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LSE: Public lectures and events
Signals: the breakdown of the social contract and the rise of geopolitics
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Ladies and gentlemen, welcome to the LSE for this evening's event. My name is George Gaskell and I'm a special advisor to Craig Calhoun, the Director. It's a great pleasure and honor for me to welcome Dr. Philippa Malgram to the LSE and to welcome her back to the LSE as she took a doctorate in political Economy in the Department of International Relations. And since then she's done a remarkable number of things. She's founded the DRPM Group, and she was an advisor, a US Presidential Advisor. Now, we anticipated that this lecture would correspond with the launch of her new book, Signals the Breakdown of the Social Contract and the Rise of Geopolitics. The breakdown seems to be in the transmission of the book from the printer distributor, etc. So it may well be available tomorrow. I asked Philippa whether she'd come back to sign it, and she thought probably she had other things to do. So she served as financial market adviser to the President in the White House on the National Economic Council. She's a member of the President's Working Group on financial markets. She dealt with the crises of Enron, Sarbanes, Oxley. Not so much a crisis, but nearly a crisis on financial markets and a working group on corporate governance. She was deputy head of Global Strategy at UBS and chief currency strategist for the Bankers Trust. She's been a visiting lecturer in Beijing and China, INSEAD in Paris, and on the Global Executive MBA program at Duke University. Back at home, because she lives in this country, she's a member of the Council of Management of Ditchley Foundation, a frequent guest on BBC programs, and she is the guest anchor on both CNBC's Squawk Box and Bloomberg's most widely viewed programs. As I said, she has a PhD from the LSE and her proper alma mater is Mount Vernon College. So for those of you well, and I should say we're delighted to see you back at the lse, and you often come to the lse, and we're very proud that you do, so we're delighted to see you and to listen to tonight's lecture. Now, for those of you who are Twitter users, the hashtag for today's event is lsesignals. May I ask you to accompany me on putting your phone on quiet so as not to disturb the proceedings. And this event will be recorded and will be available as a podcast, subject to no technical difficulties. After the lecture, there will be a chance for you to put your questions to Philippa. So for the moment, I would like you to join me Please in welcoming Dr. Philippa Malvern back to the school and for her lecture on signals, the breakdown of the social Contract, and the rise of geopolitics.
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So it's funny, when you're here at the London School of Economics studying, I remember my days here. Nowadays, you're asked to do a lot more math than I was asked to do in my time. In fact, today, what I see is most young people who are studying economics are being asked to understand math to a degree that would make you qualified to run the nuclear lab at Los Alamos in the United States. I didn't go down that path. I went into public policy with a much more international political economy background. And that was partly because I happened to have the benefit of some advice of a Nobel Prize winner, Sir John Hicks, who won the Nobel in 1974, and he was one of the world's great mathematicians. His wife, Ursula, who's less well known, is one of the leading experts on public finance from the 1930s and 40s. And she used to say to her husband, it's all very nice, dear, that you can do all that math, but if you can't explain it in plain English, you will never affect public policy. And I think that's right. And my experience in government has been that you have to be able to explain the complexity of what's going on in the world economy in very plain English, or you can't make your point, let alone win your point. And this kind of feeds into something else, which is, you know, we all come to the LSC because we want to be trained to be able to serve the president or the head of the government, the country that we're from. And so you work hard, you study hard, you look at the complex problem problems of the day, and there's this notion in the background that somehow there are these really smart people, LSE trained people, who, if you just put them in a room in the West Wing, they can sort out these very difficult problems that our society faces. And that all works beautifully until you are sitting in that room and the president asks you for the answer to the question, and you suddenly go, uh, oh, I'm that guy, that smart guy.
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And so my sense from public policy was actually, I'm not sure that there are some smart guys in a room who can resolve what's going on, especially if they speak to each other in a very obscure, dense language of mathematics, thus making it very difficult for the general public to participate in the conversation about what's going on and what the choices are. And what the consequences of those choices are. And that, in fact, the interesting thing is the market, broadly defined as all the transactions that occur in the world economy conducted by regular people every day making judgments about what is right for them. And that actually, that probably generates better solutions than those few smart people sitting in a room with a lot of power. So to that end, I decided to write a book that would allow us to shift the language from math to plain English. And my term for that is signals. And there are signals everywhere we look. In fact, I thought it was so interesting when I looked at the Internet today, the probable next prime minister of Greece came out and said he was shocked at how the numbers, the budget numbers in Greece had been so manipulated to demonstrate that the troika had done a good job. And he said, all the numbers are wrong. And I thought, okay, you see, this is exactly what I mean. If you're really good at the math, you can make the numbers. Do what you like. There's a famous phrase in public policy, you know, if you torture the data enough, it will confess just about anything. So plain English. So, signals. What do I mean by signals? I mean things like, there was a great article today which got a lot of following in the Twitterati about Cadbury's creme eggs. Some of you are eaters of those things. So what they announced was they're no longer putting six in a box, they're putting five. Right? And so they're going to charge, in this case, 20 pence less. But what you're paying per weight or per unit is more. This is a signal about price pressures that are developing in the world economy, about margin pressures. And it's the sort of thing that a regular person can see and can start to think about. What is the implication of this? Another one is in the States right now, we've had record high beef prices. And so when you go into a restaurant, the size of steaks is getting smaller, but. But the price per weight is going up. This is a signal about price pressures. Von Hayek used to say the most important signals in an economy are prices. So the question is, what is the context in which we can think about these signals and have a conversation? So I came up with the notion of, all right, let's look at the big issues of our time. What we have, most of the industrialized countries in the world are deeply, deeply in debt. In fact, they're so far in debt that if it could be resolved in some easy way, it would have been done by now. Because those smart people sitting around the head of government would have come up with a solution. But there isn't an easy solution. The magnitude of the debt is so great, it simply cannot be paid down without enormous social consequences and deep pain for the society. So the question is, what are your options? Well, option number one is you just announce to the world, we're just never going to pay you guys back. I hope there aren't any Argentinians in the audience because this is known as an Argentine style default. But what it is, is you begin to default, you simply can't pay, so you default. But there are lots of ways you can default. The United States, the United Kingdom are not traditionally likely to default in that way. There's another way you could say, I'm absolutely, definitely going to pay you back, but a little bit later and a little bit less. That's called a haircut. That's what Greece has done. That's a Greek style default. Do we have any Greeks here in the audience? Greece has defaulted on roughly 90% of its debt this way. We've seen a number of defaults like this. The newspapers describe this as the country has successfully extended the payments. Which just sounds great. If you work in the financial markets, you're like, that's a default. One penny late, one penny less, it's a default. There's a third way that nations can default on their citizens, and that is they basically don't carry through on the promises that they've made. They say every nation has a kind of social contract with its citizens. We, the citizens, we pay our taxes, we abide by the law, we agree to remain within the parameters of the rules of the society. And in exchange, we expect our nation to deliver certain things like a certain number of police in the streets, a certain speed at which an ambulance will come to your door if you are in trouble, a certain access to education, especially for those who are poorer. Certain things are expected. A military is another example. So what we're beginning to see is a breakdown of the social contract as states begin to tell us they can't deliver on the promises that they made. When a state doesn't follow through on a promise that it has made to you, the citizens, there is an economic term for this, it's called austerity. That is a default on the citizen. And we see the signals of this right now, just in the last two weeks, these stories about the, the leaked papers that government is considering extending the waiting times for an ambulance to come to your door because that's less expensive to deliver the ambulance to you Less rapidly. People are outraged because this breaks the social contract. So you can only go so far as a government before your public throws you out of office if you engage in too much austerity. So that leaves you with really one final option, which is very traditional option, and that is inflation. Inflation is usually the method that governments adopt when they have a deep debt problem. And there's a big argument going on in the world economy today. I'm in this argument every day in the meetings I have with investors and the meetings I have with policymakers. It's all over Twitter and LinkedIn and Facebook. What is the biggest risk our societies face? Is it deflation or is it inflation? And the majority view totally changes depending on which part of the world you're in. It's amazing. So if I'm in the United States or in the United Kingdom, 99% of the people think deflation is the bigger risk. There is no risk of inflation, and we don't need to worry about that. We can take all the risks with inflation because we can't afford to take any of the risks with deflation. Then you go to emerging markets where inflation is ripping through many of those economies. We can see the signals of this with our own eyes as we watch what is unfolding in Russia, for example. Belarus is a very interesting case in point where the inflation has hit so hard and so fast that the grocery store shelves are stripped. There's nothing on them, as people realize the devaluation of the currency would rob them of purchasing power. So empty grocery store shelves is a signal. It tells us inflation is not a hypothetical maybe problem. Some people are actually experiencing it in the world today. This comes to the heart of a major public policy issue. I want to describe the signals that I saw of this that prompted me also to write the book about this subject. I was very privileged to be asked to attend the famous Jackson Hole meetings where all the central bankers get together every year. And a couple of years ago in 2013, there was this fascinating moment where the topic that was chosen was Global Consequences of Monetary Policy. The people who worked at the Federal Reserve, I don't think I'm exaggerating to say they were outraged at the choice of the topic because their view was there are no global consequences. We can make our own monetary policy. We can pursue quantitative easing. That has nothing to do with the rest of the world. The emerging market central bankers that were there were incredulous. And in fact, the signal that I saw and I heard were twofold. The one I heard was this Literally was a sound that reverberated through the room. There was one other sound which is a slight uncomfortable shifting in the seats because everybody realized how profound the impasse was between the two groups of central bankers. And the other was a kind of rolling of the eyeballs, and particularly that year, because if you recall, the governor of the Reserve bank of India and the governor of the Central bank of Brazil couldn't be at that meeting because the announcement that quantitative easing was ending had created such a severe knock on effect for their markets. Their currencies were collapsing and they couldn't get on the plane to come to the conference. So this idea that there are no global consequences is a very profound impasse that exists today between central bankers of different countries. Now this becomes a very, very important issue because it starts to explain why different places make different decisions. So what should an emerging market do in a world where the industrialized world is willing to take every risk with inflation, to do everything possible to create inflation? And let's be clear, this really is an extraordinary moment in history. We've never seen every single industrialized country trying its level best to create inflation simultaneously before. Now usually one country tries and normally at some point it succeeds. We have a big argument about how long that might take, but normally one is enough. But now we got all of them. So the view from the Federal Reserve, if I put it in a nutshell, is if you, an emerging market, are experiencing knock on effects from our monetary policy, that's your problem, right? That's the famous do you remember John Connally who was the Secretary of the treasury in 1971? 72, and he said it's our dollar and your problem. The same idea persists today. And so the view is emerging markets should have and could have raised their interest rates, let their currencies appreciate and take in the pain, then instead of suffering the consequences, their view is, are you kidding? I'm taking enough pain by having the financial crisis happen. And now global demand has collapsed and my people no longer believe they're going to get rich before they get old. You can't ask me to inflict more pain on them. So what is the end result? Well, we know that when central banks are trying to create inflation, quantitative easing, a normal side effect is hard asset prices go up, the price of financial assets go up. So what have we seen? Record all time high prices for stock markets, for property. We've actually seen record all time high prices for things like proteins, which are particularly important in an emerging market context. Emerging market workers are spending 40 to 70% of their income on food and energy. So price movements in this area matter to a regular person every day in their life. So when emerging markets start to try to deal with the consequences initially of quantitative easing pushing up those prices, what happened? We see workers in China say, hey, my grocery bill is going up, my rent is going up, the price of a property is going up. And by the way, we don't have to go all the way to China to feel these effects. Everyone in London knows that the price of getting into the housing market in London has now gone beyond the reach of the students here at lse. Right. Nobody can afford practically the rent, the mortgage, the way prices have moved has been really quite exceptional. And so those workers start to ask for higher wages. And we've seen the wage demands in emerging markets escalate very dramatically in recent years, which does what renders them less competitive and helps explain why we started to see manufacturing pick up and move from China to where? The Midlands in the uk, the Midwest and the United States as the wage differential narrows. So from an emerging market point of view, the way up with quantitative easing caused a significant amount of pain. The way down is also causing pain. When the US announces that we're no longer going to loosen monetary policy, right, the so called end of quantitative easing, what happened? Commodity prices start collapsing. We've seen what's happened to the oil price, but generally speaking, commodity prices are all down now. Suddenly they suffer from the slide there. How many emerging markets do we have that have lost their revenue, their income base, and by the way, as their currencies devalue to reflect that loss of revenue generating ability, their debt denominated in dollars has gone up. So they're getting killed on both sides. So either way they feel there are consequences. So then this takes me back to this concept of what is the social contract, what is it we signed up for? And so we see emerging market governments starting to say, you know, this whole post war international economic system that was American led, that was centered on the idea that everybody's better off if they join in it, that the world order based on the idea that whoever can compete the best wins. Maybe we don't buy into this idea so much anymore. Maybe this isn't serving our people in the way that we expected it to. So they start to think about what are alternative mechanisms. And this is one reason we see China, Russia and other G20 countries start to talk about let's de dollarize, let's not have the dollar as the currency that denominates everything. Let's create a BRIC investment bank. Let's do bilateral swap deals and bilateral deals in commodities where we avoid having to rely on the US as the centerpiece. That's very interesting in a world where the US Is a country that spends more than it earns and depends on the savings of foreigners to fill the gap. Now, that may sound very simple, but I have to tell you about an experience that I had that I relate in the book, because at the London School of Economics and in the financial markets, for people interested in economics, we all understand what it means to have a current account deficit. But I was negotiating with two members of Congress and I basically said to them, if you guys keep spending like this, the current account deficit is going to get worse. And the one congressman leans forward and says, you economist, you're always talking about the current account deficit. What is the current account deficit? And I'm like, it's actually a fair question. It's a reasonable question. So I said, well, sir, what it means is we spend more than we earn and we borrow money from China to do it. And the other congressman leans forward and he goes, there's not a single member of my district borrowing any money from the Chinese. And he's not wrong. So this is interesting. Now you have industrialized countries that are depending on the savings of the emerging markets for a debt problem they don't even know they have. It's very interesting how perception is everything. So this then takes me to the important point of how we now segue into the return of geopolitics. I remember I talked with one very senior Chinese official, and he said to me, we understand very well what this game looks like. We know the history of the United States. Whenever you have a debt problem, and you've had a debt problem many times over the years, you always deal with it in exactly the same way. How did you pay for the American Revolution? How did you pay for the Civil War? How did you pay for Vietnam and the Great Society program? In every case, you inflated. So now you're telling us we're going to do everything possible to inflate. So as a lender to you, the United States, you're just telling me I'm going to default on you. So China and other investors, they have to think about, okay, what are the consequences of having made all these investments in the US or in US Treasuries, where the country is telling you they're not going to pay you back, or they're going to keep trying to create inflation until it works, which means I get to pay you back less. That's a technical economic problem, but it's bigger than that. Their view is, ah, so what you're really doing is you are creating price instability as the guardian of the post war economic system, you are telling us you are now willing to take risks, you're willing to gamble with the linchpin of this thing, which is US dollar. And it doesn't matter to you if that price instability is felt outside the US as long as you don't feel it in the US you persist on this path. So the reaction is not necessarily a monetary policy reaction. And here I'd like you to think for a moment about that famous phrase that Clausewitz gave us on diplomacy turning into warfare, where he said warfare is a continuation of diplomacy by other means. We, what we're witnessing here is military policy becomes a continuation of monetary policy by other means. Because when China then looks at the landscape and they say, okay, if the price of hard assets is going to go up at some point, we need greater access to them. So the South China sea, which has 10% of the world's fish supply in a world where protein prices have been very, very high and the risk is they can go higher still. I think we need to own that. So all the disputes about who owns what, forget that, that would be ours now. And that's not just because we've suddenly decided out of the blue to become aggressive. It's because you created the conditions under which we're going to find it more difficult to feed our people. So we're entitled to this. I don't know what the percentage is these days, but a large number of gas fields have been found in the South China Sea. They also take on immense value in a world where you think that governments are trying to create inflation and may at some stage succeed, that may have now been pushed back a bit because of what's happened to the oil price. But over time, the long term structural interest is, is to own and control those supply chains. Russia takes a similar view. Russia says, okay, so what's the value of Ukraine in a world where inflation is potentially an issue? And of course for them it's no longer potential. They've got it. Their official numbers are showing it's at least 10%. But everybody knows in real life, if you live there, you're paying a lot more than that for daily life in that world. The fourth largest food producer in the world, Ukraine, takes on much higher value. If there's a question about who's going to own that. If I were advising them, I would say, you want to own that. You want to own a hard asset. The same motivation that has every pension fund and every sovereign wealth fund trying to buy hard assets will also be the full philosophy behind China and Russia trying to own supply chains of hard assets as well. So when we see military incidents, as we have done in the last year, especially when we see the Russian air incursions into NATO airspace, when we see the near misses between US Spy planes and Chinese fighter jets where they come literally within 30 meters of each other, is this really just a coincidence? Is this really superfluous? Or is this at the heart of the economic forces that are now in play, which have been unleashed by the global debt problem? Think about it in a different way. I see two opposing forces bearing down every nation, every balance sheet, every family and every person. On the one side, you have this downdraft of deflation. What does that do? It means there's not enough jobs, not enough income. Kills your hope, your faith and belief in the future makes you no longer willing to believe your government. When they say they're going to deliver something to you, you're like, I think you won't. In the end, that already is a very painful force for any society to deal with. But we also now see in various parts of the world economy, inflationary pressures as well. We see it in the form of the wage demands coming out of the emerging markets. We see it when rents go up. We see it when protein prices rise. We see it when governments start to withdraw the fuel subsidies and force people to have to spend more on the fuel that they will have. You put these two together, that is a very powerful combination. And I think there are two things that come out of the slamming together of these two opposing forces. One of them is a question. It's a very profound political question. And it is, why is the wealth in my society being distributed to somebody else and not to me? It's one thing when we're all growing and there's enough money to go around. You're not asking redistribution questions. You believe you'll get rich before you'll get old. It's just a question of time and your own hard work. But once you're not so sure that it's all going to pay off, now you start talking about redistribution. And as we all know, much of the conversation in economics today is about that. It is about how to tax the wealthy more, redistribute the wealth. Think about whether the benefits being paid out in society are at the appropriate level or not the appropriate level. It's what you do when the pie is not growing. The other tremendous, tremendous force that comes out of this problem is innovation. And I would submit in the course of writing signals that innovation is the correct answer. I know there are lots of arguments around about how the correct answer is to tax some people harder and to redistribute the wealth more aggressively. And it's hard to argue that innovation can be a solution given the magnitude of the forces at work bearing down on societies around the world. But in fact, what we actually see happening are anonymous individuals who didn't go to the London School of Economics, who are thinking about, what can I do to create a cash flow for myself going forward? How can I deploy my own talent and resources? And I would argue that we are, in fact, on the brink of a third industrial revolution. And we can see it every time you pick up Wired magazine, every time you look at the media. The degree of innovation that is in play is truly extraordinary. But the question is, will states permit individuals in the new social contract environment, the freedom they need to build tomorrow's economy today? And so I spent a fair amount of time in the book trying to explain how individuals are innovating. But states are also innovating. States are trying to find new clouds, clever ways to tax you harder so that they can fill the gap between revenue and expenditure. For example, New York City announced recently that the new speed limit is 25 miles per hour, which pretty much guarantees everyone will get a ticket at some point. Right? And so you could look at that as a revenue generation strategy. That's an innovation here in the uk, you may say it's not a good innovation, but it's an innovation again here in the uk, things related to the National Health Service are always such a sensitive and powerful subject because that health care delivery lies at the heart of the social contract in this country. So again, when the NHS says they're thinking about permitting people to pay a fee to jump the queue, it kind of violates the whole social contract notion of what you're paying your taxes for in this country. And yet that is on the table. That's the government trying to be innovative, but perhaps in ways the public can't accept. I'll give you an interesting example. In the United States, we've seen several of our states decide to legalize marijuana. Now it's interesting. Did they just wake up one morning and say, you know, my morals have just suddenly dramatically changed? I don't think so. I think that they realized if we make it legal, we can tax it. And what's really fascinating, great signal is watching the authorities in the state of Colorado, which was kind of the first to fully legalize it. The ones who initially opposed legalization now saying, but we want some of the revenue as well. Interesting. So taken together, what I've described is a much more complex world where geopolitics is back on the table, in the mix. Part of what we have to think about, that's going to be difficult. But now we add also a social contract where everybody is having to renegotiate, re, rip up, build again. What is the social contract? What is the social contract in China? I would argue in the past it has been the Politburo's purpose is we'll make you rich before you get old. If they can't deliver on that promise, they're going to have to have something new to deliver to the public. And what they're trying to deliver is we can make sure the poor are less, worse off, we can lift the bottom of society and that's a worthwhile goal. I think in Europe we have this issue of what is the social contract right at the heart of the problem we all talk about every day, which is in the Eurozone. Germany's social contract won't permit the creation of inflation as a solution to the debt problem. The social contract in all the other Eurozone countries requires inflation. If they can't deliver inflation, then the citizens start to say, why am I in this thing? Which is exactly what we're witnessing with both Greece and Britain. Why am I in this thing if it won't let me manage my economy in such a way that I can generate more growth? So the innovations that we're now in of reconstructing, what are the promises that we should expect our state to deliver on? This is a very profound question of public policy. And now add to that, we're going to have to really think about the global world order. And is the social contract there serving everybody's interests For Russia, for China, for Brazil, for India, They've attempted to deal with this by saying, well, we would like one of our guys on the board of the imf. Well, that will happen. They want to make bigger contributions so that they have more influence and power. But that's not the only option. There is also the option to say we will use economic statecraft. We will use statecraft, we'll use our military to reach for and take control of the assets that we, we think we're going to need. To keep our population stable and to fulfill the social contracts that we have with our own citizens. I'm very interested in the activity we see, for example, in the Arctic, Russia's been quite loud about broadcasting its interest in having a much greater physical control of territory there and assets placed there. Because why? Because they think that something like 30% of the world's natural gas supplies and maybe as much as 15% of the world's oil is there. So mine. Think of it another way. Most of us in this room, I'm seeing there are some exceptions, I'm one of them. Most of us don't have a strong memory of a Cold War world. I find when I give lectures and I refer to the Soviet Union, I kind of get these quizzical looks like, oh yeah, I read about that. And I'm like, oh, I'm getting really old now. But if you think about it, for anybody whose career has occurred since the fall of the Berlin Wall, what have they experienced during their life? They have experienced a world where billions of new workers were entering the world economy and systematically put pushing down wages and prices, giving us the so called great moderation of inflation, which was fabulous. It meant every time you went to the shops, all the stuff you wanted was less expensive. Fantastic. It also did something else. It gave us the peace dividend. The fall of the Berlin Wall meant you didn't have to spend money anymore on mutual assured destruction with nuclear weapons. You could divert all that into to productive use. So we've lived in a peace dividend world. What I'm describing to you is we may have hit the limit of the Berlin Wall environment. The great benefits of its fall may have now petered out because we no longer have billions of new workers willing to work for less and less. They're saying, I need to get paid more. More. From South Africa to Argentina to China, wage demands are on the rise in all these markets. So they are no longer systematically pushing down wages and prices. In fact, you could argue they're pushing them up. Also. The peace dividend is quickly morphing into a conflict premium for the reasons that I describe. And so that requires more resources and more attention spent on that. And meanwhile our domestic publics are arguing with the leadership about, well, what's the situation in our local country going to be? I was very struck the other day. I saw the actor Liam Neeson was thinking about moving back to Ireland and he started railing about the fact that the Irish authorities are trying to test tax water. He said, forget it. That is, he didn't put it in these terms, but what he was saying is, that's such a violation of the social contract. I cannot tolerate living in that environment. Who can blame him with that much rain, you know, it's a damp country. There's a lot of water. So suddenly, all these problems, all these pressures are bearing down on those few smart people sitting in the West Wing who we think can solve this. And they speak in a language that's highly technical, highly mathematical, makes it very difficult for the general public to engage in the question. They're told, don't worry about quantitative easing. It's all in your interest. I go, yeah, but my Cadbury Creme Egg, I'm getting less of those and my rent's going up and I can't get a job still. But there's a mismatch between the language the public wants to speak to engage in these issues and the language in which the policy discussion is conducted. And that means also a gap in understanding what are the consequences of the choices that are being made on our behalf and the question of what will it mean if we succeed. And I find it very interesting that when it comes to this question of every industrialized country trying to create inflation, and the typical story is, well, don't worry, because it'll never work. You're like, then why are we doing it if it'll never work? My concern is it'll work. It just takes a little time, but eventually it'll work. And that's exactly what Paul Volcker says, who I think is kind of the Bruce Willis of the world economy, the guy who saved us last time from inflation. And he says, if you think that you can unleash just exactly the right amount and control the outcome, you have no idea. Because that's not how this works. And we can gamble away all of what we've built up in terms of credibility, stability, the way the world order is anchored by being too arrogant and thinking that our math can outweigh the plain old English and that the solution can be found by just a few who are tweaking the temperature dial and choosing what is the right level of the bond market, the stock market, and try to control outcomes in this way. I recently had both a Russian and a Chinese say to me, hey, by the way, who's more communist now? Who's got more state control over economic outcomes in a world where the central bank has become the biggest buyer of the sovereign debt of that nation? They're not wrong. That's a very interesting social question.
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B
What we've done in allowing the state to take on a much larger part as balanced against the individual. So I think this is why I felt compelled to write a book about what's going on in the world economy today. To try to explain at the opening that there are signals everywhere, all around us. You can see them if you open your eyes. If you empower a regular person, they will say, yeah, you know, now that you mentioned the Cadbury's Creme Egg, I see a bunch of other things as well, and engage them, empower them to join in these profound social questions that we now face. The middle part of the book is about the return of geopolitics, the return of domestic politics as we struggle between the power of the individual to generate a profit and the power power of the state to take it away. What is the right balance? It'll be different in every society. And at the same time, the return of this notion that geopolitics may be the answer. It would be nice if emerging markets would just stick with monetary policy and do what the Federal Reserve thinks is the right thing. But I have a feeling that threatening with nuclear weapons or taking possession of physical assets assets is also a viable option which they are pursuing. And finally, the conclusion of the book is about who's already building tomorrow's economy today. Because I think people need examples of who's innovating. What is this thing 3D printing and is it really real? How does that innovation dramatically change the landscape? I recently heard Martin Wolff from the Financial Times who was promoting his new book the Shifts and the Shocks. And I actually quoted Martin in my book from an article that he wrote in the Financial Times where he said, well, the fact is that at the end of the wars in the 1800s, when historic debts have been accumulated, what did we get? We got the industrial revolution. So you can grow your way out, you can innovate your way out. It's just hard. It's also, in his view, unlikely. I would take a different view and put forward the argument that actually the pressures I describe are so severe we won't have a choice. And that innovation and arguing about the social contract are both going to occur and both will create. Create immense opportunities. But it's hard to catch it if you're not paying attention to it, if you're not looking for the signals, if you're not looking for the stories of the surgeons who saved a two year old a few weeks ago with a 3D printed heart, of the stories of the changing business models. To that end, I felt I can't publish this book writing about how innovation is the answer, then not use the most innovative platform myself. So I made a decision to launch my book on a crowdfunding platform. I write a lot in the last bit of the book about how crowdfunding is dramatically changing the financing of businesses. Most of the employment in our economies is created by firms that employ less than 50 people. They now can go to crowdfunding and raise capital for their ideas and their ventures. So I've launched my book on Indiegogo. Amazingly, we've hit 43% of the target in the first week. Every publisher said to me, you will never sell that many books. You're completely unknown, can't be done. Crowdfunding is changing everything. And that's a signal we should pay attention to and it should give us a lot more optimism about the future. And finally, I just wanted to say one of the other things that I want to announce is a signals ambassador program. And what I mean is I am looking very actively for kids who are between the ages of roughly 16 and 25, high school and university age students who I'm talking to all the time. And they're all saying to me, I gotta learn physics, like I'm gonna run a nuclear lab. But none of it's solving the solar social problems that I care about. I want to join in the conversation about the world economy. How can I do this? And by the way, if I want to work for the president of the United States or my head of government, what skills do I need? What should I read? How do I get involved in the plain English side of this stuff and understand the signals that the world economy is sending me. So I thought, actually, let's create a club. Let's bring in young people and create a place where they can have a conversation about the signals they see, talk about things in plain English. And do any of these young people have something on their resume? Most of them don't. So when they go into the job market, actually, on the way in here, we were just talking about some kids from LSE who were applying for jobs. You know, 200 job applications, not a single answer, not even a thank you for sending your resume, nothing. So we got to get something on the resume of young people that they're involved. So I personally am looking for people who want to get involved in this conversation, help me promote this, use social media, and in exchange deliver to you some thoughts about, you know, the most important thing that you can do as this person who wants to either advise a head of government or be an active member of a society that's undergoing the public pressures. I describe is you got to be able to write a presidential memo. That means you have to explain in one paragraph, maybe two, an issue that's very difficult, very complicated. Because if you can't do that, it's not ready for the president or the prime minister to address it. And if you can develop that skill, you can answer the questions for yourself about what you should do. We with your time, with your resources, with your energy, when to borrow, when to rent, when to mortgage, when to get paid for your skills and when to build up your skills, you can write your own memos to yourself. One paragraph that isolates what is the true nature of the issue I face. And if you can do that, then you can work. Then you can be one of those smartest guys in the room, but more effectively. So that's the broad notion behind this idea that I've put forward. And now I would really welcome from you all sorts of questions and no doubt pushback. A good deal of what I've said is very controversial, but I'd be delighted to take some questions.
- [50:30]
A
Right, ladies and gentlemen, the invitation is there, but if you would like to put your hands up, I will suggest to one of the stewards that a roving mic comes to you. And if you could wait until the roving mic comes, that would be great. And if you could just briefly say who you are, the lady with the wonderful gold. I'll take three questions at a time if that's agreeable.
- [50:56]
B
Thank you for your English explanation. I just wanted to ask what you thought. The role of immigration of highly skilled workers and also limited resources. So with regards to hard assets in terms of government fulfillment of the social contract. Thank you.
- [51:16]
A
And we have a gentleman at the back there.
- [51:19]
D
Hi, Laurie McKenna. We talk about signals. There's been a huge shift in the distribution of income and wealth over the last 30 to 40 years, really following the triumph of the political right in the 80s. Do you think that capitalism can function properly if income and wealth is being concentrated at the top? Because we all know that the most wealthy spend the money they invested. So I just think, is the system actually stopping, not functioning properly anymore?
- [51:53]
A
Is there a lady here? No. No. Okay, well, let's take this gentleman here, please.
- [52:06]
B
My name's Tim.
- [52:07]
E
I'm a past student here.
- [52:09]
B
I agreed with your assessment that the.
- [52:11]
E
Emerging markets would like out of the world order.
- [52:14]
B
I think the conundrum is I don't think they know what the alternatives are.
- [52:19]
A
And if they did.
- [52:22]
E
First option of how to transition. Could you just comment on that?
- [52:26]
B
Okay, yes. So let me start with the immigration issue. I think I lean towards a world where we have relatively free movement of people, goods, money across borders. So I have a real problem with restrictions on immigration because it's human capital. And human capital is the source of innovation. And that's not only about people who are highly trained. That's also about the taxi driver that I had in Texas a while back from Ethiopia and who I asked about, what do you think about politics? And he looked in the rearview mirror and said, I don't care who's in charge, I'm going to be rich. And I'm like, you're American, you know, so it's not right to say it's only the talented that we want. And today we're not even saying we want that. Most governments are trying to find a way to restrict immigration, even for the highly skilled. I think this is counterpretation, productive. But what it reflects is a bigger issue. When the sense of well being falls, when GDP is weak, tolerance falls with it. And I think we're seeing that in so many different ways, including some recent events that we're all aware of. We have to be aware when our economies weaken, tolerance weakens as well. So it's very high social price to pay for getting into an economic mess. As for hard assets, one of the interesting things is watching in the United States, for years and years, local authorities opposed selling hard assets like, you know, railway links or train bridges, etc. To foreigners on the grounds that, you know, I don't know what, we can't have foreigners owning these strategic assets. I'm like, what are they going to take it away with? A helicopter? You know, like anyway, okay, now they're broke. So they're like, actually we'd like to sell the railway link. So this is innovation in a good way. I think that there's going to be more capital made available to come in. So anyway, that's at the core of that whole social contract question on the distribution of wealth. Yes. So one of the sort of sub issues that I try to address in the book is this definition of what is capitalism today? I think we define capitalism wrongly by saying it means the financial markets are the dominant driver of prices in the economy. Or the health and well being of the banking system is the most important issue. And that's gotten us into this too big to fail. This idea that it's okay when the banking system incurs a truly historic loss that jeopardizes the entire banking system, that it's okay to take that loss and shift it onto the national balance sheet, which really means you've shifted it onto the backs of the general public. So, yes, we can save the banking system. But what nobody said in plain English is the price we will pay is that all of us regular folks will be working longer than we ever imagined for a low, lower standard of living than we ever expected. So there's a price. And only now are people starting to think about, wait a minute, what was the cost of that decision? And this question of just because you bail out Wall street, does it benefit Main Street? These are open questions. My angle on it is financial markets are not the center of capitalism. Businesses that employ less than 50 people should be at the center of how we define capitalism. They generate more than 60% of the net new jobs in the economy. That's where innovation comes from. You look at a company like Apple, they will say out loud, apple is not one big company. Basically, they insource from lots of little companies of five or six people are being highly innovative in their space. So I would prefer to see a capitalism that's more heavily defined by a more generalized definition of the market, rather than a narrow definition of it means banks. And so that's an open question that ties into this question of how the wealth can be more broadly distributed in a society. Because at the end of the day, the great fortunes in history were not typically made exclusively in banking. They were made in the real economy. And the one good thing I have to say on this subject is the real economy now is paying wages that exceed the financial markets. Engineers, the graduates of engineering schools, as of the last two years are now being paid more than Harvard Business School graduates. And this is going to shift where young people focus their time and their energy in what I think will be a much more productive direction. If you want to go on financial markets, you better really love that stuff, because it isn't going to reward you the way it did in the past. But it also means only the really smart, committed people who want to be there will be there and they'll innovate and create something new and there will be new innovation in all these places. So call me an optimist, but I lean in the direction if we would give more freedom to all that, you'd get a better outcome. And finally, on the emerging market front, you're right, they don't have an alternative. I think it drives them insane in emerging markets when they announce, we're creating the new BRIC bank and with the combined rubles and renminbi and I don't know what it will have this many assets. And then the Financial Times writes parentheses, that means this many dollars. That's the whole point. We don't want it denominated in dollars anymore. Right. But what can they do? Nobody knows how to get their head around what is the value of what's being described. And also they don't necessarily have common interests and they're philosophical issues. I think it's important to spend just a moment on the philosophical issues. Do we believe in a world where the international order should reward those who produce the best widget or outcome and get paid for that? Or do we want a world order where states define who gets what in the world economy? That is a philosophical question of our time. I think a lot of emerging markets take the view that philosophically we don't want to live in a world where someone else might get the asset, we want the asset and we use state power if we have to, to get it. What are the implications of that world? So this is I think why, you know, Henry Kissinger's recent book on world order is interesting, the timing, because this is an open country question, what is it and what should it be?
- [59:06]
A
Okay, gentleman right at the back.
- [59:15]
D
You talk about empowering regular people to participate in economic discussions using simplified language and that sounds like a great idea. So can I make you a brief challenge? Can you please explain to everybody here why QE that didn't create inflation? And also can you expound quickly on the fact that why it isn't actually printing money?
- [59:33]
A
Yeah.
- [59:34]
B
Oh, actually we're going to do three questions at a time. I'm so anxious to answer that.
- [59:37]
A
Is that a quarter hour lecture?
- [59:39]
B
No, no, I'll do that quick.
- [59:41]
A
We have another gentleman at the back there.
- [59:45]
E
Hi, thank you so much for this. This is great. I guess my question is two pronged. Traditionally obviously the social contract is between individuals and the state. But a lot of people have argued that nowadays we live in a world where the states are no longer primary actors or there are other actors. So I guess I would like you to expand a bit more on how multinational corporations for example, or non governmental organizations, what role they would play in a sort of a post state world in terms of social contract. And then I guess the flip side of that is obviously a social contract is bilateral. So states expect certain amount of obedience or whatever it is from their citizens. What would or what should non state actors expect in return? Yeah, thank you.
- [60:32]
A
And we have Another question over there. Thank you.
- [60:38]
D
Good evening. And you spoke about the States wanting to cut corners in the services they deliver to their subjects. Why does it happen? Why does the state want to do that? Is it because it's not able to afford it or is it bypassing a bigger issue?
- [60:57]
B
Okay, let me go to this first question. Isn't it interesting that the reason that central banks don't include asset prices in their calculation of inflation is because they haven't found a mathematician mathematical model that permits it? So it's not that asset prices don't matter to all of us in this room. They do. What's happening to the property market, the stock market, it matters to our lives, it matters to our pension fund, it matters to the price of the rent we pay. But no, that doesn't get included in the model because asset prices, mathematically it doesn't work. So, for example, I think I could describe Janet Yellen's position as the reason quantitative easing didn't work in Japan is because when house prices and property prices started to rise dramatically, which is a natural outcome of quantitative easing, they lost their nerve and stopped the program too soon. But I, she says, won't blink. So I will let asset praises go through the roof. That is not my problem. My focus is on unemployment and real growth. But then we get in this weird situation where we say, well, there's no inflation. In fact, there are all the indicators of deflation. But the US just printed a 5% GDP number which is huge. So really, do we have no inflationary outcome from the effort of quantitative easing gave us? I then look at margins in the economy and what I see are the price of assets has gone up so much that it started to crush the margins. So for example, we have, I mentioned steak price earlier in the US we have record high price paid for beef, but we also have record high prices paid for the land that you grow the beef on. And so the margin has been crushed. And so we have have the smallest level of the cattle herd since 1951. That's a signal. Where do we think cattle and beef prices are going to go in that environment? I would argue the pressure could be upward, in which case we should begin to anticipate that their grocery bill may not be what you expected. So this is one part of the answer. The other part I'd like to do say on Japan, which is always used as the reference point on this issue, that you can print all the money you want. However you define that, it means that you've created liquidity in the system, but it won't work because it didn't in Japan. Why didn't it work in Japan? You could argue because they ended it too soon. But I would argue it's because the traction comes from the entrepreneur. It comes from the small businesses taking advantage of the money and being able to build something new. In Japan, they've always had the social contract embedded in the big companies. Big companies provide the pension, big companies provide the vacation, big companies provide the healthcare system. They didn't want little companies competing with the big companies. So yeah, you can open a new shop as a little family business, but it has to be in the middle of a rice paddy where there's no customer, you can go talk to the. So in Japan, they could never get that entrepreneurial response function. I don't think it's comparable to what we have in the industrialized countries today. So that's part of the answer. I know that doesn't get to all of it, but that would be another lecture. As Professor Glasgow Gaskill quite rightly points out, the NGO question. You're quite right. And one of the most interesting signals that we've seen recently, recently, I think in the monetary policy arena has been from ISIS or ISIL as some call it, where they announced we are going to issue gold coins. And that is because we think that there is a premium on producing a currency that people have confidence in the value of. And there's no doubt you spend a lot of time in financial markets talking to people about gold. Should we. Should I buy gold? Governments are pursuing quantitative easing. They're telling us they're not going to raise interest rates forever. Should I buy gold? Jim Grant, who's a very famous market guy, he says we no longer have a gold standard in the central banking world. Now we have an academic standard. That is it all depends on how smart the people are at the central bank, whether or not you should buy gold as a hedge against them. So this is an interesting signal about a non state actor beginning to engage in a monetary policy position. How fascinating this is. So, yes, there's no predetermined answer to the question. I would argue states have become a much more powerful player in many ways, but they've also devolved responsibility, which I think goes to your question about why are states not delivering on their promises and how do they not do that? Well, it's, I would argue because they're broke, the numbers don't add up, the revenues are exceeded by the expenditure. So one way to fix it is you outsource and we're watching governments outsourcing a lot from military activity. Right. Why do we have all these private sector companies that the military utilizes to deliver troops into the fields? You know, the famous kind of Blackwater story. It's a kind of outsourcing for cost containment strategy. But I would argue that has all kinds of consequences. Or recently in New York City, the local authorities said we can't afford to keep window washing all the building buildings that the New York City authorities own. It costs like US$5 million a year just to wash the windows on the buildings that belong to the local government. So we're going to outsource that. Personally, I thought that was great because there's some private contractor in New York that just got a $5 million contract and will probably go hire some people as a result. But this is a philosophical issue. Whether you believe that we're better off with the state washing its own windows or outsourcing it to a private entity. And we come back to what's your personal definition of the appropriate role and function of the state versus the citizen? Whether it's even the corporate citizen as well as an individual. And this is what we all have to think about. And the answer will be different in different parts of the world. The social contract question will be answered differently in France than it will be in America. It'll be answered differently in China than it will be in Brazil. And we're all entitled to come up with our own definition of what's the appropriate balance in the society. But what we can't do is pretend that there isn't a question. There is now a question caused by the inability to meet everyone's needs. And so now we have to think about how do we redistribute what does exist. But even better, build something new so there's more GDP to go around.
- [68:07]
A
Grant, let's take some questions from this middle section. No, we'll take a question from this lady here first, please.
- [68:24]
C
Hi, I'm wondering what we can all think about it and we all, like in the west, live in democracies. Why is the outcome so different in Germany than in the United States? I mean, we can think and vote about it, but it just seems like K Street has taken so much policy away from the people that the people can think all they want, but there isn't. Voting is no longer effective.
- [68:51]
A
The next room behind the man with the. What is the halving of the alpoist of the last six months signalling to us? And the gentleman behind hi, I'm a.
- [69:06]
D
Student from Hong Kong. I think it's a very enlightening talk and definitely struck a chord. I think what particular strike chord to me is that I want to highlight one point is the role of young people. Yeah. Because as you probably realize what happened in the months ago in Hong Kong is. I want to have sense, particularly from, from that experience and also from the talk here is not just, yes, the powerlessness or the weakening of the government to deliver on the social contract and also the waning away of trust on citizens to the government. But most importantly, I link what you mentioned about the importance of innovation to the role of young people because I think, by the way, we.
- [69:53]
A
Sorry, this is an invitation to ask a question.
- [69:54]
D
Oh, yes, okay. Sorry about that. I think. Do you think there is a relations between the starving of the order innovation that we really need and the suppression of young people by the governments? That is very evident not just in Hong Kong where they crack down of the civilian movement, but also so in.
- [70:18]
A
The uk We've almost got the drift of your question. Let's stop you there.
- [70:23]
B
Great. Voting is not effective. Let's look at an interesting phenomena I would argue in the Eurozone today. The proposition on the table is Germany has said we will consider writing the check to pay for the debt, cover the losses in the rest of the Eurozone if everybody else agrees to cede all or some of its fiscal authority to a centralized group in Brussels. By the way, why anybody thinks the people in Brussels would do a better job. But I don't know. But okay, so Brussels, so far, every political leader in Western Europe from Sarkozy onward who has campaigned on this idea of cash in exchange for. For sovereignty has been immediately voted out of office. Not only that, but it's very fascinating watching a situation in Europe today where the policymakers say what is in the best interest of the public is to stay in the Eurozone and to hold this thing together at any cost. And in fact, what the public is saying is actually I'm joined, joining the far right which calls for the exit of my country from the euro. We see a massive increase in Germany in the support for the AfD party which is an anti euro position. Same thing in Greece, same thing in France, the Le Pen party. So this is another aspect. Monetary policy may be taken out of the hands of central bankers by the public in this way, but what they're basically doing is creating a new social contract. If you won't deliver what I like as a citizen, I'll just bypass you and create a new political party. New political Leaders who will take us in a different direction. So voting within the existing choices may not be so attractive. The public are very innovative in creating new choices, picking new outside. I think that's one reason we see so many new players in politics, because the public's like, you guys can't solve the problem on the left and you can't solve it on the right. Let's get somebody new in here.
- [72:35]
A
Right?
- [72:36]
B
And we see that in so many different countries. So I'm a little more optimistic than you about the ability of a democratic process to engage in innovation. On. Let me jump just to finish, I'll do the oil price last. On the role of young people, I would go a step further. I think most emerging market leaders believe that a major contributing factor to the Arab Spring was a combination of very suddenly rising food prices. Something we also saw in Ukraine, by the way, as an example. Typically where you have that price pressure, people get agitated. That will propel people into the streets. By the way, Singapore, which is not a place we associate with social protest, has had, I think, three or four street protests now. And one of the main drivers has been the rise in food prices there. So they are very aware that the combination of higher cost of living plus young people feeling they can't innovate or they're constrained. If you recall, the young man who committed suicide in Tunisia was a vegetable seller and his complaint was that he was being taxed ever harder on his sales and couldn't get ahead, couldn't make a living. And this was a microcosm of the bigger question. Why is all the wealth in our society going to one guy? Why is it not being distributed to all of us? The same question that I raised, I think that underpins a of lot lot of the social protests that we're seeing in other parts of the world, Hong Kong included. If the government can't make me rich before I get old, then how come it also constrains me and prevents me from innovating my way? And one of the big questions we have in what David Ignatius from Canada calls authoritarian capitalism, where you have Reichsinger Po like China, like Russia, where it's not like a free capitalism, but there's a kind of authoritarian element to it. Can you really get innovation if you won't permit individual freedom? I see you nodding no, but I think that's one of the open social questions of our time. And which will triumph in that argument is a very important question. And then I'll finish with the oil price. The oil price is a very Powerful signal of many things. Of course, perception is everything. And it doesn't mean there's one right answer. Even what I've argued to you tonight. I'm giving you a series of perceptions. You know the Fed will stand by its position. Emerging markets are wrong. They can take care of their own monetary policy and it's their own problem. In terms of the oil price. The perception in Saudi was that the US was about to cut a deal with Iran. Iran is a mortal opponent to Saudi. That's not what they wanted to see happen. They felt the relationship with the US had deteriorated for many reasons. A lot having to do with the Arab Spring and the US backing their opponents. And because of the fracking in the United States and America saying, guess what, we don't have to depend on those people in the Middle east anymore. And they're like, that's us. We're going to lose our cash flow. And so in response, what's a smart way to deal with the problem? If Saudi drives the oil price down, you immediately impair the budgets of your major opponents, Iran, Russia, and you slow down the whole fracking story in the United States because suddenly half the projects aren't economic anymore. And we're seeing that we had the first bankruptcy of a large fracking company in Texas just only two weekends ago. So part of it is this is a geopolitical issue. Some will argue that it's just too much supply. I would argue, yeah, but it's very difficult to get lending into labor intensive, capital expenditure intensive businesses and anything that involves pulling stuff out of the ground. It's been pretty hard to raise money for that. You can raise money for share ownership for the financial speculative aspect of those things, but to actually have enough money to drill and retrieve, not so easy. So I personally think we're building supply shortages into the world economy over a longer period of time. And this will only make it worse because now so many projects will be rendered uneconomic. Then again, there's a guy in California called Howard Marks, very, very famous buyer of distressed out assets and he's all over buying these broken assets, which means he'll put new money in. So this is something we're all definitely going to have to deal with. I have the open question in my mind, is a lower oil price always deflationary or is there a point at which it's such a gift in your pocket that you actually spend because you don't need to spend that money on other things, things? And could we find that increases consumer expenditure already in the US, we see this happening and in the uk, so actually it could be pro growth and stimulus for a little bit more inflation rather than purely deflation. Do the math on that. Tricky. Anyway, couple more questions.
- [77:58]
A
I thought we take one more question and it's a lady in the front row, please wait for the microphone.
- [78:11]
C
Thank you very much. Part of my question was about the geopolitics of oil and how. So thank you for answering it. But another aspect also of the return of geopolitics in terms of economic relations between countries, some people would argue is also the attempt by Western countries to remodel the trade multilateral, the bilateral and multilateral trading system by weakening the WTO doing the mega bilateral trade, I mean the mega trade agreement, the TPP and the tpip. Does this also fit within your view that actually this could be an element of containing China somewhere somehow if we matter, or forcing it to change its attitude towards its economic relations with its agent partners?
- [79:08]
B
Just that one.
- [79:08]
A
Let's take that as the last question.
- [79:10]
B
You won't believe this, but that is exactly what I wrote my PhD on here at the London School of Economics. It was called economics Statecraft and it was all about the use of anti dumping and countervailing duty law as a mechanism for compelling other nations to do things the way we in America wanted them to. And bottom line is I think every nation perceives that it has a national interest that it wants to pursue that often involves compelling other nations to do things our way instead of your way. So this is nothing unusual. I think today we see, you know, Russia is trying to compel certain border states to do things their way, not our way. And they have their own good reasons that are in their own national interest. The question is, how do you reconcile conflicting and opposing national interests? Trade was always considered a great equalizer that you could reconcile these conflicting interests. That again, I look back in history and wonder. It works when the world economy is delivering on the promise and you believe you'll get rich before you get old, that the social contract is working in your favor and it's worthwhile joining multilateral trade organizations when they give you that outcome, when they no longer give you that outcome, then you say, wait a minute, I want to protect the interests of my community and the people I work with my business at the expense of someone else's. And suddenly regional configurations, bilateral deals become easier to negotiate politically. They just carry more weight politically. And so that's a change in the environment. Again, it's the price we pay for having allowed the world economy to fall into a difficult state. That's the thing. It's not without cost that actually, when we take our eye off the ball and the world economy disintegrates, we will pay the price for this in many different ways for a very long time. And we begin to realize how expensive the exercise is because the buildup of goodwill in multiple multilateral trade arrangements in the world order, underpinned by a US dollar that took years to build, the trust and moments to destroy it. And so now we have to begin again and come up with something that serves, in the view of the participants, their own national interest. Which is why I keep coming back to perception as everything. And to that end, are we done with the questions?
- [81:55]
A
I think we are.
- [81:56]
B
I'm very delighted to have had this opportunity.