This is the full transcription of podcast 'Hidden Forces'.
What Comes After Secular Stagnation Barry Eichengreen #Podcast #Transcription #ReadAlong #KnowledgeUnlocked
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This is the full transcription of podcast 'Hidden Forces'.
What Comes After Secular Stagnation Barry Eichengreen #Podcast #Transcription #ReadAlong #KnowledgeUnlocked
Brad Setzer at the Council on Foreign Relations has connected the continued dominance of the dollar in international reserves to the fact that the main current account surplus economies, China and the oil exporters of the Middle East, Saudi Arabia in short, are running current account surpluses. The United States is the large economy that is running current account deficits. So the only way to make those surpluses and our deficits add up is if those economies continue to accumulate dollars in payment, in settlement for our purchases of Chinese merchandise and Middle East oil, if you will. On the other hand, those current account and capital flows do not obligate anyone to use a particular currency in settlement, invoicing of transactions. So I think China can continue to build up its Renminbi based cross-border interbank payment system to settle some of its bilateral transactions even as its central bank is continuing to accumulate dollars. Let's talk about this a little bit because we (23/38)
but banks and firms make more strictly commercial decisions about what currency to use. They look at the cost of getting in and out of a currency and they see the cost of getting in and out of the dollar as low, so they stick with it for their private commercial and financial transactions. Can these two aspects seriously decouple from one another? Could central banks and governments move away from the dollar big time while banks and firms stick with it? I don't think so. I think there has to be a broad parallelism in the trends in the two dimensions because if banks and firms are borrowing dollars offshore and then they get into trouble, their central banks are going to have to be able to lend them those dollars. Part of what we're seeing may be that currency swaps have become more important that foreign central banks don't have to hold dollars if they can swap their currencies with the vet and obtain dollars that they can then turn around and lend to their banks and firms. But broadly (16/38)
no traffic and just burden the government with more debt that it can't repay. Do you think that we're seeing the emergence of a bifurcated global economy? I worry that we're seeing the emergence of a bifurcated global economy. China and the United States are still one another's number one or number two most important trading partners, but bilateral foreign investment has fallen off. The Chinese are investing abroad, but not so much anymore in the United States. US companies are investing abroad, but no longer in China. There are important economies aligned with the United States like South Korea that depend importantly on trade with China and non-aligned countries like India that continue to deal with both economies. I think a bifurcated global economy where economic relations between the US and China broke down and there were more trade restrictions and retaliation and bilateral financial flows dried up entirely would be disastrous for the global economy. As you and I speak later this (27/38)
What's up, everybody? My name is Demetri Kaffinas, and you're listening to Hidden Forces, a podcast that inspires investors, entrepreneurs, and everyday citizens to challenge consensus narratives and to learn how to think critically about the systems of power shaping our world. My guest in today's episode is distinguished professor of economics and political science at the University of California, Berkeley, Dr. Barry Eikengreen. Dr. Eikengreen is a prolific author and a highly regarded historian of monetary economics and political economy. In his first appearance on this podcast nearly five years ago, he joined me to discuss the legacy of the Great Moderation, a multi-decade Goldilocks period of low inflation and positive economic growth that lasted somewhere between the mid-1980s and the onset of the great financial crisis. The period that we've been living in up until very recently and that some have called secular stagnation was characterized by historically low interest rates, (1/38)
sluggish economic growth, persistently low inflation, and growing levels of social and political instability. One of the main questions that Dr. Eikengreen and I wrestle with in this conversation is the current period of higher inflation and rising interest rates, a temporary phenomenon soon to be followed by a return to secular stagnation. Or are we entering a new economic paradigm where sovereign debt levels in the developed world become unmanageable, multilateral cooperation breaks down, and state power grows at the expense of capital and labor. Our conversation includes a discussion about the future of the US dollar, the potential internationalization of the Chinese Yuan, and the role of gold and other commodities as potential reserve assets in a world where fiat-based collateral comes increasingly under stress. This episode is part of a series that I've been putting together on the future of the US dollar, the move from unipolarity to multipolarity, and the evolving impact of (2/38)
great power competition on global trade and finance. You can find other such related podcasts on this week's episode page at hiddenforces.io, where you can also access the second part of today's conversation by joining one of our three content tiers. This gives you access to our premium feed, which you can use to listen to the second part of today's conversation on your phone using your favorite podcast app, just like you're listening to this episode right now. If you want to join in on the conversation and become a member of the Hidden Forces Genius community, which includes Q&A calls with guests, access to special research and analysis, in-person events and dinners, you can also do that on our subscriber page. And if you still have questions, feel free to send an email to info at hiddenforces.io, and I, or someone from our team, will get right back to you. And with that, please enjoy this excellent conversation with my guest, Dr. Barry Eichengrin. Dr. Barry Eichengrin, welcome back (3/38)
to Hidden Forces. Demetrius, it's been a while. It has been. You were on the podcast in the early summer of 2018 to talk about primarily the evolution of populism in the United States. And we also got into a conversation about the Euro, the future of the Euro, the future of the Yuan, and also some geopolitics, because you had written a paper a year before that on the geopolitical premium in a reserve currency. So before we start, for anyone who's not familiar with your work, Dr. Eichengrin, can you tell us a little bit about who you are and how you got involved in economics? I'm a professor of economics and an amateur political scientist as well at the University of California at Berkeley, where I've been for like three decades. I got into economics because of an early life interest in the social sciences, what was going on in the political sphere, in the economic sphere, et cetera. And I found economics really for two reasons, an inspiring teacher that affects the direction in which (4/38)
many of us go. And because economics had a structure, it had models that I found comforting, congenial, if you will. Some of the other social science disciplines were a little touchy-feely for me, so I gravitated toward economics. At that point, I discovered that there were other people with more serious mathematical chops than me doing economics. So I ended up working on the border between economics and political science on the border between economics and history, where I could carve out my own terrain a little bit rather than competing with the advanced mathematicians. Was Golden Federer's your first book? Golden Federer's was my first book other than some edited collections and the like. So yes, it's risky to write a book in economics where one's peers judge you on the basis of journal articles. So I got tenure back in the day in 1987, at which point I embarked on the book, which came out about five years later. Very nice. So I was telling you before we started the conversation (5/38)
that I've been really interested in the intersection of geopolitics and global macro. For years, it's been something that we've talked about on this podcast, but it's become increasingly newsworthy as, for lack of a better word, the financial and political hemisphere has developed narratives around it. And it's a lot easier in those circumstances to speak to something because people are looking for it. One of the ways that I think about this is I try to think about what the period we're living through today will be remembered for. When I look back at like the 1990s, and for me the 1990s will be remembered primarily for the end of the Cold War and the commercialization of the internet. Those are the two big forces of the 90s. The first decade of the 2000s was Iraq and 9-11. And I actually don't even think of the 2008, 2009 financial crisis as part of that decade. I think of it as the 2010s, in which I also include the public revolt against the prevailing structures of power in society, (6/38)
manifest as political populism and in movements like Occupy Wall Street and Wall Street Bets, and social media, which has transformed our society in ways that I think we're only just beginning to really grapple with and understand. And this decade is already shaping up to be as explosive at the very least as the early 2000s with a pandemic of COVID-19 and with the war in Ukraine. But the big backdrop in all of this is this larger conversation of the global order. And are we currently living through a reorganization of the global order that is something analogous to what we saw during the interwar period or during the post-World War II period? What do you think, let's say if we were doing this conversation in 2030, what do you think this decade will have been remembered for? I think the decade will be remembered first for the backlash against globalization, the populist politicians and pressures, disaffection with the elites, identity politics, and problems around the management of (7/38)
immigration, that number one and number two, geopolitical tensions between the US and China. What's going on in Russia is a very, very unfortunate, deadly sideshow. I think the important geopolitical tensions are those between the US and China. And we're seeing that in the fact that contrary to widespread expectation, the Biden administration did not roll back the measures taken by the Trump administration vis-Ã -vis China trade policies and so forth. To the contrary, it escalated and broadened the economic measures designed to at least loosen the coupling between the two economies. So I think it will be backlash against globalization and US-China tensions that will be at the center of those future histories. Just to comment briefly on the connections between geopolitics and the international economy, there is a long tradition of scholarship focusing on those connections. I would go back to the work of Charles Kindleberger, the late great MIT economist and economic historian who wrote (8/38)
about how the changing of the guard between the US and the UK in the 1920s and 1930s brought down the gold standard, which in turn brought down the global economy. So he made those connections long before I did in that book you mentioned, Golden Fedders. But that emphasis kind of died away with the end of history, with the end of the Cold War. And now we have the end of the end of history. The new Cold War is back and people are rediscovering that geopolitics and international economics, geopolitics and international monetary and financial affairs are connected at the hip. Yeah, we actually, I want to point listeners to our episode with Perry Merling on the rise of the global dollar system and his book Money and Empire, which chronicles the life and times of Charlie Kindleberger, who I actually discovered coincidentally, grew up before he moved to Queens, grew up right across the courtyard from my apartment in New York. Which I think that building has been since demolished. So to go (9/38)
back to this thing about geopolitics and the changing order, it seems that what is clear today is that there is a large contingent of economies in the world, including the second largest economy, China, that are dissatisfied with the American led international order. In some cases, like in the case of Iran, or now Russia, it feels like these countries have permanently broke. Well, maybe Iran's a, it's too much to say that Iran is permanently outside the order, because maybe Iran doesn't have the kind of ambitions to ever lead the order. So maybe it could always swing in either direction, depending on whether or not it was actually brought into the fold. But certainly Russia feels like it's out of the order. Now whether or not Russia wants to collaborate or whether there's an opportunity for some kind of buying back into its commercial relationship with Europe, that's a separate question. But it's not clear what that future order is going to be. And part of that conversation also (10/38)
involves what the nature of the international dollar system will be. Let's start maybe with a question about the existing role of the dollar and what some people call dollar dominance. What do you attribute dollar dominance to? And how do we define that? Let me start with the definition that dollar plays an outsized role in cross-border transactions globally, depending on how you measure the size of economies. The United States is maybe 20%, 25% of the global economy. But the dollar accounts for 60% of the foreign exchange reserves of central banks and governments around the world. The dollar is the vehicle for the majority of cross-border transactions globally, including transactions between countries other than the United States. What do I attribute the dollars dominance globally to the long shadow of history? Basically, after World War II, the US was far and away, the dominant economy globally dominated the so-called free world. The US was the only country with deep and liquid (11/38)
financial markets open to the rest of the world. European countries had regulatory restrictions, capital controls on cross-border flows. Japan had regulatory restrictions, capital controls as well, and actively resisted wider global use of the N on the grounds that this would interfere with its industrial policies. So it was, you had to use the dollar and the US banking system if you were an importer or exporter or an investor seeking to do cross-border transactions virtually anywhere in the world. And there are complementarities between the different functions of the dollar because companies need and use dollars when they import and export merchandise. They sometimes have to borrow dollars from their banks. So their banks in turn try to obtain dollars from US banks and central banks in other countries, hold dollars because they may have to lend them to domestic banks in the last resort. So these different parts are interlocking and they kind of lock in dollar dominance or at least (12/38)
make it difficult to move away to alternatives. Europeans were long unhappy with this state of affairs. Charles de Gaulle and his finance minister, Valerie Giscard d'Estaing, were unhappy about this in the 1960s. And with the passage of 35 years, the Europeans created the euro in the hope that they would, with the expectation that they could create an alternative to the dollar that would be equally dominant on the global stage. It didn't happen. The Chinese are trying to promote international use of their currency, the renminbi, but their currency remains far behind the dollar and on most measures, they're making only slow progress. So there's an interesting conversation now about whether those alternatives will gain ground more quickly on the dollar. Now that the US is weaponized its currency, now that we have used Russia's dependence on the dollar in the US banking system against it, will other countries, not only Russia, but other countries in effect move away from having all their (13/38)
eggs in the dollar basket by seeking alternatives? Yeah, I want to let listeners know that we just recorded an episode and published it with Agathe Mare, who has written a book on sanctions policy and export controls. And we did one episode with Julia Friedlander shortly after the invasion of Ukraine on this same subject of the weaponization of the dollar if people are interested. I've seen analysts make the case for the dollar having become stronger over the course of its rise and arguments to the opposite effect, that it's become weaker. The weaker arguments or the less dominant arguments, I think, rely mostly on what you've put forward, that it's become a smaller share of international reserves, central bank reserves. I think it was 71% to begin the 2000s, and it's like you said, 60%, 59%, something like that today. The opposite arguments, I think, rest on what is more of a commercial argument, that the dollar has become more valuable, let's say, as a medium of exchange to use a (14/38)
maybe more modern term, though that goes back a while, but all the crypto stuff. Do I have that generally correct? And what accounts for those distinctions? Can a currency continue to function as a widely used medium of exchange, but become disfavored as a reserve asset for central banks? Yeah, I think you have the broad picture correct that central banks have been diversifying their reserve portfolios slowly, but surely, very slowly, but surely away from the dollar and mainly toward the currencies of smaller economies like Canada, Australia, Singapore, South Korea, Norway, Sweden. I would include Switzerland, a traditional reserve currency under that heading as well. At the same time, the dollar has not lost ground in the foreign exchange market and is invoicing and settlement currency for banks and non-financial firms around the world. The difference may be attributable to those geopolitics that we were talking about before, that central banks and governments are sensitive to them, (15/38)
speaking, I think there has to be conformance between the currencies that central banks and governments hold on the one hand and the currencies that their domestic banks and firms use on the other hand. So when you talked about the changing nature of the composition of international currency reserves, you highlighted that it hasn't been a move towards the euro, which maybe a lot of people would have thought if you were... In fact, I think even you may have said that early in the 2000s that if there was going to be a move, it would have been a move towards the euro. But instead it's been a move towards a larger number of smaller currencies. What has driven that reallocation in your estimation? First, there has not been movement toward the euro because there is a very limited supply of safe and liquid public label, meaning government issued bonds. Last time I looked, there were only four euro area governments with AAA ratings and its AAA rated bonds that central banks prefer to hold (17/38)
other things equal. There were hopes that next generation EU, this 850 billion euro European Union bond taken in 2020 in response to the pandemic, would change that. But next generation EU has been very slow to roll out. It looks like a one-off. They didn't do something similar in response to the energy shock last year. So it's been hard to move toward the euro because of a shortage of safe and liquid euro-denominated government bonds. On the other hand, Canadian dollars and Australian dollars and the like have looked relatively safe. Some of those bonds of smaller economies have had positive interest rates, which look attractive relative to the negative interest rates that have prevailed in Europe until recently. It's become easier to trade currencies even of smaller economies because of electronic trading platforms with automated liquidity provision and currency matching. Algorithms, bid-ask spreads have come down toward the bid-ask spreads on the currencies of big economies. If you (18/38)
want a China play, you want a currency that moves along with the prospects of the Chinese economy as opposed to the US economy. Until recently, there was an argument for holding Australian dollars, for example. Australia-China is another example of recent decoupling, but until recently, Australia's fortunes have been closely tied to China's. So I'm an economist. I can't give you one answer to a question, but I can give you two or three. Is that a movement that you expect to continue? Do the network effects and lower costs associated with transacting in dollars become less appealing in a world where you have alternative settlement solutions and possibly, let's say, stable coins or CBDCs? Yes. I do expect the trend to continue because I expect the cost of trading currencies moving in and out of them to continue to go down with advances in the digital sphere, maybe including central bank digital currencies. Don't see why not. And the second, remind me now, the second part of your question (19/38)
was... If that would make the commercial use case for the dollar, the argument for the dollar strength less compelling because there are alternatives for being able to move between two pairs since you've got an intermediary currency that you can use rather than having one dominant currency that everyone's using. Yes. So I made that argument in a book that came out in 2018 called How Global Currencies Work with two co-authors, Arno Mel and Olivia Cheetu. We argued that the network affects the complementarities between the different functions of a currency and the pressure, the advantages of using the same currency and cross-border transactions that everybody else is using. That's what we mean by network effects in this context, that in a high-tech digital world where it becomes easy to pull up an app on your smartphone and trade a currency at relatively low cost, those network effects and complementarities will weaken and we will see more diversification away from the dollar in all of (20/38)
these different international domains. So we made that argument now five years ago. I think that trend is ongoing, but recent events have reminded us that movement away from the dollar is still relatively slow. I might even call it glacial, so I've been surprised given all this action in the digital sphere and weaponization of the dollar that such movement hasn't been faster. It can always accelerate going forward, but there has been a lot of political and economic turbulence. We had Donald Trump for four years, the unpredictable President Trump and his unpredictable trade policies and that did not precipitate the fast movement away from the dollar that some people had expected. So how much of that glaciality, if that's even a word, is a result of all the effort that's been invested in and the network effects that result from the use of the dollar after so many decades and how much of it results from balance of payments and the way in which the underlying economies have been structured (21/38)
so that it's not so easy. This is the thing that I think is interesting, at least how I frame this and look at it. The Chinese absolutely want financial, economic independence from the United States because they want political independence. They want to be able to have complete autonomy. They don't for sure want to have happened to them, what happened to Russia. But at the same time, so much of their economy has grown up around the US dollar based international trading and financial system and has resulted from trade and engagement with the rest of the world and the persistent running of structural current account deficits by the United States. So how do we separate those two? The fact that yes, there are network effects associated with dollar and US dollar based financial infrastructure, but there's also an economic reality that has depended on various economies playing various different roles. I think we can separate those things by looking at the different uses of the dollar. So (22/38)
touched on the rise of the international dollar system post World War II at the beginning of this conversation. And part of what facilitated the dollar's rise was the Marshall Plan and the recycling of dollars. And the Marshall Plan, as it was structured, was less of a loan, more of a grant than what, let's say, China seems to be doing with BRI. One, do you agree with that? And two, how important was the Marshall Plan and what China, do you think, need to do something similar in order to get countries to adopt the yuan and to further internationalize it? After World War II, trade flows, current account balances were the main thing that drove the balance of payments. There was a dollar shortage in Europe because European countries had basically used up their dollar reserves to finance their war effort. They found it difficult to get their economies going because they needed imported merchandise, cotton imported from the United States and elsewhere in order to get their textile exporting (24/38)
industries up and running, and they needed other imported equipment. So the Marshall Plan was important for getting European economies on their feet, again, restoring their capacity to export and earn dollars. More generally, I think the Marshall Plan did play a critical role in the golden age of economic growth in Europe and Japan, getting it started in the third quarter of the 20th century. Do I think the Marshall Plan was critical for solidifying the dollar's international role? Not so much. I think the dollar would have been dominant had the European economy been robust, as it was, or had it limped along in the third quarter of the 20th century, because, again, only the United States had deep and liquid markets open to the rest of the world. I think China now is in a different situation because not only are there trade flows as there were after World War II, but we live in a world of capital flows as well, until recently anyway, other countries have been investing in China. China (25/38)
has been investing abroad via Belt and Road and in other ways as well. I think Belt and Road probably has not been critically important for China's Ren-Men-B internationalization drive. The data that I've seen from the folks at the College of William and Mary who've done the best work on this suggests that the majority of China's Belt and Road loans have been denominated in dollars, not in its own currency, because dollars have been what foreign construction companies and the like want and use. That could be changing as we speak, but I don't see that Belt and Road has been either important for Ren-Men-B internationalization or that it has played a positive role in economic recovery and development in the recipient countries in the same way that the Marshall Plan did after World War II. We all know the stories of Sri Lanka and Pakistan and elsewhere where Belt and Road has probably unbalanced played a negative role. The stories of railways in Kenya financed by Belt and Road that carry (26/38)
week, Secretary Yellen is supposed to meet with her Chinese counterpart in Zurich, I believe, and try to begin to reach understandings that will prevent the emergence of that bifurcated world economy. I hope that my former, my old UC Berkeley colleague succeeds in making some progress there. I want to get your take on a thesis that's gotten a lot of attention in the financial community recently. It's been put forward by the managing director and global head of short-term interest rate strategy at Credit Suisse, Zoltan Posar, as part of his war dispatches, which are like a subset of email notes that he sends out to people on his mailing list. I would call it the commodity encumbrance thesis though. I'm not sure that this is what he would call it though that is a term that he uses in a number of his recent notes. The basic argument as I've understood it is that in a bifurcated global economy where 40% of the world's proven oil reserves and where a large share of industrial commodities (28/38)
are produced in countries that may end up decoupling from the American-led international order and where fiat-based reserve assets are seen as less desirable forms of collateral, that we should expect to see certain industrial commodities like oil, copper, lithium, et cetera, begin to trade at a structural premium in Western countries and that we can expect to see alternatives to the US dollar like gold, for example, play a more important role as reserve assets. Are you familiar with this thesis and do you think that something like this can emerge without a larger kinetic geopolitical conflict? In other words, can we see a real break of such magnitude that would impact the global economy and growth, which have been driven by more internationalization and interdependence without a war? You should have Pozaran on your podcast to speak for yourself. I've spoken with him about it and it may or may not happen. We'll have to see he's limited in terms of how many interviews he can give from (29/38)
what I understand, but I would love to have him on to talk about it. I'm sure he can represent his views better than I can. He tends to extrapolate current events, right, that tensions between China and commodity exporters on the one hand in the US and the G7 on the other hand have been rising. Is it insightful to extrapolate current events or to think about how there may be an inflection point that turns matters back to the status quo, toward the status quo if China and India and others get the representation in multilateral organizations like the International Monetary Fund and the World Bank and the World Trade Organization that they deserve? I think there is concern about the possibility of this kind of rake in the White House and the US Treasury and in Europe and the resistance that G7 countries have put up to giving the rising powers a louder voice may diminish in order to try to bring them back into the fold and give them more say in the governance of a globalized economy. What (30/38)
would the alternative where we do see this bifurcation occur? What would that alternative monetary and financial architecture or broader global economic architecture look like? I don't see a clear description of that in the writings of the folks who extrapolate current events and say that bifurcation is coming. Maybe what we should do is go back to the post-1945, the post-1948 global order when there was a Soviet bloc, an Eastern bloc centered on the Soviet Union and a Western bloc centered on the United States and they hardly interacted with one another. I think one can imagine the coexistence of two largely disconnected blocs where the Western bloc utilized mainly the dollar and was centered on the US banking system and the economies that were involved traded amongst themselves and China slash commodity exporter bloc centered on China that utilized the renminbi that would look like the Cold War world. I can imagine its existence but it's like the old New Hampshire joke. How do I get (31/38)
to the following address? Well, you can't get there from here. I cannot imagine the transition. I think the transition from our present globalized, highly interconnected world to that bifurcated world would be- An event horizon. Yeah, it would be immensely more disruptive than the fallout we've seen from Russia's invasion of Ukraine. It would be a disaster for the global economy. At some point we would recover from, said, disaster. But it would be a wrenching change that we have to hold will be avoided. We have to hope will be avoided and we have to hope that those who simply extrapolate current events are looking forward to the wrong future. What do you think about the argument that sovereign debt has become an increasingly unattractive form of collateral and material to serve as a reserve asset for central banks and that there's some increased role for commodities and in particular for gold in the mix? I have a research paper on that that is working its way through the clearance (32/38)
process of an international financial institution, but should see the lot of day really soon within days where my co-authors and I looked at past instances of sanctions and asked specifically whether their imposition or expectations of their possible imposition led central banks to move away from currencies toward gold in particular. And we do find an effect. There is a significant tendency of countries that experience sanctions in the last 40 years and there have been a bunch of them to shift the composition of their reserve portfolios away from currencies and toward gold, which can be warehoused, vaulted safely at home. But that significant effect is very small. So if you hold your reserves in gold at home, those reserves are safe. But they're basically useless. They can't be used in financial transactions. They can't be swapped for currencies. They can't be lent out in order to earn interest. If a central bank wants to hold and do those things, it has to hold the gold in London at (33/38)
the London Metal Exchange or the Bank of England or in New York at the Federal Reserve Bank of New York. And if you want to use that gold for merchandise transactions, you have to commission jumbo jets and ship that gold around very carefully. So there are costs as well as benefits of holding your reserves in the form of commodities, gold or platinum or something else as well as benefits from doing that if you are a rogue state or worry about regarded by the United States in the future potentially as being a rogue state. So we do see that movement on the part of the various countries, Iran, Belarus, you name it, who've been subject to various sanctions in the past. But that effect is very small. We do not expect commodities to displace the dollar despite steps in toward weaponizing the latter. Do you think it also would be... I'm familiar with a paper by Michael Pettis who's also been a guest on this podcast where he argues that using commodities as reserve assets would run counter to (34/38)
many of the existing frameworks that bankers have for thinking about how to manage the boom bus cycle, how to manage the business cycle in a counter cyclical way because of the fact that commodities correlated with periods of economic excess and when commodity prices fall, that tends to be when markets are declining and the economies are contracting. Are you familiar with that argument and what are your thoughts about that? So I haven't heard that argument. My colleague Brad DeLong says, never argue against Paul Krugman because Paul is so often right. I never argue against Michael Pettis because his views are original and I often come around before long to realizing even though they differ from the status quo, they are right. But I'm going to have to think more about that one. Yeah. Yeah, let me leave it at that. I can send you that paper if we're done. But you're like the biggest econ sleuth. You probably find it in seconds. So you'll remember and find it. So I'm going to move the (35/38)
rest of our conversation onto the premium feed, Dr. Eichengreen. We're having this conversation while the Bank of Japan is meeting to discuss monetary policy and whether or not they are going to increase the band around which they allow JGB yields to trade. There have been huge dislocations in the Japanese bond market and one of the interesting things that's happened recently, which I think I understand, but which at first made no sense to me, is that both yields and the yen have been rising concurrently, which I'm guessing is in anticipation of the central bank of Japan raising interest rates, the expectation being that the yen would therefore become more valuable. Anyway, I'd like to try to untangle that a little bit because I've struggled to understand the story there and I haven't really seen any podcasts do a dedicated segment to it. I would also like to discuss with you something else and this kind of speaks to the work that you did in your book, The Populous Temptation, which (36/38)
has to do with the reorganization of power. Let's start with it America. Let's just focus there and we can expand outward to let's say Europe or other countries, but what we saw in the beginning of the late, I guess late 19th century through the first half of the 20th century was a reorganization of power away from capital towards labor. And we spent the last 50 years moving in the opposite direction away from labor towards capital. I'm curious to ask you in the second part of this conversation what you think the next 50 years or the next 40 years or whatever is going to be characterized by. And if that dichotomy isn't actually the right framing, but rather that the beneficiary of the next 50 years is going to be governments and nation states, which are going to accumulate more power, that it isn't going to be capital, it isn't going to be labor, but it's actually going to be nation states. And that economic opportunities in some cases will actually manifest around the things that (37/38)
governments choose to support, deem important and which they regulate accordingly. Now, for those of you who are new to the program, Hidden Forces is listener supported. We don't accept advertisers or commercial sponsors. The entire show is funded from top to bottom by listeners like you. If you want access to the second part of today's conversation with Dr. Eichen Green, head over to hiddenforces.io. And sign up to one of our three content tiers. All subscribers gain access to our premium feed, which you can use to listen to the rest of today's conversation on your mobile device using your favorite podcast app, just like you're listening to this episode right now. Dr. Eichen Green, stick around. We're going to move the second half of our conversation onto the premium feed. Very good. Thanks for listening. We'll see you next time. (38/38)