took away New York and California, then Trump incredibly won the the popular vote. 312 00:36:27,040 --> 00:36:32,290 He thinks he won the popular vote anyway. But if you took away New York and California, he did. 313 00:36:32,290 --> 00:36:41,500 There is just no better way to get at New York and California and punish them than to take away the deduction for state taxes. 314 00:36:41,500 --> 00:36:48,010 We rely very heavily on an income tax. State taxes in a place like New York and California are very high. 315 00:36:48,010 --> 00:36:57,250 I think it goes up to I might have this. Off slightly, but then California, 13 percent, if you do state and city in New York City, 16 or 17 percent, 316 00:36:57,250 --> 00:37:05,410 that's on top of the federal and the people paying these highest rates tend to be in the highest brackets for federal tax. 317 00:37:05,410 --> 00:37:08,780 And so in a way, the federal government's paying half of it. 318 00:37:08,780 --> 00:37:13,360 Now that's an oversimplification. We have this thing called the alternative minimum tax. 319 00:37:13,360 --> 00:37:16,020 I won't get into the details which. 320 00:37:16,020 --> 00:37:27,060 Kind of mutes the effort, that's a fact, but he's taking that away, so he's making it very tough on California and New York, 321 00:37:27,060 --> 00:37:34,650 and I'm sure this is one thing which you know, can be portrayed as technocratic, but it's fairly political. 322 00:37:34,650 --> 00:37:42,760 When I chose this topic, I thought I was going to talk about the border tax a little more than it did a lot. 323 00:37:42,760 --> 00:37:47,640 Economists like to write about his idea, what it takes to hesitate to say his idea, 324 00:37:47,640 --> 00:37:57,510 but an idea floating out there that was portrayed that it might be in Trump's bills, that you would put a tax on imports and a subsidy on exports. 325 00:37:57,510 --> 00:38:11,010 And that way, in some ways, mimicking what a value added tax does in Europe and encourage, encourage exports and discourage imports. 326 00:38:11,010 --> 00:38:16,560 Now, if you have a fixed exchange rate, this has an effect like the devaluation. 327 00:38:16,560 --> 00:38:20,760 Cairns actually suggested this idea in the early nineteen thirties. 328 00:38:20,760 --> 00:38:26,550 But if you have a floating exchange rate, it's it's it's a lot less clear because I won't go into all the economics, 329 00:38:26,550 --> 00:38:29,920 but the exchange rate basically moves and neutralises the whole effect. 330 00:38:29,920 --> 00:38:31,800 That's the first order thing. 331 00:38:31,800 --> 00:38:44,940 But Alan Alan Auerbach, who is a Berkeley economist who's a Democrat, has championed this idea as a way to fight transfer pricing where corporations, 332 00:38:44,940 --> 00:38:50,550 which are multinational, try to book their profits in the lower tax regime. 333 00:38:50,550 --> 00:38:57,660 You actually get a lot of profits booked in Ireland from British companies and part of the Philip Lane, 334 00:38:57,660 --> 00:39:01,170 who's now the head of the Central Bank in Ireland, 335 00:39:01,170 --> 00:39:07,800 has written about this how part of the British parent accounts a bit of an illusion from the way these profits are booked, 336 00:39:07,800 --> 00:39:12,240 and the US has a very high nominal corporate tax rate. 337 00:39:12,240 --> 00:39:16,740 And so there's a temptation to try to try to move things. 338 00:39:16,740 --> 00:39:18,630 And I won't get into all the details. 339 00:39:18,630 --> 00:39:25,380 But what I do want to say is that Sanjaya Lyle was a pioneer in this, that he recognised this important transfer pricing. 340 00:39:25,380 --> 00:39:31,320 It's a big deal because you may not know this, but half of all trade in the advanced countries. 341 00:39:31,320 --> 00:39:41,190 Half is intra firm Ford Motor importing from Ford Motor because you have to pay tariffs discounts when you cross the border. 342 00:39:41,190 --> 00:39:46,310 And so it's a very. Way to fight it. 343 00:39:46,310 --> 00:39:53,390 So economists like to debate that, but as I was discussing with John just before we spoke, of course, 344 00:39:53,390 --> 00:40:02,870 he seems to have eliminated that from the one page belly pass, but it could come back now. 345 00:40:02,870 --> 00:40:09,800 You know, he's he's certainly not an attractive person in many ways to represent the United States. 346 00:40:09,800 --> 00:40:13,520 I was very proud of having President Obama represent the United States, 347 00:40:13,520 --> 00:40:18,290 and I have to say, you know, and I hope Trump turns out to be a great president. 348 00:40:18,290 --> 00:40:25,430 But you know, he he he in many ways represents the ugly American where Obama was exactly the opposite. 349 00:40:25,430 --> 00:40:30,440 And there are many things you can say about his economic team as ideas that a lot of people come to. 350 00:40:30,440 --> 00:40:36,690 The conclusion that everything he does is wrong. And that's a grotesque overstatement. 351 00:40:36,690 --> 00:40:40,400 He's no one's that smart that they can get everything wrong. 352 00:40:40,400 --> 00:40:49,460 And I actually think his his gut instincts on some things are good and the regulation piece taking 353 00:40:49,460 --> 00:40:56,240 away the environment where I feel very strongly the regulation piece probably had gone way overboard. 354 00:40:56,240 --> 00:41:04,580 And those of us who live in the United States saw this in many walks of life, especially had been this went on under Clinton. 355 00:41:04,580 --> 00:41:08,000 It went on, went on under Bush, who is a Republican, 356 00:41:08,000 --> 00:41:15,230 but it certainly continued under President Obama and maybe even accelerated the last couple of years he was in office, 357 00:41:15,230 --> 00:41:19,640 perhaps out of frustration with not being able to get things through Congress. 358 00:41:19,640 --> 00:41:25,610 The regulation as a problem and Trump's gut instinct of trying to reduce regulation, I think, 359 00:41:25,610 --> 00:41:34,560 is something where there is a potentially a significant productivity gain for the United States. 360 00:41:34,560 --> 00:41:40,880 He who knows what [INAUDIBLE] actually do, but he's talked about having infrastructure spending. 361 00:41:40,880 --> 00:41:47,330 Everybody agrees that would be a good idea and it would be a good idea, whether it was even if it was debt financed. 362 00:41:47,330 --> 00:41:55,550 I mentioned clean up of corporate tax and the individual taxes don't need to be lowered, but they do need to be simplified. 363 00:41:55,550 --> 00:42:03,770 And I can't resist saying they're so complicated that he can't release any of his tax returns for the last 15 years. 364 00:42:03,770 --> 00:42:11,150 They are very complicated and simplification as needed. So what's going to happen? 365 00:42:11,150 --> 00:42:23,060 I personally think that the secular stagnation that you've debated here recently is way oversold as an idea and actually had Hillary Clinton come in. 366 00:42:23,060 --> 00:42:28,010 Things would have gotten better. And there are some measurement issues. 367 00:42:28,010 --> 00:42:36,800 There's overhang from the financial crisis. So Donald Trump's very lucky in catching this upward current that was happening under President Obama, 368 00:42:36,800 --> 00:42:44,600 the IMF, after downgrading world growth twenty seven times in a row from 2007. 369 00:42:44,600 --> 00:42:54,420 And by the way, that's downgrading the same year. So like their 2016 estimate gets downgraded, finally upgraded a little bit. 370 00:42:54,420 --> 00:42:56,330 There are estimates of world growth. 371 00:42:56,330 --> 00:43:04,910 And I think there are reasons to be optimistic for the next five years and some of the things that the corporate tax, 372 00:43:04,910 --> 00:43:09,590 simplification and the deregulation. 373 00:43:09,590 --> 00:43:19,460 I didn't get to talk about the financial sector but can leave that are, you know, that there's there's potential that they might be helpful in this. 374 00:43:19,460 --> 00:43:25,610 There certainly certainly a chance this ends in a classic populist mess. 375 00:43:25,610 --> 00:43:35,180 And that's where you got a boost. You spend a lot to do deficit spending using monetary policy, and it works well for a while. 376 00:43:35,180 --> 00:43:43,040 But you end up with high inflation, rising interest rates and suddenly have to pull the plug fast and hard. 377 00:43:43,040 --> 00:43:49,340 That's that's certainly a distinct possibility, although I don't think that's going to happen any time soon. 378 00:43:49,340 --> 00:43:58,130 And I'd say my baseline case is that whether he deserves it or not, things will be actually pretty good for a while. 379 00:43:58,130 --> 00:44:02,100 And it may take a few years. I don't know, is it going to take? 380 00:44:02,100 --> 00:44:10,320 Five years to see the populous mass as it can take three years makes a big difference for alfo get re-elected and then one last 381 00:44:10,320 --> 00:44:19,020 final topic I wanted to talk about because I work on international economics and I bring this back to my research a little bit. 382 00:44:19,020 --> 00:44:29,190 The the dollar has achieved this utterly pre-eminent role in the global economy and really over the last 15 years, 383 00:44:29,190 --> 00:44:38,250 it is now and by many, many measures, more important today than it was in the fixed exchange rate Bretton Woods period after World War Two, 384 00:44:38,250 --> 00:44:42,630 when it was theoretically enshrined as the centre of the system. 385 00:44:42,630 --> 00:44:51,560 And now it's the de facto centre of the system. A remarkable amount of it's priced in. 386 00:44:51,560 --> 00:44:57,380 Colleague Geeta Gopinath had that's a remarkable amount of debt. 387 00:44:57,380 --> 00:45:09,470 The numbers are just stunning. I have my colleague Matteo Majority and former students, brand name and Jesse Schrager are writing on this. 388 00:45:09,470 --> 00:45:14,750 And John Shen at the business has it's become a very much a dollar world. 389 00:45:14,750 --> 00:45:22,580 And if you look at the world exchange rate system, this is from a very recent paper of mine with Ethan El-Zakzaky and Carmen Reinhart, 390 00:45:22,580 --> 00:45:30,680 where red denotes countries which use the dollar as their benchmark currency and monetary policy, 391 00:45:30,680 --> 00:45:43,350 and the exchange rates dark red represents stabilising significantly against the dollar, and lighter shades represent a much looser tie to the dollar. 392 00:45:43,350 --> 00:45:51,590 The euro is in blue and the dollar is just dominant in the world today, and Trump takes this over. 393 00:45:51,590 --> 00:46:02,990 And if you undermine some of these central tenets of what the United States stood for, would that that, you know, be maintained? 394 00:46:02,990 --> 00:46:09,020 I don't know. I think that there are many open questions that are out about Trump. 395 00:46:09,020 --> 00:46:14,390 And so I'm going to I'm going to I'm going to stop there. 396 00:46:14,390 --> 00:46:24,560 I have to say, if you really want to understand Trump dynamics instead of watching me, you should like watch Alec Baldwin on Saturday Night Live, 397 00:46:24,560 --> 00:46:32,930 who actually gets Trump hates him, but actually think gets a certain perspective about it right of wanting. 398 00:46:32,930 --> 00:46:40,520 He actually portrays Trump as wanting to do the right thing, but it stops there somewhat. 399 00:46:40,520 --> 00:46:59,780 But I will leave you to that. Thank you. So we're going to have a generous, generous time for questions and answers after the speakers. 400 00:46:59,780 --> 00:47:17,630 Let us now thank John Moe Bauer, who didn't get the proper applause at the beginning and he will be our next panellist. 401 00:47:17,630 --> 00:47:27,420 Thanks very much. I'm very grateful to the foundation for inviting me to this occasion. 402 00:47:27,420 --> 00:47:34,100 And I think the three speakers will be in many ways in agreement. 403 00:47:34,100 --> 00:47:38,760 So you'll have to bear with us if we agree too much. 404 00:47:38,760 --> 00:47:50,730 And. Well, Ken, Ken mentioned the environment. 405 00:47:50,730 --> 00:47:57,280 I think this could be the single worst aspect of a Trump. 406 00:47:57,280 --> 00:48:03,780 I'm. And I think the connexion with economics is really profound. 407 00:48:03,780 --> 00:48:12,360 It isn't economics and society more generally where the climate has these very serious connexions. 408 00:48:12,360 --> 00:48:18,260 So Trump doesn't understand the climate at all. 409 00:48:18,260 --> 00:48:28,610 Scientists realise that there are these amplifying feedback loops in the in the climate system, which threaten mass species extinction. 410 00:48:28,610 --> 00:48:32,990 Major sea level rises and lots of other disasters. So I mean what? 411 00:48:32,990 --> 00:48:40,220 All of these amplifying feedback loops? Well, melting polar ice caps is one. 412 00:48:40,220 --> 00:48:47,210 So if you reduce the reflection of the sun's rays, which the ice reflects and put dark water there, 413 00:48:47,210 --> 00:48:53,280 then you absorb a lot more energy from the sun, which increases global warming. 414 00:48:53,280 --> 00:49:04,470 The second, maybe even more serious one is what happens to the polar ice caps, to the sort the permafrost in the in the Arctic tundra. 415 00:49:04,470 --> 00:49:15,930 For a start, there's methane gas trapped under the tundra, which is 30 times more powerful greenhouse gas in terms of the greenhouse effect than CO2. 416 00:49:15,930 --> 00:49:20,520 In the short run, that is when that is released, 417 00:49:20,520 --> 00:49:30,270 there's a dramatic increase in in the insulation properties of of the greenhouse effect and global warming accelerates. 418 00:49:30,270 --> 00:49:33,330 On a slightly longer time scale in that soil, 419 00:49:33,330 --> 00:49:41,510 there's a lot of carbon trapped and that buried carbon is going to get released over somewhat longer time scale. 420 00:49:41,510 --> 00:49:50,930 The third one concerns the rainforest, the rainforest do a magnificent job at absorbing CO2, but when rainforest is stressed by droughts, 421 00:49:50,930 --> 00:49:58,870 which is a serious risk, they actually reverse the carbon cycle and instead of absorbing CO2, they actually release CO2. 422 00:49:58,870 --> 00:50:09,590 And then the oceans. Well, the major absorbs of CO2, but the warming reduces the capacity to stabilise. 423 00:50:09,590 --> 00:50:16,560 Now, Trump is at odds with the massive the US population. 424 00:50:16,560 --> 00:50:26,340 The Yale Programme on Climate Change Communication suggests that 71 percent of adults believe, 425 00:50:26,340 --> 00:50:33,740 well, trust climate scientists regarding global warming somewhat or strongly. 426 00:50:33,740 --> 00:50:39,740 And when you look at the the picture, if you remember where Trump did particularly well, 427 00:50:39,740 --> 00:50:43,640 you can see there is a correlation between the lighter parts of the picture where 428 00:50:43,640 --> 00:50:49,130 Trump is more popular and those who have somewhat less faith in the scientists. 429 00:50:49,130 --> 00:50:54,710 But he is at odds with the mass of the American population. 430 00:50:54,710 --> 00:51:01,420 So the risks of rapid, catastrophic climate change loom large. 431 00:51:01,420 --> 00:51:07,360 Now imagine if the risk only five percent of a catastrophe. 432 00:51:07,360 --> 00:51:11,020 Would you get on a plane if it was a five percent chance of crashing? 433 00:51:11,020 --> 00:51:17,800 Would you send your children or your grandchildren on a flight, whether it's a five percent chance of the plane crashing? 434 00:51:17,800 --> 00:51:26,860 You know, thinking about risk really makes one wonder about the dangers of Trump. 435 00:51:26,860 --> 00:51:33,010 Now he's appointed a bull not just to be in the China shop, but to actually run the China shop. 436 00:51:33,010 --> 00:51:39,100 Scott Pruitt, the archenemy of the EPA, is now now runs the EPA. 437 00:51:39,100 --> 00:51:42,040 Rex Tillerson. This is maybe slightly less important. 438 00:51:42,040 --> 00:51:49,540 The ex-ceo of Exxon Mobil, the oil major that was most involved in lying about climate change, is the secretary of state now. 439 00:51:49,540 --> 00:51:59,940 Maybe that's an indirect influence. And already we've seen drastic cuts in research, funding the science budgets generally going to be cut. 440 00:51:59,940 --> 00:52:07,200 The Keystone Pipeline has been approved. Environmental effects are going to come from that. 441 00:52:07,200 --> 00:52:10,260 So in thinking about the economics of this, 442 00:52:10,260 --> 00:52:21,480 I think what's really crucial and what offers maybe a bit of hope is that the economic weight of businesses promoting greenhouse gas amelioration. 443 00:52:21,480 --> 00:52:23,550 Has been growing a great deal. 444 00:52:23,550 --> 00:52:33,530 And the question is, is it large enough to overcome the weight of the fossil fuel promoters who are trying to influence Trump? 445 00:52:33,530 --> 00:52:37,160 And connected with that, and that's very important for the future of the US, 446 00:52:37,160 --> 00:52:45,320 is the US going to cede leadership on the new technology climate ameliorating technologies to China. 447 00:52:45,320 --> 00:52:50,930 There's a very good Brookings paper on this, which I've referenced here, 448 00:52:50,930 --> 00:52:58,860 and it raises very serious concerns about about the technological leadership of the US in the future. 449 00:52:58,860 --> 00:53:05,270 OK, well, my second topic overlaps with, I think. 450 00:53:05,270 --> 00:53:16,100 What Martin will talk about and. And indeed, some points that Kenneth just just raised. 451 00:53:16,100 --> 00:53:21,290 So one one risk for the US economy is inflation. 452 00:53:21,290 --> 00:53:30,470 Now this populist policies that Kenneth was talking about might have an impact on the inflation rate, 453 00:53:30,470 --> 00:53:39,560 which would drive up interest rates, bond yields affecting house prices, asset prices, consumer spending and investment and so on. 454 00:53:39,560 --> 00:53:49,820 So you need not. And I have done some some interesting work on on forecasting US inflation and, you know, forecasts. 455 00:53:49,820 --> 00:53:58,310 Well, forecasting the future is particularly difficult, but forecasting does. 456 00:53:58,310 --> 00:54:02,500 Does give you an idea about mechanisms and risks. 457 00:54:02,500 --> 00:54:15,400 And so what we find is that the key drivers of the US price level, the consumer expenditure deflator unit, labour costs, house prices, 458 00:54:15,400 --> 00:54:20,260 the mortgage interest rate and foreign prices, 459 00:54:20,260 --> 00:54:27,460 the unemployment rate is also very important changes and levels of the unemployment rate and the rate of unionisation of workers. 460 00:54:27,460 --> 00:54:34,420 So in the last 30 years, the rate of unionisation has fallen from roughly twenty five percent to about 10 percent. 461 00:54:34,420 --> 00:54:43,660 So that declining power of trade unions in our work is a major part of the story for the disinflation in the in the US. 462 00:54:43,660 --> 00:54:49,510 The model also includes short term dynamics, change in oil prices like inflation and so on, 463 00:54:49,510 --> 00:54:55,240 and we are drawing on major work in the forecasting literature. 464 00:54:55,240 --> 00:55:02,800 We use robust forecasting techniques that average different models. 465 00:55:02,800 --> 00:55:08,030 Now. Basic data, the unemployment rate is the blue line, 466 00:55:08,030 --> 00:55:20,000 you can see that unemployment spiked during the global financial crisis and since then has come down remarkably to four point six percent. 467 00:55:20,000 --> 00:55:23,300 I think it is 4.5 percent. 468 00:55:23,300 --> 00:55:32,720 Now, in the past, certainly in the distant past, that kind of decline in unemployment would have caused quite a lot of inflation. 469 00:55:32,720 --> 00:55:37,840 But we've not seen the pickup in inflation now in our model. 470 00:55:37,840 --> 00:55:46,250 That's partly because your labour costs have been have been so depressed. 471 00:55:46,250 --> 00:55:57,310 And the. The red line is the measure that the Federal Reserve particularly looks at, that's core inflation that takes out energy and oil prices. 472 00:55:57,310 --> 00:56:02,890 That's the really volatile a bit of inflation, which in the Green Line is included. 473 00:56:02,890 --> 00:56:08,970 So you can see in the Green Line that big collapse of energy prices. 474 00:56:08,970 --> 00:56:17,250 But in the global financial crisis, an important part of our model is rents. 475 00:56:17,250 --> 00:56:24,870 So in the US, rents are an important part of the consumer price index and rents lag behind house prices. 476 00:56:24,870 --> 00:56:35,070 So one of the long run influences that drives us inflation is is that our food costs are actually quite benign at the moment. 477 00:56:35,070 --> 00:56:43,230 So 2.1 percent over the next 12 months for the the main index and one point eight percent for the cool. 478 00:56:43,230 --> 00:56:50,150 And similar numbers for the two year horizon. 479 00:56:50,150 --> 00:56:54,620 So close to the Fed's target, but the question is, what are the risks? 480 00:56:54,620 --> 00:56:56,420 What does the models suggest? 481 00:56:56,420 --> 00:57:04,370 Might where the risk factors might, might well, immigration restrictions could cause further tightening of labour markets, 482 00:57:04,370 --> 00:57:11,900 the fiscal boost if an increased demand, if higher trade barriers increased inflation. 483 00:57:11,900 --> 00:57:13,670 That's inflation risk. 484 00:57:13,670 --> 00:57:23,150 On the other hand, the repatriation of multinationals profits parked abroad and export expectations of higher rates would cause dollar appreciation, 485 00:57:23,150 --> 00:57:34,130 and that is does cause a bit of bit of dampening. But as Kenneth said of the US, dollar is so dominant that much of pricing is in U.S. dollars anyway. 486 00:57:34,130 --> 00:57:40,090 And so you get some of your lots of small influence from that. 487 00:57:40,090 --> 00:57:50,830 The third topic I want to talk about is the financial accelerator. And, you know, this is a really important part of the US business cycle. 488 00:57:50,830 --> 00:58:00,010 And, you know, two points really are amplifying feedback loops and the importance of nice regulation. 489 00:58:00,010 --> 00:58:09,040 Am I, my co-author at the Fed, John Duca, has this this lovely picture, which reflects very much the way I think about this as well. 490 00:58:09,040 --> 00:58:17,170 This is how the accelerator worked during the financial crisis. So we had this crisis in the subprime mortgage market. 491 00:58:17,170 --> 00:58:21,400 House prices fell low, demand for housing less construction. 492 00:58:21,400 --> 00:58:24,310 There was a consumption impact as well. 493 00:58:24,310 --> 00:58:34,690 And then the bad loans built up for foreclosures rose as the bad loans affected the balance sheets of banks who credit standards with tightened. 494 00:58:34,690 --> 00:58:42,370 And you had this really terrible feedback loop amplifying a feedback loop that 60 economy into what 495 00:58:42,370 --> 00:58:49,510 would have been a much worse recession of the 1930s if it hadn't been for effective federal action. 496 00:58:49,510 --> 00:58:54,430 Now, the next downturn of the US should be a lot less serious because banks are far better 497 00:58:54,430 --> 00:59:00,310 capitalised and tough stress testing by the Fed has made banks more cautious. 498 00:59:00,310 --> 00:59:09,350 But the problem is that if you put the foxes in charge of the hen house, that could increase the risks. 499 00:59:09,350 --> 00:59:17,240 Ken has talked about the succession issues in the Senate already, so I don't want to mention that for them. 500 00:59:17,240 --> 00:59:24,400 But one important in the financial accelerator is the US housing market. 501 00:59:24,400 --> 00:59:27,860 And it work with my two Fed colleagues. 502 00:59:27,860 --> 00:59:40,430 We constructed a model which has created factors, interest rates and rents as the main drivers for the US House Price Index, 503 00:59:40,430 --> 00:59:47,930 and it incorporates an important overshooting aspect. People tend to extrapolate capital appreciation. 504 00:59:47,930 --> 00:59:52,280 So if you have a capital appreciation in housing, it's been very strong for the last few years. 505 00:59:52,280 --> 00:59:58,120 They tend to extrapolate that, and that is part of the reason why house prices overshoot. 506 00:59:58,120 --> 01:00:04,420 Now at the 2010 AA meetings we produced. 507 01:00:04,420 --> 01:00:16,070 Assimilation, which? Suggested that house prices would bottom out in 2012, and that's exactly what happened. 508 01:00:16,070 --> 01:00:28,910 Now, the same model says if the same model holds, we're going to get the peak actually quite soon in about a year's time. 509 01:00:28,910 --> 01:00:34,190 Now there are reasons why the model might be not exactly constant. 510 01:00:34,190 --> 01:00:41,840 Members of the global financial crisis may have made consumers more cautious. Maybe improve consumer sentiment might prolong the upswing a bit. 511 01:00:41,840 --> 01:00:48,500 But the basic feature of this model is that we're all going to get overshooting and then the correction afterwards. 512 01:00:48,500 --> 01:00:54,020 Now, how could Trump policies or alter that prospect? Well, lax fiscal policy. 513 01:00:54,020 --> 01:00:59,480 Inflation effects of tighter immigration rules might drive up mortgage rates. 514 01:00:59,480 --> 01:01:07,850 On the other hand, Fed the Fed might be backed by Trump in order to keep rates low, as can, one might happen. 515 01:01:07,850 --> 01:01:16,340 Also possible the news of financial regulation might make banks lending rules lax, and that could prolong the boom a bit. 516 01:01:16,340 --> 01:01:20,000 But it's going to make this subsequent recession worse, 517 01:01:20,000 --> 01:01:27,110 and the needed reform of the Freddie Mac and Fannie Mae is going to be delayed further, probably. 518 01:01:27,110 --> 01:01:36,860 And the Trump. Well, let me conclude with the squeezed middle and technical change. 519 01:01:36,860 --> 01:01:43,850 Um, you know, we face a world of pretty astounding technical change, 520 01:01:43,850 --> 01:01:55,050 as this cartoon illustrates, um, America's squeezed middle, oh, many of them Trump supporters. 521 01:01:55,050 --> 01:02:05,590 Now, the economist perhaps has done the best work on the squeezed middle is David counsel at Mighty. 522 01:02:05,590 --> 01:02:12,340 These are two of his articles and the second one on the China shock you might have thought 523 01:02:12,340 --> 01:02:18,610 plays right into Trump's hands because he showed that when you look at local labour markets, 524 01:02:18,610 --> 01:02:22,430 it's those locations that were most affected by imports from China. 525 01:02:22,430 --> 01:02:34,250 What the biggest job losses occurred in manufacturing. On the other hand, he still holds a basically optimistic view about the future. 526 01:02:34,250 --> 01:02:40,750 He argues that there will be middle skilled jobs coming along and. 527 01:02:40,750 --> 01:02:48,010 Many of these jobs will never be automated because of the special advances that humans have interpersonal interaction, 528 01:02:48,010 --> 01:02:57,220 flexibility, adaptability and problem-solving. So the key is then to provide the education and training that that's needed. 529 01:02:57,220 --> 01:03:03,820 So the question is, is Trump going to provide salvation for the squeezed middle? 530 01:03:03,820 --> 01:03:12,820 Well, in my view, most unlikely, because to deal with technical change, we need a better social safety net. 531 01:03:12,820 --> 01:03:21,930 We need multiple democratic access to training and education to ease the transition in jobs that people have to go through. 532 01:03:21,930 --> 01:03:29,940 But the US educational system is is is not doing very well in terms of democratic access. 533 01:03:29,940 --> 01:03:38,790 Student debt has risen enormously and the cost of college education have risen enormously relative to the consumer price index and incomes. 534 01:03:38,790 --> 01:03:49,050 And my worry is that this unholy alliance, which the passing of the affordable saw the replacement of the Affordable Care Act recently indicated, 535 01:03:49,050 --> 01:03:57,900 might if that becomes more permanent, then I think basically we have continued rule by the wealthy for the wealthy. 536 01:03:57,900 --> 01:04:05,550 And I think you could argue that Trump used a populist bait and switch country to get himself elected. 537 01:04:05,550 --> 01:04:19,680 And I think he's going to betray the squeezed middle. Thank you. 538 01:04:19,680 --> 01:04:29,520 Thank you very much, our panellists, Martin Wolf. So sorry. 539 01:04:29,520 --> 01:04:40,620 So, first of all, it's a great pleasure to be here at this lecture in honour of St. Jude Law, whom I knew well and greatly admired. 540 01:04:40,620 --> 01:04:48,840 We had our own disagreement, which is always the most attractive part of an intellectual friendship. 541 01:04:48,840 --> 01:04:59,680 And in addition to that reason, I this is actually, I think, the third time I've been invited back to comment on the distinguished economist, 542 01:04:59,680 --> 01:05:04,530 the first being a Marxist and the second being Paul Krugman. And the third being Ken Rogoff. 543 01:05:04,530 --> 01:05:11,160 I won't comment on whether I'm going up or down, let's say sideways. 544 01:05:11,160 --> 01:05:16,470 The difficulty with this one is there was no really almost no prior collusion. 545 01:05:16,470 --> 01:05:21,960 So I didn't know what Ken was going to say, and I only discovered what John was going to say very recently. 546 01:05:21,960 --> 01:05:27,600 So there is overlap. I am not covering everything. 547 01:05:27,600 --> 01:05:37,380 So I'll just make two initial comments which sort of gets it all in the open because I've written as I am prone to do in my job. 548 01:05:37,380 --> 01:05:40,260 I've written a great deal about Mr. Trump. 549 01:05:40,260 --> 01:05:48,720 And there will be no great surprise that I find him a truly horrifying individual on every conceivable level he has. 550 01:05:48,720 --> 01:06:05,010 From my point of view, only one only one advantage, which is not small, is that the second most popular Republican in the primaries was Ted Cruz. 551 01:06:05,010 --> 01:06:11,100 And in my view, he would have been significantly worse because, unlike Mr Trump, 552 01:06:11,100 --> 01:06:18,840 he seems to believe in what he says and a deranged fanatic who believes in what he says is, 553 01:06:18,840 --> 01:06:27,600 in my view and my experience, we've all had significantly more dangerous than a deranged fanatic who doesn't actually 554 01:06:27,600 --> 01:06:33,660 believe anything he says and may not even be a fanatic except about self-promotion. 555 01:06:33,660 --> 01:06:42,480 So that's that's my read. I mean, the only thing I think Donald Trump is really fanatical about is Donald Trump. 556 01:06:42,480 --> 01:06:49,290 Possibly he's quite keen on his daughter. The second thing? 557 01:06:49,290 --> 01:06:54,480 Yes, that was a deliberate double entendre. I hope you've all followed it carefully. 558 01:06:54,480 --> 01:07:07,740 His comments on his daughter, the the the second point I wanted to make is there are important issues I'm admitting and I'm very pleased that others, 559 01:07:07,740 --> 01:07:15,270 that others have mentioned that I deliberately decided not to talk about climate change because there's simply too much to say about it. 560 01:07:15,270 --> 01:07:21,000 I agree with everything that John said on that. I think it's probably the most important thing. 561 01:07:21,000 --> 01:07:24,690 And there are many other aspects of his policy making, 562 01:07:24,690 --> 01:07:30,450 which can commented upon the non-zero chance that we will suddenly find ourselves in a World War, 563 01:07:30,450 --> 01:07:37,020 for example, all of which I think is irrelevant by character, temperament and intellect. 564 01:07:37,020 --> 01:07:40,950 He seems to me entirely and grotesquely unsuited for the job. 565 01:07:40,950 --> 01:07:45,750 Apart from that, American democracy has been doing really well recently, 566 01:07:45,750 --> 01:07:52,260 and now the second thing I then I want to talk about the lecture, I'm going to divide my remarks into three parts. 567 01:07:52,260 --> 01:07:58,320 I'm first going to pick up on something John emphasised what I call the rise of. 568 01:07:58,320 --> 01:08:06,420 And since we're focussing on right wing populism since Bernie Sanders didn't get elected, so at another stage we can discuss left wing populism, 569 01:08:06,420 --> 01:08:14,520 the rise of what I've been calling plutocratic populism, which is a very interesting and. 570 01:08:14,520 --> 01:08:19,380 Not uniquely American Point development. 571 01:08:19,380 --> 01:08:30,540 I very well remember Brexit, my agony on his view of similar view of what happened in Germany in the thirties, but nonetheless has unique features. 572 01:08:30,540 --> 01:08:37,080 And then I'm going to talk about Trump and omics itself, and then I'm going to have a brief summation at the end. 573 01:08:37,080 --> 01:08:44,640 So what seems to me interesting about this marriage, we've seen the Trump takeover, 574 01:08:44,640 --> 01:08:51,170 as Ken called it, is we are seeing the emergence of quite a strange combination. 575 01:08:51,170 --> 01:09:00,270 Um, I think if we look at comparable movements elsewhere, which is that Trump embodies and reflects nationalism, 576 01:09:00,270 --> 01:09:12,120 ethnic, um, I think one can't really use any word ethnic racism but can't use anything other any other word with. 577 01:09:12,120 --> 01:09:23,700 At the same time, quite a deep commitment, which is also in his own programme to pretty free market economy economics, massive deregulation, tax cuts. 578 01:09:23,700 --> 01:09:26,820 We've already talked about Obamacare. 579 01:09:26,820 --> 01:09:36,660 And that's quite an interesting combinations, because what we see on the one hand, is protectionism and economic nationalism as an ideology, 580 01:09:36,660 --> 01:09:43,860 at least of this administration as well, along with the proposals for then still out there, 581 01:09:43,860 --> 01:09:49,200 huge tax cuts for the wealthy and massive deregulation of business, 582 01:09:49,200 --> 01:09:57,030 including in very sensitive areas like the environment and then somehow almost in left field in that, 583 01:09:57,030 --> 01:10:06,030 perhaps in addition to those relatively extreme features of his proposals, 584 01:10:06,030 --> 01:10:13,530 we had this emphasis in the campaign on infrastructure, which, as Ken mentioned, 585 01:10:13,530 --> 01:10:19,440 almost every sensible person writing about America thinks is essential and ought to happen. 586 01:10:19,440 --> 01:10:30,120 So this is a very weird combination. I think of policies and policy attitudes, and one of the biggest questions all along was what would win. 587 01:10:30,120 --> 01:10:36,180 And it looks increasingly and what I argued a week a couple of weeks ago, or I can't remember exactly when. 588 01:10:36,180 --> 01:10:42,450 It looks increasingly that what is going to emerge, though I'm not going to discuss this throughout, 589 01:10:42,450 --> 01:10:47,190 is something pretty close to traditional republicanism. 590 01:10:47,190 --> 01:10:54,420 It looks as though at the moment, the most likely outcome is that Trump, in reality, 591 01:10:54,420 --> 01:11:10,590 is going to be a fairly traditional Republican with rather different rhetoric, but not changing very much from that sort of agenda. 592 01:11:10,590 --> 01:11:27,390 So now let me return to what I think are the risks in his views or the implicit views of this administration, some of which overlap on economics. 593 01:11:27,390 --> 01:11:32,040 Relatively narrow economics, given the time available, I think, is what I focussed on. 594 01:11:32,040 --> 01:11:37,230 The first thing I want to discuss which others haven't read is the administration's view, 595 01:11:37,230 --> 01:11:43,950 which I think is very important of how much growth they can get. The second I'm going to talk about briefly is public finances. 596 01:11:43,950 --> 01:11:48,180 The third is macroeconomics, which includes the Fed. 597 01:11:48,180 --> 01:11:52,710 The fourth is trade and then a brief on finance, and I'll try and get through this quickly. 598 01:11:52,710 --> 01:12:02,830 Now, one of the things that the administration has persuaded itself of, or at least it says, is that it will get growth up to three percent. 599 01:12:02,830 --> 01:12:09,130 And Trump has said it should be four percent, but the administration the Treasury has said it should be three percent. 600 01:12:09,130 --> 01:12:13,780 And there's a pretty obvious reason why they would want to say this because three percent growth, 601 01:12:13,780 --> 01:12:18,340 which is roughly 50 percent faster than the growth over the last six or seven years, 602 01:12:18,340 --> 01:12:26,230 would make the public finances problems and the wage and job problems look much, much better. 603 01:12:26,230 --> 01:12:33,310 So a very important question in thinking about whether any of this is going to add up is whether that's at all plausible. 604 01:12:33,310 --> 01:12:40,300 And to look at that, I'm going to look at some work, which I think is particularly helpful in just analytically thinking about. 605 01:12:40,300 --> 01:12:48,250 Can they get to three percent by the work, which is done by Jason Furman, who is the former chairman of the Council of Economic Advisers? 606 01:12:48,250 --> 01:12:52,960 And I think it's been a very interesting and thorough analyst of the US economy. 607 01:12:52,960 --> 01:13:02,740 I greatly respect him now. And one of the key issues in thinking about that not as important as all that, but quite important is shown in this chart. 608 01:13:02,740 --> 01:13:06,790 And that is labour force participation. 609 01:13:06,790 --> 01:13:12,340 So this is the male labour force participation in the US in the long run. 610 01:13:12,340 --> 01:13:20,410 The proportion of people looking for work and working and this is what is usually called prime age 25 to fifty four. 611 01:13:20,410 --> 01:13:27,910 And the remarkable thing is how deep and consistent the decline has been. 612 01:13:27,910 --> 01:13:37,780 US male labour force participation is now a which this part of the labour force is low by European standards. 613 01:13:37,780 --> 01:13:44,620 In fact, it's pretty close to Italy. It's really quite remarkable, not much observed. 614 01:13:44,620 --> 01:13:55,030 And of course, a very big question is, can that reverse? And so he's put forward three options a really optimistic one in which he does reverse a 615 01:13:55,030 --> 01:14:00,670 base case in which it stabilises in a pessimistic case in which it continues to decline. 616 01:14:00,670 --> 01:14:04,090 I don't think this is well explained. 617 01:14:04,090 --> 01:14:10,570 I mean, it's much worse than in the U.K., for example, but it's a hugely important question for the welfare of America. 618 01:14:10,570 --> 01:14:16,510 No doubt explains in part the voting patterns in America and for the future of the economy. 619 01:14:16,510 --> 01:14:27,940 The second one is also very interesting is that the rise in female participation of the similar part of the labour force mature people, 620 01:14:27,940 --> 01:14:34,380 which was also remarkable, as you can see, peaked in 2002 and has since fallen. 621 01:14:34,380 --> 01:14:40,540 And up to 2000, the US was well in line with what was happening in northern European countries. 622 01:14:40,540 --> 01:14:44,500 I don't have the time to show it, but since then that has stopped. 623 01:14:44,500 --> 01:14:53,320 The US female labour force participation is now below most northern European countries, including our own. 624 01:14:53,320 --> 01:14:57,220 In this case, of course, it is well above Italy, which is remarkably low. 625 01:14:57,220 --> 01:15:03,550 But the but the this decline is also remarkable and very disturbing. 626 01:15:03,550 --> 01:15:07,390 And again, Jason is putting in three possible outcomes. 627 01:15:07,390 --> 01:15:10,990 Optimistic base case and pessimistic case. 628 01:15:10,990 --> 01:15:20,350 Now the third issue, which is which neither of the other speakers mentioned, so I'm going into this a bit, is what happens to productivity. 629 01:15:20,350 --> 01:15:24,250 We know because you can see these these. 630 01:15:24,250 --> 01:15:36,580 The Blue Line shows 10 year average annual growth rate of labour productivity in the previous the previous 10 years, if the previous 10 years. 631 01:15:36,580 --> 01:15:43,840 And you can see it's varied a lot. You can see that our recent figure is just above one percent. 632 01:15:43,840 --> 01:15:47,320 The last 10 years, by the way, that's a [INAUDIBLE] of a sight better than ours. 633 01:15:47,320 --> 01:15:48,670 I won't go into that. 634 01:15:48,670 --> 01:15:57,280 In fact, US productivity performance so dismal by its own record is better than all the other G7 countries, if I remember correctly. 635 01:15:57,280 --> 01:16:07,180 But three percent. Anything close to three percent productivity growth has been very, very rare in American history. 636 01:16:07,180 --> 01:16:12,670 The last time this happened was in the ten years up to 2005, the so-called internet era. 637 01:16:12,670 --> 01:16:18,820 And the only other period when this happened was in the 60s. So that sort of growth rate was very rare. 638 01:16:18,820 --> 01:16:25,510 It's very important given the labour market conditions that I've mentioned and given the ageing of the population, 639 01:16:25,510 --> 01:16:33,670 the relatively slow growth of the labour force productivity growth is really important in determining the future growth of the economy. 640 01:16:33,670 --> 01:16:42,190 And again, you got an optimistic middle and lower bound putting this together. 641 01:16:42,190 --> 01:16:50,320 Jason basically comes to the following conclusions the labour force participation dissipation options are put in. 642 01:16:50,320 --> 01:16:53,950 The three gave a pessimistic case for the labour force. Obviously lower growth. 643 01:16:53,950 --> 01:17:02,440 The base case and the optimistic case. It turns out that unless there is an incredibly radical shift in participation in either direction. 644 01:17:02,440 --> 01:17:06,820 Really radical outside extreme, it doesn't make much difference. 645 01:17:06,820 --> 01:17:17,800 The only way that the US can get to three percent growth is if the the the productivity growth goes to two point eight percent, 646 01:17:17,800 --> 01:17:26,290 which is two and a half times as high as in the last 10 years and is extraordinary by historical standards, really historic. 647 01:17:26,290 --> 01:17:28,390 That doesn't mean it's impossible. 648 01:17:28,390 --> 01:17:37,780 Anything is possible, but we have to say on the basis of what we now know that three percent growth really looks a very unwise bet. 649 01:17:37,780 --> 01:17:46,150 You wouldn't place your money on that. More likely is something in the era of a continuation of two percent, 650 01:17:46,150 --> 01:17:50,800 possibly even less right at the moment, potential growth is clearly less than two percent. 651 01:17:50,800 --> 01:17:57,790 So the growth assumptions that they're going to use, I think in their fiscal forecasts are very implausible. 652 01:17:57,790 --> 01:18:04,090 The second question is I've said, let's think about fiscal possibilities. 653 01:18:04,090 --> 01:18:07,840 I have no idea what the final fiscal plan will be. 654 01:18:07,840 --> 01:18:15,880 Kenneth has discussed this at length. This is a chart we prepared at the end of last year based on Trump's initial plans. 655 01:18:15,880 --> 01:18:26,290 We look a little bit like, though strangely enough, they were more detailed than the very sketchy one page outline they put out a couple of weeks ago. 656 01:18:26,290 --> 01:18:30,040 If they were going to do anything like the Trump plan, 657 01:18:30,040 --> 01:18:39,340 as originally originally put out at the end of last year and and if we take the baseline under current law, 658 01:18:39,340 --> 01:18:46,270 which was the law at the end of the Obama era, this is what the plan might produce. 659 01:18:46,270 --> 01:18:52,090 If it weren't reversed, of course, it would be reversed. But basically, the point is that if they were to put this in, 660 01:18:52,090 --> 01:18:59,830 they would double the structural deficit to about six or seven per cent of GDP and debt will be on an explosive path. 661 01:18:59,830 --> 01:19:08,500 What that means is if they're going to do the spending plan, they the tax plan, they would have to cut spending dramatically. 662 01:19:08,500 --> 01:19:16,120 As I've shown in various columns, I've done it twice to cut the spending necessary to offset that sort of tax plan. 663 01:19:16,120 --> 01:19:23,140 They either have to slash core areas like health, Social Security, defence. 664 01:19:23,140 --> 01:19:29,500 Presumably, they're not going to default on interest, though Trump at one stage indicated he might find that quite an attractive idea. 665 01:19:29,500 --> 01:19:31,120 Come to that in a moment. 666 01:19:31,120 --> 01:19:39,520 But assuming they don't do that essentially to get rid of three percent of GDP in spending, they have to eliminate everything else. 667 01:19:39,520 --> 01:19:48,310 And I do mean everything else because right now, the whole budget, 90 percent of the federal budget goes on. 668 01:19:48,310 --> 01:19:58,570 Interest, health, defence, Social Security, Health is a complex bundle of things and a number of redistributive programmes, 669 01:19:58,570 --> 01:20:06,130 disability benefits and things of that kind. So if they do the tax plan, they really have a problem. 670 01:20:06,130 --> 01:20:15,610 The next thing I want to discuss very briefly, and because this is people have gone over, it is the macroeconomic policy setting. 671 01:20:15,610 --> 01:20:20,100 Trump comes into office, came into office when measured unemployment, 672 01:20:20,100 --> 01:20:25,000 I'm going to ignore the participation and employment ratio staff now measured on employment, 673 01:20:25,000 --> 01:20:29,590 as John has already pointed out, is really very, very low. 674 01:20:29,590 --> 01:20:34,720 So you would normally assume we're fairly close to full employment, 675 01:20:34,720 --> 01:20:39,460 depending a bit on how much of these workers who've left the labour force can be pulled in. 676 01:20:39,460 --> 01:20:45,670 And that suggests that the Fed should indeed be thinking about tightening. 677 01:20:45,670 --> 01:20:49,510 And that's what the Fed is indicating it's doing, and this supports that. 678 01:20:49,510 --> 01:20:55,900 This is another version of core inflation in the US. This is the personal consumption expenditures. 679 01:20:55,900 --> 01:20:58,450 Using a trimmed mean from the Dallas Fed. 680 01:20:58,450 --> 01:21:04,210 But they basically show the same thing, which is that core inflation is running about two percent, which is in line with Target. 681 01:21:04,210 --> 01:21:10,090 So the Fed is quite reasonably on the verge of tightening. 682 01:21:10,090 --> 01:21:15,220 And of course, if they introduce these huge fiscal boost, 683 01:21:15,220 --> 01:21:23,320 the big question will they or will they not then when we reasonably expect the Fed in this situation, 684 01:21:23,320 --> 01:21:27,610 full employment inflation on target, a huge fiscal boost, 685 01:21:27,610 --> 01:21:35,830 massive pro-cyclical boost when the economy is close to full employment to tighten monetary policy rather hard. 686 01:21:35,830 --> 01:21:44,740 And that would suggest that long term interest rates are going to tighten quite a bit and the market seems to have expected this. 687 01:21:44,740 --> 01:21:55,390 As you can see from the blue line, which is the US. The US interest rates have indeed shot up quite a bit since Trump's became the candidate. 688 01:21:55,390 --> 01:22:01,930 Not that much still relatively modest because I probably in expectation this won't be utterly huge, 689 01:22:01,930 --> 01:22:07,270 but nonetheless, long term interest rates in the US have gone up quite a bit. 690 01:22:07,270 --> 01:22:13,330 I think it's rather amusing that long term interest rates 30 year rates in the US are the same more or less as those in Italy. 691 01:22:13,330 --> 01:22:19,360 Go figure. I'm not going to try and explain that in the time I've got it to discuss this. 692 01:22:19,360 --> 01:22:26,080 But anyway, one thing that is clearly happened is that along with this perception that the 693 01:22:26,080 --> 01:22:31,330 Fed will tighten and the fact that the American recovery was relatively strong, 694 01:22:31,330 --> 01:22:38,170 and therefore it's the first country to tighten and long term rates are rising, the dollar has been very, really pretty strong. 695 01:22:38,170 --> 01:22:42,790 Really, exchange rates have appreciated very, very substantially. 696 01:22:42,790 --> 01:22:48,040 And that's what we're seeing here. They're up quite a bit. 697 01:22:48,040 --> 01:22:52,960 One would normally expect the following things to happen The real exchange rate is rising. 698 01:22:52,960 --> 01:22:58,780 Demand in the US will be strong for the reasons I've suggested. Interest rates will rise. 699 01:22:58,780 --> 01:23:07,300 The real exchange rate will rise. The current account deficit will rise, which is precisely what Mr Trump wants to prevent. 700 01:23:07,300 --> 01:23:11,680 The Fed will be tightening and just to reinforce what Ken says. 701 01:23:11,680 --> 01:23:20,170 Mr Trump will come along just as Mr Nixon did back in the early 70s and will say, you must stop this. 702 01:23:20,170 --> 01:23:29,020 And so he will put in place a Fed, which will be told not to raise interest rates, not to resist the inflationary pressure, to keep down the dollar. 703 01:23:29,020 --> 01:23:34,580 And then we get monetary Armageddon. That's the worst possibility of this outcome. 704 01:23:34,580 --> 01:23:40,270 I've just sort of put in more journalistic terms what Ken said in a very sober way. 705 01:23:40,270 --> 01:23:51,550 The final thing I just want to discuss is trade globalisation and by the growth of world trade seems to be more or less topped out. 706 01:23:51,550 --> 01:23:55,810 It's not going to reverse. These are sort of the rates of global trade to GDP. 707 01:23:55,810 --> 01:24:01,270 They haven't reversed, but they have topped out. Now along comes Trump. 708 01:24:01,270 --> 01:24:06,010 And he says, I want to eliminate all the bilateral deficits we have. 709 01:24:06,010 --> 01:24:12,250 So these just to point out who's going to be smashed? Who's going to be hit by the policy if they ever introduce it. 710 01:24:12,250 --> 01:24:17,500 And at the moment, it looks very uncertain. And the answer is China, the European Union. 711 01:24:17,500 --> 01:24:22,960 Germany are the top candidates for beat being beaten up. 712 01:24:22,960 --> 01:24:29,020 Will they do any of that? Probably not. But if so, they don't have a trade policy at all. 713 01:24:29,020 --> 01:24:37,180 Nobody knows what on Earth they're going to do. One chart I just thought I put in the end is when I put in Mr. 714 01:24:37,180 --> 01:24:43,270 Wilbur Ross, who is the commerce secretary and seems to be the most influential person on trade policy in the administration, 715 01:24:43,270 --> 01:24:49,540 seems to think that if you are protectionist, you will have a smaller current account balance. 716 01:24:49,540 --> 01:24:56,080 In fact, the current account deficit current account is basically determined by how determined is determined by how protectionist you are. 717 01:24:56,080 --> 01:24:58,240 So I did this for every country in the world. 718 01:24:58,240 --> 01:25:06,190 I could find there's an index of trade freedom at the bottom that more to the right, the more free you are, 719 01:25:06,190 --> 01:25:15,080 the that the the height of the vertical axis is the ratio of current account balance to GDP and you. 720 01:25:15,080 --> 01:25:22,130 We'll see, interestingly, the truth is the exact opposite of what they believe, which is the more liberal you are, 721 01:25:22,130 --> 01:25:28,850 the bigger your current account surplus, probably because the causality goes the opposite direction, opposite directions. 722 01:25:28,850 --> 01:25:33,890 So this is my concluding remarks in a world context. 723 01:25:33,890 --> 01:25:43,070 If he does any of the really, really, really bad things that he's been thinking about and talking about, this could be a transformative event. 724 01:25:43,070 --> 01:25:51,110 He has been talking about a programme of domestic spending on infrastructure, which I think is a really wonderful idea for the US. 725 01:25:51,110 --> 01:25:55,730 And worth borrowing for, though, because it would create assets, 726 01:25:55,730 --> 01:26:00,110 though it's this is terribly badly timed, but it doesn't look now that going to happen. 727 01:26:00,110 --> 01:26:05,960 There is likely to be a huge macro mess. Trade wars look less likely. 728 01:26:05,960 --> 01:26:13,190 I would emphasise what John has said about the risks of financial deregulation and if things get really, 729 01:26:13,190 --> 01:26:20,450 really bad and he really does go after China in the EU, the global system as we know it will have disappeared. 730 01:26:20,450 --> 01:26:34,880 Apart from that, everything is absolutely fine. Thank you. 731 01:26:34,880 --> 01:26:45,200 So I want to thank all three speakers for an incredibly clear and intelligent diagnosis of the Trump presidency. 732 01:26:45,200 --> 01:26:55,130 It's the first time I've been able to be light-hearted about it, even for a few seconds since January 20th. 733 01:26:55,130 --> 01:26:59,660 I want to start by by trying to sum up a little bit. 734 01:26:59,660 --> 01:27:09,500 My job description is I'm supposed to sum up. But in fact, what I'm going to do is sort of emphasise a couple of points and throw out some, 735 01:27:09,500 --> 01:27:18,200 some some ideas that can function as a primer for the question and answer period that will follow immediately. 736 01:27:18,200 --> 01:27:20,870 One thing is, 737 01:27:20,870 --> 01:27:33,800 I think could be more emphasised than the average of the panellists is the is the importance of stability of governance and institutions. 738 01:27:33,800 --> 01:27:40,820 I don't take that quite as for granted as as some people do. 739 01:27:40,820 --> 01:27:45,080 And I think it's been deeply shaken in the past few months. 740 01:27:45,080 --> 01:27:50,360 In particular, the American system runs on checks and balances. 741 01:27:50,360 --> 01:27:54,410 Right now, we have a Congress that can't seem to do anything, 742 01:27:54,410 --> 01:28:03,860 and therefore the checks and balances have been have been mostly the courts without a Congress that's willing to say no to the president. 743 01:28:03,860 --> 01:28:10,490 The courts can be gradually undermined, and we still don't know yet what the new Supreme Court is going to do. 744 01:28:10,490 --> 01:28:21,050 But in any case, we we need fully functioning three branches of government to preserve the stability of the of the American institution. 745 01:28:21,050 --> 01:28:26,630 The second thing I worry about more than the average panellist is the credibility. 746 01:28:26,630 --> 01:28:35,570 I believe that the function of the presidency is partly to sort of guide and lead public opinion. 747 01:28:35,570 --> 01:28:42,770 We've heard Trump speculate out loud about how unfair it is that people don't believe anything, he says. 748 01:28:42,770 --> 01:28:51,650 He doesn't seem to see to see the connexion between the truth, truthfulness of what he says and whether people are willing to believe it. 749 01:28:51,650 --> 01:29:02,860 We've never really had a presidency in living memory, which for me goes back to Harry Truman that people just dismissed as much, 750 01:29:02,860 --> 01:29:14,390 and I believe that it's that it's going to be a disadvantage to to the country that the government can't really say anything with any credibility. 751 01:29:14,390 --> 01:29:23,750 The third things, the third and fourth things that I'm particularly concerned about are the the the fact that Congress 752 01:29:23,750 --> 01:29:30,950 has not yet properly done its job looking into the interference in the elections by Russia, 753 01:29:30,950 --> 01:29:41,060 which I think is a is an existential threat to our country, as it seems to possibly be two European countries and the U.K. as well. 754 01:29:41,060 --> 01:29:50,570 The fact that Congress hasn't actually been willing to get to the bottom of it and seems to be engaged in protecting Trump is deeply disturbing to me. 755 01:29:50,570 --> 01:29:59,390 The fact that Congress seems to be trying to repeal the Affordable Care Act to get a symbolic political victory without properly 756 01:29:59,390 --> 01:30:09,080 evaluating the consequences without even waiting for the rational but budget office to score the economic consequences of the measure. 757 01:30:09,080 --> 01:30:15,530 In fact, trying to rush the vote through before the score becomes public is deeply disturbing. 758 01:30:15,530 --> 01:30:23,390 I believe, as Ken did, that they're going to fail in the sense that the Senate is not going to agree to anything like the House bill, 759 01:30:23,390 --> 01:30:31,130 but they might end up destroying something that works not perfectly, but much better than what will follow. 760 01:30:31,130 --> 01:30:35,360 And the fourth and final thing I'll emphasise, which wasn't really mentioned, 761 01:30:35,360 --> 01:30:46,700 is the sort of arbitrary and very damaging executive orders trying to shut down immigration from from particular countries. 762 01:30:46,700 --> 01:30:56,690 Our country was built on accepting people who wanted to come there from their home countries and try to make a new life. 763 01:30:56,690 --> 01:31:05,750 We can turn that off. We may not see the consequences for five or 10 or 15 years, but it will impoverish our country in the long run. 764 01:31:05,750 --> 01:31:16,100 It has far more consequences for long run economic growth in America than I believe as a micro economists any macroeconomic policy would do. 765 01:31:16,100 --> 01:31:22,820 So what I'm going to do now is basically turn the floor over first to the panellists if they want 766 01:31:22,820 --> 01:31:29,000 to say anything more about the things I've just raised and then to you to ask for questions. 767 01:31:29,000 --> 01:31:35,680 And I believe that you will need a microphone and. And mind works, I will lend you mine when the time comes. 768 01:31:35,680 --> 01:31:41,910 But first, the panellists, if anyone wants to speak. 769 01:31:41,910 --> 01:31:49,560 No, I appreciate everyone's comments. It's hard to find a lot to disagree with, I I don't know what the next. 770 01:31:49,560 --> 01:31:57,360 I mean, I think if you're someone who believes the next few years is just going to be awful and he won't get re-elected, don't count on it. 771 01:31:57,360 --> 01:32:03,660 I think the macro shock and it could take a while for everything the chickens to come home to roost, so to speak. 772 01:32:03,660 --> 01:32:11,340 And I would say the odds [INAUDIBLE] get re-elected or, you know, whatever normal is for an incumbent on for, you know, 773 01:32:11,340 --> 01:32:21,570 and over the long run, I'm very I think the populist message and broader that FinCEN refers to are tremendous concerns, 774 01:32:21,570 --> 01:32:25,140 but I'm not so sure that's what we're going to see in the short and something, 775 01:32:25,140 --> 01:32:29,250 by the way, I didn't mention I should have think puzzles a lot of people. 776 01:32:29,250 --> 01:32:32,640 Why does the stock market go up and it's so bad? 777 01:32:32,640 --> 01:32:38,640 Well, I have to say I predicted the stock market would go up, but I have to say I thought Hillary would win. 778 01:32:38,640 --> 01:32:44,940 So if you had told me Trump was going to win, I would never have guessed the stock market was going to go up. 779 01:32:44,940 --> 01:32:50,850 Because even though I don't think it's bad for short run growth actually compared to 780 01:32:50,850 --> 01:32:55,470 Hillary Clinton and some of why the stock market's happy is not because he's Trump, 781 01:32:55,470 --> 01:32:59,820 but because he's not Hillary Clinton. That's my read of things. 782 01:32:59,820 --> 01:33:07,260 But I would have thought the uncertainty just trumps all of that, that, you know, you just the outside risk. 783 01:33:07,260 --> 01:33:11,370 And most of our models and any sort of logical thinking is that if you think something 784 01:33:11,370 --> 01:33:16,770 catastrophic could happen and maybe the odds have gone from one percent to three percent, 785 01:33:16,770 --> 01:33:21,680 it's really bad for stocks, but there you have it. 786 01:33:21,680 --> 01:33:28,070 OK, Martin. OK. Um. 787 01:33:28,070 --> 01:33:33,110 I thought we were going to. I thought I should focus on Trump and omics. 788 01:33:33,110 --> 01:33:42,710 Though I indicated a bit of what I thought about him at the beginning, I agree with everything you said. 789 01:33:42,710 --> 01:33:53,630 I wouldn't disagree with any of it gets into deeply into politics, institutions of governance. 790 01:33:53,630 --> 01:33:58,550 And I wrote a number of pieces indicating this. 791 01:33:58,550 --> 01:34:06,380 Back in April of 2016, I wrote a column called Donald Trump is how great republics meet their end. 792 01:34:06,380 --> 01:34:14,630 And so and I don't I don't resile in any way from a single word in that a column. 793 01:34:14,630 --> 01:34:21,860 I think the only thing that has comforted me is that he seems to be remarkable, even though I have to say this, 794 01:34:21,860 --> 01:34:29,630 not even remarkably less competent than I feared and his advisers he has on 795 01:34:29,630 --> 01:34:36,020 his side as well on his extreme populist side and people like Steve Bannon. 796 01:34:36,020 --> 01:34:42,710 Peter Navarro in a different way also seem remarkably less competent than I had feared. 797 01:34:42,710 --> 01:34:47,420 I do regard trusting the future of the world's. 798 01:34:47,420 --> 01:34:50,120 I'm the world's most important country still, 799 01:34:50,120 --> 01:35:02,030 and sending the world's most important democracy to the slender reed of the sheer incompetence of malevolence is is very disturbing. 800 01:35:02,030 --> 01:35:06,980 But let me just say I just want to say one. Yeah, the incompetence of malevolence. 801 01:35:06,980 --> 01:35:10,290 Yes. Yes. I'm writing a book in this area. 802 01:35:10,290 --> 01:35:13,800 Maybe that would be. I'm writing a book on the crisis of democratic capitalism. 803 01:35:13,800 --> 01:35:20,570 Is this a better title, isn't it? OK. The point I wanted to make, it seems to me obviously strange things are happening in the UK too. 804 01:35:20,570 --> 01:35:28,310 So clearly strange things are happening in the politics of Western societies or strange, maybe not unexpected things. 805 01:35:28,310 --> 01:35:34,880 And it's pretty clear that a lot of that is to do with the fact that a very appreciable part of our population, 806 01:35:34,880 --> 01:35:42,140 obviously here in the Brexit vote and in the US, even more are deeply disenchanted with what's been going on. 807 01:35:42,140 --> 01:35:45,860 That is obvious and it and this is not short term. 808 01:35:45,860 --> 01:35:53,690 May I also emphasise, I utterly agree with Ken that there's a very real chance the economy will work well enough to get the man elected re-elected. 809 01:35:53,690 --> 01:36:01,640 We'll have to see what happens in over eight years. The damage you can do to appointments, to court appointments to government is incredible. 810 01:36:01,640 --> 01:36:08,160 But I think there's one other very interesting thing which I think is about the American Right. 811 01:36:08,160 --> 01:36:12,830 So I'm not going to go into the left because they're not yet been in power and they're not close to it yet. 812 01:36:12,830 --> 01:36:20,270 Over the last twenty five years, very obviously, I think since Newt Gingrich, 813 01:36:20,270 --> 01:36:27,890 the Republican Party has been moved from being obviously very conservative, pro-free market party, 814 01:36:27,890 --> 01:36:30,140 but nonetheless very clearly under Reagan, 815 01:36:30,140 --> 01:36:39,170 a party of government with people in the administration who are interested in running government in the normal way. 816 01:36:39,170 --> 01:36:45,830 Adding things up. And I mean, thinking about people like Cap Weinberger and George Shultz and Jim Baker and all the other. 817 01:36:45,830 --> 01:36:53,000 These were perfectly sane human beings who who wanted, who wanted to run a government. 818 01:36:53,000 --> 01:36:59,240 It seems to me, and this is seems to me very, very interesting. Progressively over time, we can go to one policy area. 819 01:36:59,240 --> 01:37:03,110 After the other, the Republican Party ceased to be a party of government, 820 01:37:03,110 --> 01:37:07,310 and when a party that doesn't believe in government is actually running the government. 821 01:37:07,310 --> 01:37:12,890 Very strange things start to happen if they have a president who doesn't know what he's doing at all. 822 01:37:12,890 --> 01:37:18,410 Then even Stranger Things happen and they become wildly unpredictable. And that, I think, is where we are. 823 01:37:18,410 --> 01:37:31,950 Yes, very good. John, do you want to say something? Well, I I agree with most things that the other panellists have said just one thing, 824 01:37:31,950 --> 01:37:38,800 I think where I'm maybe slightly more optimistic report from the Trump being impeached, which I'm hoping for. 825 01:37:38,800 --> 01:37:45,030 And I suspect the business cycle will turn before the four years are up. 826 01:37:45,030 --> 01:37:50,730 And I think at the end of those four years, the economy will be in worse shape. 827 01:37:50,730 --> 01:37:55,020 And therefore, hopefully he will not be re-elected. 828 01:37:55,020 --> 01:37:59,820 If you're optimistic predictions. So we're running slightly late. 829 01:37:59,820 --> 01:38:11,980 We have time, I think, for a couple of questions from the audience. Let's take the gentleman over here and. 830 01:38:11,980 --> 01:38:18,170 Thank you. All of the three speakers have emphasised. 831 01:38:18,170 --> 01:38:29,000 Drums, songs, open to ideas, songs, clarity as the weakest part of his thinking on empathy. 832 01:38:29,000 --> 01:38:37,040 And fourth, the and mark Luke, as at the end, I designed the infrastructure. 833 01:38:37,040 --> 01:38:45,860 I won't give up these buildings that often mention that Obama was supposed to do the infrastructure spending, but he didn't. 834 01:38:45,860 --> 01:38:56,540 My question to you is that won't be easy philanthropy. The constraints will prevent Obama from doing the infrastructure spending, which he did not do, 835 01:38:56,540 --> 01:39:01,460 and how Trump will be able to overcome those structural and political constraints. 836 01:39:01,460 --> 01:39:04,670 That's one. Secondly, on the cost of infrastructure, 837 01:39:04,670 --> 01:39:12,410 it's important to you and my bill that there is a decent preventive aspects of infrastructure deployment in infrastructure spending, 838 01:39:12,410 --> 01:39:22,890 which is not going to inform the candidates perspective and expand into the economy for now, given the understanding we all have on drums. 839 01:39:22,890 --> 01:39:30,680 The infrastructure spending, if he does do, is going to be not informed by the comments and that would have to give up indications. 840 01:39:30,680 --> 01:39:39,690 So if that's not important enough to accurately. You want. 841 01:39:39,690 --> 01:39:43,030 That was split that was almost two point is a very important point. Yes. 842 01:39:43,030 --> 01:39:51,660 Huge problem with with infrastructure is the the energy use and the company implications of the installed infrastructure, 843 01:39:51,660 --> 01:39:54,810 and that is very slowly, very slow to change. 844 01:39:54,810 --> 01:40:02,880 So if you install anti climate amelioration infrastructure that has long term consequences, the really, really dangerous. 845 01:40:02,880 --> 01:40:08,220 So it's very much right quick answer to water. 846 01:40:08,220 --> 01:40:13,980 I think the difference is Obama mostly didn't have a Democratic Congress, 847 01:40:13,980 --> 01:40:21,630 and the general political climate is very strongly opposed to the government's use of fiscal policy or anything. 848 01:40:21,630 --> 01:40:27,050 Meaning spending policy as opposed to tax and taxing policy. 849 01:40:27,050 --> 01:40:31,830 And I think that's that was that was the key thing. 850 01:40:31,830 --> 01:40:43,050 I don't think the infrastructure plan really was conceived by Trump as a conventional government, you know, spending plan the way we did in the 30s. 851 01:40:43,050 --> 01:40:51,990 I think he was always thinking probably of some some kind of subsidies to private companies to build things which would basically 852 01:40:51,990 --> 01:41:03,600 just extend the reach of kleptocracy and probably not be an effective stimulus to the economy or even to infrastructure. 853 01:41:03,600 --> 01:41:09,120 One more very quick question, gentlemen. Way back. Way in the back. 854 01:41:09,120 --> 01:41:16,930 That's the best you. That just. 855 01:41:16,930 --> 01:41:25,260 It's one question I just wanted to start off by saying, I have actually recommended, 856 01:41:25,260 --> 01:41:30,220 you know, a lot of the what we try to do method is to figure out what was wrong with it. 857 01:41:30,220 --> 01:41:38,320 If I had read in the last few years of been this big attack of expertise and on glass and you know, 858 01:41:38,320 --> 01:41:45,280 we are not going to do that often not go, but still, you know, very easily. 859 01:41:45,280 --> 01:41:50,080 All you need a sense of quality context and sometimes you need six missions. 860 01:41:50,080 --> 01:41:58,420 So in that business environment, how do we generate this demand for what's what we are going to do to make the what we do, 861 01:41:58,420 --> 01:42:04,150 which is, you know, on the one hand, this look at that. How do we generate demand for that amongst what is the deepest? 862 01:42:04,150 --> 01:42:14,410 Thank you. Christopher, you can put that out, there is a very strong demand amongst policymakers for nuance and for research. 863 01:42:14,410 --> 01:42:21,670 I do think some some economists have undermined civil discourse. 864 01:42:21,670 --> 01:42:31,690 There's been this tendency to misrepresent to use fake news as it were to try to undermine the credibility. 865 01:42:31,690 --> 01:42:38,950 I particularly point to the University of Massachusetts researchers who are very heavy in the Sanders campaign, 866 01:42:38,950 --> 01:42:42,010 and we've I mentioned a lot of their results. 867 01:42:42,010 --> 01:42:52,760 But no, it's it's all about Twitter and social media, and it's much it's much broader than just academics, really. 868 01:42:52,760 --> 01:42:57,280 I mean, you just can't go in. All right. 869 01:42:57,280 --> 01:43:00,730 Part of the problem isn't just Twitter and social media. 870 01:43:00,730 --> 01:43:11,920 Part of the problem is the huge mistakes that the new Keynesian science of monetary policy made in persuading central banks that asset prices, 871 01:43:11,920 --> 01:43:20,860 credits and money were irrelevant to understanding monetary policy and the business cycle and the discredit that the macroeconomics profession, 872 01:43:20,860 --> 01:43:31,510 the central banks have suffered and after after the financial crisis, I think is has really reduced the credibility of all economists. 873 01:43:31,510 --> 01:43:40,900 Mark, I'm very sympathetic with what John to what John is saying. 874 01:43:40,900 --> 01:43:47,710 I've been thinking a lot because you're part of this book, I'm trying to write about how a democracy actually works. 875 01:43:47,710 --> 01:43:53,140 And one of the it seems to be pretty obvious sort of it. 876 01:43:53,140 --> 01:43:54,370 I'm not a political scientist, 877 01:43:54,370 --> 01:44:05,980 but it seems sort of banal is that we do not expect the electorate at large to have expertise in all the areas over which government policy operates, 878 01:44:05,980 --> 01:44:17,170 and that includes for every one of us. So we we think that government must be informed by experts or expertise to some degree. 879 01:44:17,170 --> 01:44:23,950 And I think most people, if really push, will accept that. Probably not Steve Bannon, but most people will accept that. 880 01:44:23,950 --> 01:44:33,430 But the problem is the deal is we will allow, as it were the experts to guide policy. 881 01:44:33,430 --> 01:44:37,990 If it looks as though they know what they're doing. 882 01:44:37,990 --> 01:44:45,670 And how do you judge whether people know what they're doing by the results, because there's not much else that you can judge it by? 883 01:44:45,670 --> 01:44:51,520 So there are lots of areas where people still there also ideal ideological aspects. 884 01:44:51,520 --> 01:44:56,080 The climate scientists are obviously under attack because it's not yet happened. 885 01:44:56,080 --> 01:45:01,070 But also what they're recommending is a very large amount of government intervention that lots of people against that. 886 01:45:01,070 --> 01:45:11,240 So there's an ideological element. I think the problem for economists specifically is they lost their franchise and they lost their franchise. 887 01:45:11,240 --> 01:45:19,400 Way because they didn't prepare the public, to put it mildly, for the possibility of a disaster on that scale. 888 01:45:19,400 --> 01:45:23,090 I think that's been quite general and John has touched upon it. 889 01:45:23,090 --> 01:45:29,540 So the only way one can regain that authority, it's injury. 890 01:45:29,540 --> 01:45:35,390 By the way, I would say that the two gentlemen to my left are very powerful exceptions to that 891 01:45:35,390 --> 01:45:45,050 in their written work beforehand and particularly on both on the credit money dead. 892 01:45:45,050 --> 01:45:54,670 But basically, it seems to me we are going to have to regain our reputation and that's going to take a generation. 893 01:45:54,670 --> 01:46:05,360 And in the meantime, people are going to listen to quacks. That's the price of failure, and it's a very, very steep one. 894 01:46:05,360 --> 01:46:17,453 OK, thank you very much.