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The London School of Economics and Political Science.

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Get ready to hear from some of the most influential international figures in the social sciences.

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Very good. Welcome, everyone. Welcome to this LSE event, the LSE this Evening. My name is Ricardo Ghujs and I'm the A.W. phillips Chair in Economics at the LSE. I am very, very pleased to welcome Professor Kenneth Rogoff. Today, Ken is the Moritz Boas professor at Harvard University, and he is here to give us a lecture based on his recent book, Our Dollar, your Problem, an insider's view of seven turbulent decades of global finance and the road ahead. A few announcements. First, for the social media users. The hashtag for today's event is lsevents and the event is being recorded and should be made available soon, subject to no technical difficulties. Kenny will speak for a little while, then we will open it to questions from the floor so you will have your chance to put questions for the online audiences. Please submit your questions via the Q and A feature at the top left of your screen, and I will submit those questions myself. When you do ask questions, please let us know your name and affiliation. And we are particularly keen to hear from students and alumni. So please let us know. For those of you in the theater, I'll let you know when we open the floor for questions and just raise your hand and the steward will go to you. Finally, at the very end, there will be some copies of Ken's book available if you want to purchase, and you will stick around for a little bit if you'd like to get a signature. But for now, I am delighted to hand over to Professor Kenneth Rogoff.

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Thank you, Ricardo, and it's such a pleasure to be here. It was a while ago, but in 1999, I was a visiting professor here and I still remember students, you know, having no place to go and the library, it looked like a homeless encampment, you know, with people trying to study. And it's really remarkable how the campus has really come around. So I am going to talk about my book, Our Dollar your Problem. And I'll start by saying what the title comes from. Some of you may know, but probably a lot of you don't. In many ways, the closest I should start off by saying I finished this book almost, you know, except for one paragraph, before I knew who won the election. It didn't come out till much later. I'll explain that I thought Kamala Harris, his opponent, was very mediocre and Trump was Trump, and I thought there was more commonalities than you might think between what they might do. And so I sort of was somewhat skeptical about where things were going either way. But I chose the title way before I knew Trump would win. But in many ways, the closest parallel to Trump, without a doubt, is Richard Nixon, who was the president from 1968 to 1969 to 1960, 1974. I'm not trying to insult Nixon, but if you were to listen to the Nixon tapes, you know, he recorded the conversations in the White House. I don't know if you know, that they're available. I just wasn't planning to say this. Well, throw it out. I was. I was a professional chess player before I was an economist. And I remember meeting some Russian grandmasters. We're walking somewhere in Poland and we're going for a walk, and I'm telling them about the Watergate tapes. And I start out by saying, well, our President recorded everything going on in the room, and they're going, yeah, yeah. So, you know, of course. And then. And he was forced to give it over to the Senate. Right. You believe that. That he really did it. But it happened. And if you listen to these tapes, you know, he says things like, who gives a flying F about the Italian lira? Like, as one quote, you know, in it, and you see many things that sound like Trump on camera. But there's some similarities there. But there are also, I think, similarities in terms of their impact on the financial system. So the world, as you probably. Probably know, used to be on the gold standard. Actually, for a long time, not forever. I won't go through the whole history of the global financial system, but for many, many decades, we were on the gold standard. And then it fell apart. At first during World War I, and then completely fell apart in the 1930s, where, since then, as an American, you can no longer trade your dollars for gold. But back then, actually, a dollar bill and probably. Probably a pound note. I only know the dollar bills actually said payable in gold. And you could take it and get gold. Well, that went by the wayside. But when we reconstructed the global financial system after World War II, the United States was placed at the center of it by design. Now, I should say. I'll come to it later. There are a lot of countries that were really not in the system. Much of the world was not in the system, but the countries that were had the United States at the center. And the United States had to pay gold to treasury bills if the bank of England wanted the Banque de France. So the dollar was convertible to gold. And everybody else made their currencies convertible to the dollar. I won't get off, you know, all the issues about it. It's a very interesting period. It came to an end eventually because. Because there are many reasons, but one was that when Nixon was president, we really started getting inflation that later became this very heavy 1970s inflation. It was creeping up and it sort of started occurring to many people that fixing the price of gold, letting the price of everything go up, that's not really equilibrium. And in mid August of 1970, he said, no more. We won't trade the dollar for gold. And the Europeans were furious. Canadians, Japanese too. They were furious because back then Europe held a similar amount of treasury bills as a share of GDP to what the Asians hold today. They hold trillions and trillions of trillion dollars. They saw this inflation coming and some of this was long term debt. And they said, what are you supposed to do? And Nixon sent over his treasury secretary, John R. Connally, who's a very colorful character, but I won't get into. He's a Texan. And he said, well, it's our dollar, it's your problem. And I think that episode sort of spoke to me and partly why I chose the title because I didn't like the arrogance of it. We Americans are arrogant. I don't need to tell you that. But I didn't like it. I had lived in Europe actually in London also as a teenager playing chess, but other places in Europe and sort of really felt how people felt about that. I didn't like it. But also it's ironic because when we got off the gold standard, it was our problem. We didn't really have a plan for how we were going to fix inflation. That only came much later. So anyway, that's the genesis of the title of the book. The book goes through the whole back a little further than that, but the whole post war rise of the dollar, which goes through a lot of ups and downs and twists and turns and I think pieces of luck and also weaves in some things I experience with meeting with world leaders, policymakers. I definitely don't regard it as a memoir. I think it's pretty light on that stuff, but enough to try to give a flavor of the times and what was going on. Although the book's about the dollar, it's not really about the value of the dollar. I have some discussion of it. This is a graph. I think it's actually quite a good one. If you're a PhD student or even an undergraduate in economics, you can get it online easily. This isn't mine. I have a version of this that's mine, but this one's not mine. This comes from the St. Louis Fed. It's a measure of the purchasing power of the dollar and it's against the major trading partners. There are a lot of ways to do it. I won't even get into the particulars of it, but no matter how you do it, this goes from 2006 through almost the present. No matter how you do it, the dollars had this amazing run upwards. Don't think that that's always how it is, because if you stretch it further back, there was periods that's gone like this. In 1985, the dollar was similarly very high and it fell by nearly 40%. In 2002, when I was chief economist at the IMF, same thing happened. I wouldn't rule out same thing happening again. But it doesn't necessarily mean that the dollar's not important, that it's not used in trade, it's not used in finance. It's really a separate issue that I'll unpack a little bit over the course of this. So when, you know, there's this little depreciation that happens at the end of this period that under Trump it went down 7%. But you know, we say, oh, that's Trump. I mean, it was very high. And one of the very few empirical regularities we have might go down. I'm going to skip the next few things which is about why that might have happened. I won't worry about it. One of the things I think that's surprised everyone, and I'll certainly, again I think if we went back and were having this conversation 25 years ago or certainly 40 years ago, is how the US has maintained such a large share of global GDP. Nobody, and I mean nobody, thought that would happen. There were all kinds of books about the decline of the American health empire, et cetera. And they weren't necessarily that we were screwing up or doing everything wrong. It was just that our old growth models had catch up and the world was catching up and Europe was growing very fast. And so this has a couple measures of the US share of global gdp. One of them is trying to control for prices and it's, I think, less meaningful for most of what I want to talk about. So I'll focus on the dash line, which is the simple way to calculate it, where you take British pounds, you take the UK GDP in pounds, you convert it to dollars, and how big is it compared to the us? This compares it to the Whole world. So after World War II, the US was nearly 40% of world GDP. That was short lived. It comes down, but not as fast as anyone thought. It's a surprise. So that's certainly been a factor. I think one of the reasons for this, I think one deep reason for this is that a lot of the old growth models we had had decreasing returns to scale. But a lot of modern technologies involve these network externalities where you get big and you get big first. That doesn't necessarily happen. Okay, so focusing on this question of how important is the dollar in the world? There's actually not such a simple answer to that. There are many, many measures of it. One measures how much of trade is indexed in dollars, 80% of oil pricing is in dollars, how much of goods, how much of world's financial instruments are in dollars. And there are different angles on that. How much of foreign exchange rate is in dollars. That's actually one where the dollar is very impressive. But there are all these different measures, but none of them, you know, they each captured different things. This is a measure that comes from a series of papers I did with Carmen Reinhart and also Ethan Elzitsky, who's here but not here today. He teaches here, but he's not here today. Where we look at central bank policy on the logic that if the central bank's seeing everything in the economy, how much problem there is with dollar debt, how much problem there is with trust trade and if the central bank's choosing to stabilize against the dollar, that that means something. There's simple measures like what we call reserves. What are central banks using to protect against a crisis? What do they hold? So in this figure, red are dollar centric countries. Europe's there because in 1950 I already said everybody was pegging to the dollar. The that was Europe, but everybody. There were a lot of countries kind of not in the system. So in orange is China and Russia who were off doing the Soviet Union, former Soviet bloc, off doing their own thing. There's a lot to be said about everything that happened in between. But this goes to 2015. This is from a Quarterly Journal of Economics paper, 2019 with Ethan and Carmen. And the dollars just colonized the world during this period. So by the way, red are dollar centric countries. And if it's light red, it's looser. Where the dollar, you might use it as a reference currency, but it's looser. We explain it in the paper. One thing to notice though is Europe has disappeared. Europe is in blue. It's not part of the dollar anymore. And just it was small in terms of geography, but in 1950 it was a huge part of the global economy. So you don't. Things aren't forever. I think it's a lesson to bear in mind in Africa, those are the French franc zone, where for various historical reasons they've maintained the franc. And there are a couple countries in yellow where their exchange rate rotates so wildly, it's hard to make an analogy. I know what you're thinking. Exactly. So in my book chart, I have Greenland and it's actually huge. And you can see why Donald Trump wants it. And it would be in blue using the Danish kroner, which is in turn kind of pegged to the euro. But in using our metric and using a number of metrics, the dollar has actually been in gentle decline for a while. So there are a number of reasons for this. I would say the biggest single reason is that you can see here, Asia is a very big part of the dollar block. And in fact, on a GDP weighted basis, Asia's now become huge. China is the second biggest country. And the fact Asia was choosing to peg to the dollar is very significant. There's a lot of reasons China shouldn't have wanted to peg to the dollar for so long. I discuss it in the book and they're figuring that out and they've loosened it a lot. And that's one of the reasons that by a bunch of measures it's been in gentle decline, even pre. Pre Trump. Another reason has to do, maybe relatedly, but the US Very promiscuously uses financial sanctions. And I'll come back to that. We also use the financial system for spying. We. I know, you know, we're really good at tech, but actually some of it is that a vastly disproportionate share of the world, world's financial transactions clear through the United States. I'll come back to that point a little later. But I have a later chart in my book which actually not in color, why I don't have it here, which shows this fading a bit. So I want to talk about what are the advantages to being the dollar? And this has become a big debate in the United States because the Trump administration said it's a terrible burden on us to be the currency everybody's using. You should pay for it. And finding different ways to make everybody pay for the privilege of using the dollar. I think most economists would regard being the currency everyone's using as an incredible advantage. So one simple advantage is you get lower interest rates. But because there's demand from the rest of the world. That's an obvious point. But also, as I mentioned, it's one of the reasons why the whole global financial system, the back office of the global financial system, when you make a payment and somebody else receives it, who is it? Who accounts for that? A lot of that is taking place through various institutions that are effectively controlled by the United States. United States. That's partly because the dollar is so big. I won't get into it right here. But it's also because of US military power. Trump uses this very crudely of saying, you don't use the dollar, we won't protect you. You know, Korea goes off the dollar, forget it. You know, China can have you. But believe me, you listen to Nixon on the Watergate tapes. We know a lot about Lyndon Johnson and Reagan and these people, they didn't do it on camera. Could be, I don't know how to say it. Sobs. You know, when they were negotiating with someone, they were pretty tough. So for a number of reasons, that's also a big advantage. The first person to really start complaining about this was the French finance minister who later became president of France, Giscard d'. Estaing. And apologies about not saying his name exactly right. And he complained, he said, it's just not fair. We have to hold these dollars which don't pay that much, and the money is getting recycled back into Europe and they're buying up Europe and making a lot of money off Europe. Europe. And he called that exorbitant privilege, that the US was somehow getting this sweet deal by being able to do this. And actually what this next figure is, it's just sort of an aside in the book. One of the people exercising this exorbitant privilege was my great Aunt Henrietta, who didn't come from a wealthy family for sure, but her dream was to be build a shoe factory. And she actually was able to design her shoes in Italy. I would say she didn't get rich on it, but had a very successful career coming from this. This is from McCall's magazine. I want to say 1953 or something like that. These are her shoes. But more significantly, Andy Warhol drew this picture. You may know that. That's what he did. That's how he got his ideas. That's what he did before he became famous. Sadly, she did not buy the print, which would have made her infinitely richer than whatever she made on. The shoes are pretty cool looking, but, oh, well, that was difficult for my cousins, but so be it. So over time, there were a number of challengers to the dollar. And by challengers, it's not that they're supplanting the dollar, it's taking market share. If you take market share, then the dollar faces lower interest rates. And actually, as some scholars have shown, I particularly mentioned Jesse Schrager, Christopher Clayton and a couple co authors have done some papers on this. If your market share drop drops from 90% to, say, 65%, it makes a big difference on your ability to enforce sanctions. And if you think about it, you know, if there's only one charge card, American Express, and you're cut off, it's really bad. But if there's MasterCard and Visa and cryptocurrency, it's less so. So there are a number of countries that are challenged for market share. The most significant first one was Russia, the former Soviet Union. And I have to say I have Dmitry Vukov must be somewhere in the audience. But I also have a different Russian colleague who said, who would have ever thought that that's ridiculous? Well, everyone thought that. The historian Angus Madison wrote about this. Many leading scholars wrote, wrote about this. My professors at Yale had that view. Marty Weitzman had that view that that was inevitable. Not that Russia was going to overtake the United States, but that it was going to come very close. The textbook that I had to use as an undergraduate at Yale predicted that Samuelson's textbook that many people use and you know, we now know, for various reasons that didn't happen a little bit, it might have ended a little bit differently. I won't go into that. But really the first country to, after Russia, to really threaten the United States economically was Japan. And I think people forget how far Japan got in this. So one measure is that per capita income in Japan at market rates 1 above the United States. This is another measure is the value of the Japanese stock market combining. They have one major market, a couple minor ones, and you combine the ones in the US it exceeded the value of the stock markets in the United States. These are traded internationally. This is what people thought. I mean, right now you're looking at what the Magnificent seven five, whatever depends on what weak it is. And you think, you know, everybody thinks they're going to be great. I mean, that was Japan in its day. It seemed to be doing amazing. Even more amazing is the value of real estate. There are a number of constructs of this. They all say the same thing, that the. If you took Japanese real estate at market value, it exceeded that of the United States for quite some time. It's not true anymore, but it did. Okay. Japan only had half the population of the United States, but, I mean, England only had a quarter of the population of France, and it was the dominant currency. The Netherlands actually had a period in the 1600s when it was the dominant currency and it was less than half the size of England. So simply being small is not ruling this out. And there's this very important episode. I talk about it in the book, and it's one of the things where I feel like I got it wrong. When I first thought, for years, when I thought about it, was the United States kind of beat up on Japan and made Japan massively appreciated. Exp. Exchange rate, make its exchange rate go way up and make everything more expensive. It's called the Plaza Accord 1985. And most of you probably didn't care about this, but early in the Trump administration, there was this idea floated of the Mar A Lago Accord where it would replicate some of what we did to Japan and we would do it to everybody. We would do it to Europe, we would do it to China. And I said, there are a couple things. There are a few things in the book I talk about where I change my mind about something. And I used to think this was nonsense, that Japan got old and whatever. And I think I have changed my mind about this. The Chinese, which I'll come to in a second. If you talk to any major Chinese policymakers or Chinese leaders, they have said for decades, we will never, never, never allow the US to do to us what you did to Japan. Well, we'll see in a couple slides. This is what happened to the yen. It went way, way down. I'm sorry, it's going way, way up. And value, because this is yen per dollar. I'm an international. I work on exchange rates my whole life. I still get this confused. So it's become more valuable. I think another important challenger that still remains the second most important currency is the euro. And there's a lot to say about the euro, but it's remarkable that it happened. I was a skeptic. I didn't think they could do it. I watch it blow up in the early 90s, and a lot of people other than myself made a lot of money on that. I wrote a paper on it and I thought it wouldn't, you know, I just thought they wouldn't do it and they did it. And I think I'm, I'm. I know it was in London. I'm not sure. It was at lse. I was at conference where a Very top British economist, I would say British American economist, maybe giveaway, but was declaring today, and I think it was 2006, debt in Europe exceeds that of the United States and therefore the euro is really about to make it. And Olivier Blanchard had a paper a lot like this with Francesco Giovannzi and Brookings. Of course you could have interpreted that was all this debt another way. But I think a lot of people thought that. And again, I talk about this at length in the book, but I believe had Europe not, had France not insisted on bringing Greece into the euro prematurely, we just live in a different world today. The Euro is coming back. Actually, you may not believe, believe that being in Europe, it's coming back. But the euro had reached, I would say, 25% market share on a lot of measures, and then it fell dramatically. But there was a lot of catch up, which has slowed down. I'll skip this, of course. The modern day Challenger is China. And I did a series of papers on, on China starting almost 10 years ago. They were outgrowth of my work with Carmen Reinhart on financial crises. And I was looking at China and it just looked to me like they were going to have a real estate crisis. I honestly did not have the data to really say anything confidently because they're very secretive about their data. But I had seen price data, I had a sense of that. I started talking about it. I didn't yet have a concrete paper. And I got invited to give a presentation at this thing called the China Development Forum. I saw Nick Stern earlier, who goes regularly to that, asked me if I was going to be there, which I'm not, but 2016, I got invited and I'd already been talking, talking about this, and they actually kind of said, don't talk about it. You know, we want you to talk about the US But I did and, you know, said I thought for a number of reasons they were in trouble. I won't give the whole list here, but certainly one of them was population. One of them was they had caught up technologically, a number of reasons. But I said the big reason is you have a huge overbuilding in real estate and infrastructure and I think you're going to have a problem. These were, I should say we were supposed to submit written remarks, which I did. They said for the translator, but I said something different. And I was, when I finished it, I was a little nervous and the deputy premier came up to me and said, professor Rogoff, we really appreciated your remarks. I'm thinking, is this what they say before they arrest You. But then I was, you know, hardly sparked by that. A brilliant young Chinese economist who was still a graduate student at Tsinghua came up to me who had an idea of how to say something more concrete. And her basic idea, she knew a lot about the data that China was producing, and she's amazing. But her basic idea was, yes, vacancy rates, which is one measure of overbuilding. State secret. Youth unemployment. State secret. Everything's a state secret. But China's very, very proud of how much they've built. So you're always seeing this measure if you've ever seen a presentation on China. So it turns out for housing, you can get, like, really detailed city block by city block, digitally what they built over 25 years. And so we use that data to look at the size of how much China had built. First of all, this is a different chart which just looks at the size of the footprint of real estate and infrastructure in China. And it's large compared to other countries. But this was much more significant when we were really just stunned when we came up with this, which I think has stood the test of time. It's from a paper five years ago at this point. This looks at per capita housing space. It's in square meters. And China's more than the UK and France, and it's a much, much poorer country. Yes. If you've been to China, Shanghai is very impressive. Beijing is very impressive. Like, tiny part of the country. They have 1.4 billion people, a good 800 million are, you know, not wealthy by any stretch. And so we started digging it. We looked at different angles on this. We have a number of papers about this. We have a Brookings paper coming up about it. Hi, I'm interrupting this event to tell you about another awesome LSE podcast that we think you'd enjoy. LSE IQ asks social scientists and other experts to answer one intelligent question, like, why do people believe in conspiracy theories? Or can we afford the super rich? Come check us out. Just search for lseiq, wherever you get your podcasts. Now back to the event. Why has this led to problems in China? It's led to problems because finally they couldn't prop up the market anymore. They did all these tricks and stimulus and this and that, and they just couldn't prop it up. So this is a measure of what the value of Chinese housing was in 2022. In dash, in red is 2023. Prices are already coming down there. And it gives the US by comparison, you can see that China's housing is worth more than the US that's not so incredible. It's a huge country. Japan is less than the size of California. So it's little more shocking. But what you also see is that housing accounts for a huge part of private wealth and prices have, even at the official measures, which are surely understating it, been in free fall for a few years now, particularly in the we call the tier three cities, but that's 60% of the value of real estate in China. Maybe a few have an apartment in Beijing. You're okay. But again, it's very small. They've been in free fall and that's why China's having a recession. I mean, that's what they're fighting because people, they don't have Social Security. You have to pay to educate your children. You could go medical care, you could go on and on. And suddenly people feel much poorer. I nevertheless, although I would use this logic to argue China is not going to catch up to the United States anytime soon, it's going to have this problem for a long time. It'll eventually go away. As Reinhardt and I showed in our 2009 book, these Things last a long time, but not forever. Nevertheless, it's going to hold them back for quite a while. So competitors Japan, Europe, Europe, Russia, China, and I think cool figure, but I won't talk about it today. I think cryptocurrencies are another issue where there's some elbowing in on the dollar because the dollar commands the world's underground economy. And the underground economy is big. The World bank did it what do you call it, you know, a meta analysis of all the studies that had been done and came up with some numbers. They're kind of pulling it out of their hat because the nature of the underground economy is stuff the government can't see. And so it's hard to measure. But I did a paper that just came out with Francesco and I also incorporated in my book with Francesco Papada, where we use value added tax revenue country by country, and we use it against survey data collected also by the European Commission on a standardized basis, country by country. And the survey data can give us an idea of what they should have collected with the value added taxes. And then using that, we form a measure of how much is missing and and goes year by year. These are averages. Greece is very high, Italy's very high. But I should say these are we were really shocked. They're remarkably similar to what the World bank survey was finding where people are looking at electricity production, the quantity of cash and other stuff. Stephanie Stancheva who's an amazing French, Bulgarian economist colleague of mine, and she won the Clark Medal this year, if you know what that is for the top economist, 40 and under might be under 40, I'm forgetting. And she's worked on this topic, and she was enthusiastic about the paper. She said, Bulgaria. That can't be right. 20%. I go to Bulgaria. There's no way it's just 20%. And so that's where, you know, there are these uses of cryptocurrency that are competing with the dollar. And I've had papers on this as well. I talk about it in the book. I'm not going to. Where we look at forensic accounting of what happened. And we have a. I have a paper with Clemens, Grapp, von Lochner, who, by the way, is on the market this year, and Carmen Reinhart, where we sort of use forensic analysis of some crypto markets to demonstrate the transactions used in cryptocurrencies. And as a sidebar, while we were writing this paper, Clemens found himself stuck in Lebanon when they had a financial crisis and he didn't have access to any cash. The banks were all closed, but he had bitcoin. And he went around and found this bitcoin shop. That's what you're seeing a picture of here in downtown Beirut where you could trade bitcoin for cash. So he got a couple thousand dollars that way, but then he had their wallet number, at least one of them. He's looking at it, and he sees transactions for $300,000, $500,000, a million dollars, routinely, every day. And this person's handling cash. And when he did it, when he went there a couple times, there's only one guard outside. And then finally it dawned on him. This is a Hezbollah bank, and this is how they're transferring money to everyone, everywhere. I didn't put this in the book. Clemens gave me permission to. But I realized, even though I don't agree with everything Israel does, but I'm pro Israel by and large, I didn't particularly want to give them a bombing target, you know, by showing a picture that maybe they could trace something of where this was. But I would just say that this is this idea that crypto, you know, it's just very innocent. And also this notion that I used to believe very early on that crypto had no use in the underground economy. It is used. That's final demand. So the idea that it should be worth nothing is exaggerated. A couple words, and I should wrap up about. I've gone on a little. Well, maybe not Longer yet than I intended. But I'm getting to the end of what I intended. Central bank independence Independence is a big issue these days, particularly in the United States. We're going to get a new central bank head announced any day now. And I think I wrote the first theoretical paper on this of why you wanted to have an independent central bank that put a big weight on inflation. And even though you hated them a lot of the time, it was a good system. It's nevertheless relatively short lived thing. And I think everybody, when they look at it thinks about interest rates. Trump says he wants interest rates to be lower even though it seems like he would get inflation. He says he wants interest rates lower. And I believe whoever wins will have promised probably a percent worth of cuts or doing their best to deliver a percent worth of. But I think something people don't think about is there are other aspects to the Fed regulation for darn sure think about. I don't know if you followed this, but they've used the Federal Home Loan Board information to take detailed information on people's mortgages and go after some of Trump's enemies by finding some purported and concealed. That's nothing compared to the data the Fed has because the Fed audits all the banks and collects information. But another thing, and Ricardo's worked on this topic, another thing the Fed does that I think most people just, you know, don't think about or care about is something called swap lines. And a 2:1 sentence explanation is the dollars used all over the place. But only the Federal Reserve can print dollars. And sometimes there are shortages in the local markets, the solar market, the London market, anywhere there can be shortages. And when this is happening big time, the Fed basically makes a loan in dollars in return for a loan in local currency. And it went into the many billions of dollars, hundreds of billions of dollars in the global financial crisis, again in the pandemic, a little bit in the European debt crisis. Well, if Trump were to control the Fed, and I think that's a serious concern he can make just like he does with tariffs, he can say I don't like, I don't like the way the Swiss lady was speaking to me, said that at the Davos recently about the Swiss president or some such language, no swap line. You know, next time there's a crisis that would literally cause an immediate crisis somewhere if he said that through these instruments. When I talk about why I see the dollar in decline, some of the reasons are from the outside that we use sanctions, all these things we're using on Russia The European stuff like it, we control information. But I think a lot of the problems come from the inside. Central bank independence is one of them and the other is debt. The US debt's very high. This is another random thing that's not in the book. This is actually my friend David Blaine who is incredibly good at holding his breath and holding balloons there. And I think there's some aspect to that, to the US debt, you're all familiar with, that the US debt is actually at this point greater than the debts of all the advanced countries put together. For a long time that was thought to be who cares? Because interest rates were really low. They'd always be low. Why would you care about that? And I, I think if you look at history, you would realize these things don't last. This is another measure from the Federal reserve Bank of St. Louis where this is a measure of the inflation adjusted interest rate. You can buy a Treasury bill but 10% of our debts like that indexed to inflation. So if inflation goes up, you get paid more and more, you get a lower interest rate, baseline interest rate to start. So you can see it was, you know, two, two and a half percent. But in the circle period, which runs roughly 210 to 211 to 2022, it averages zero. And there was all these papers written at the time. Ricardo can ask me about it, but there are all these papers written at the time time by Olivier Blanchard most famously. But Larry Summers wrote these things about secular stagnation. We're never going to grow again. Interest rates are always going to be low. Paul Krugman wrote about this constantly in the Times. Debt is a non issue, no one should ever think about because the interest rate is 0. I actually did a debate at Oxford Union with Peter Thiel about this once, believe it or not. And so I did these debates 10 years ago. And part of, you know, the main thing I was looking at was this, that if you look at this is the real interest rate over this is actually over eight centuries. You can just look at the UK and the US and you get something similar. And you know, there are periods where real interest rates are low, there are periods where they're high. And by the way, it's not as volatile as it looks. It's because we've squeezed 8th centuries into this little graph. If you stretched it out, it would sort of look more normal. But the period, the period that Larry Summers was writing about is the very last period, the little tail end of that where the interest rate was going down. It just shouldn't Be a surprise. And by the way, post 1900, there's no particular trend in the real interest rate. It's not necessarily trending down. So that's a concern. Some people say demographics mean that in the future interest rates will be lower. This is. That last chart was from paper from August 2024 in the AER with Paul Schmelzing and Barbara Rossi. This is also from that. It's a variant of a chart we had there where we looked at demographics in the real interest rate. And it's true, there are all these papers about. This is this little period recently where population's been going down and the real interest rate's been going down. But the extrapolation people make for 75 years is probably a little optimistic. There are lots of upward pressures on the real interest rate. One of them is interesting. Everybody's spending more money on defense. That includes the United States. Trump just raised it by 50%. But we're still going to be nowhere near where it was at the time the Berlin Wall fell. This is defense spending as a share of gdp. Now some people say, well, don't worry, we're going to grow. AI will save all of us. And I won't try to summarize everything here. It might be true, but I would just say don't spend it yet until you actually see what's going to happen. Skip this. I followed AI my whole life because I'd been a professional chess player when I was a teenager. As I mentioned, this has nothing to do with anything, but I like showing it. I played one game over the last really, you know, 45 years, an exhibition game for charity with Magnus Carlsen, who is by far the best player in the world, and somehow miraculously made a draw. My wife took this picture. She didn't even know what happened because people. There was a large audience and their faces were just, you know, aghast. And she didn't. She doesn't play chess and didn't realize. But I have, you know, know followed AI And I think it'll move more slowly than we think. Finally, you know, if the US Gets into debt trouble, what will we. What will we do? Inflation, financial repression. But, I mean, Donald Trump, you, you've got to be kidding that he wouldn't consider defaulting. Like he said in the, in the Mar a Lago accord. I mean, he believes in heterodox policy. And then finally, this is my 2009 book with Carmen Reinhart, which is about all kinds of crises. And we reached fourth on Amazon of all books for A week. At one point we were, I mean, even it's a very the book I'm talking about today is I think, much easier to read and this time is different, but it did we were behind the three Girl with the Dragon Tattoo novels, which had the advantage of having sex and violence. But, you know, maybe the next edition. Thank you.