Odd Lots - Adam Tooze On How This Crisis Is Different Than The Last

Episode Date: April 27, 2020

In 2018, Columbia history professor Adam Tooze published his magisterial work “Crashed”, which framed the Great Financial Crisis as essentially a crisis of the global dollar system (as opposed to merely a housing bubble). Now we’re experiencing numerous systemic frailties all at the same time, amid extraordinary difficult times for the real economy, the financial system, and virtually every government around the world. On this week’s episode, Tooze compares and contrasts the last crisis to this one, and how it might permanently change our world.See omnystudio.com/listener for privacy information.

Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Wisenthall. And I'm Tracy Allaway. Tracy, obviously on the podcast lately, I would say we've been talking about events in this crisis that are extremely fast moving. And we've kind of been joking around that perhaps in some cases by the time people actually listen to the episode, it'll be irrelevant or extremely out of date by the time it actually gets. gets out. Yeah, I'm not even sure it's a joke, really, because there have been a few episodes that have been sort of superseded by events. It's been a struggle. So in light of that, I think today's episode might be a little bit risky, like even riskier than our normal one. Oh, boy. Why? Well, the reason I say it is because we're going to try, and I don't know if we'll be successful,

but we're going to try and look a little bit big picture and sort of bigger lessons, bigger themes that we can take away from all the events that we've seen over the last couple of months. And I think almost everyone who tries to project forward on what it all means will probably be looking a little bit foolish in some respect. But that's kind of what we're going to attempt to do today. I mean, it's what everyone is interested in at the moment. but as you say, forecasting this is hard because, as we have discussed sort of ad nauseum at this point, everything has the potential to change with the current crisis. And we really are in uncharted territory in many ways. So, yeah, sympathy for the forecasters at this point. It's a tough call of putting your neck out there for something completely unknown.

Right. So fortunately, I don't think we're going to make our guest today forecast the future, which is, as you say, extremely difficult even in normal times. But our guest today is someone who has a sort of very good ability to sum up the big themes of the moment and identify what, at essence, what a crisis is really all about. Great. Who are we speaking to? So today we're going to be speaking to Adam Tooze. a lot of people will know him as the author of the book, Crash, which was the sort of magnificent overview of the last financial crisis. And he is also the Catherine and Shelby

Colm Davis Professor of History at Columbia University. And for those who don't know, who didn't read it, crashed was, you know, there were a lot of crisis books, but crashed really sort of identified the tensions that emerge from the sort of global dollar system and how that really sort of played a huge part in the coming undone of the economy just over a decade ago. And we'll talk to Adam about what he sees as potentially the equivalent stresses that he's seeing in the system today. So Adam, thank you very much for joining us. It's a pleasure to be here. Thanks for having me on. Your book crashed. I think it came out in a summer of 2018.

I actually did read the whole thing during a week vacation that I had on the beach. I was a big fan of it. But for those who don't know, I sort of gave a half a sentence summary. But it came out like, so basically eight years after the crisis. What was it about that crisis that took so long for you to sort of really tie together the big themes and to sort of put it all together in such a big work? Well, I think, I mean, I'm a somewhat accidental tourist, if you like, in 21st century financial history.

I now found myself marooned and stuck on this particular island, but I came to it somewhat bleakly, I have to say. I mean, I came to the topic through the history of the Eurozone crisis, which concerned me deeply as somebody who's deeply passionately identified with the EU as a result of my upbringing. And then thinking hard about what sort of a crisis that was, following the track back to the story really about the bank-based crisis as opposed to the sovereign debt crisis as being a kernel really of the disruptions, setting aside the immediate Greek issue, thinking about the instability of the European banking system that echoes through from 2008.

And then basically stumbling across the BIS papers, you know, the work of Shin and Borio and others, But mapped this very, in some sense, sort of counterintuitive story of the world before 2008, not as a world of, you know, driven essentially by current accounting, but current accounting balances, trade deficits and surfaces, but thinking through the flows of money through the global dollar system and understanding that as one of the ways in which the supposedly American subprime crisis of 2008, in fact, entangled all of the European banks. And it was really that that set me going. And I did then have, I have always heard, I've had a long-standing preoccupation with the question

of American hegemony, American power, which goes all the way back to the beginning, you know, to World War I. And recognizing all of a sudden that looking at this 21st century crisis 2008, I was actually looking at, as it were, the latest chapter, then the latest chapter of the Fed's role as the pivot, the anchor of the global dollar system, which is a story that goes back to the very origins of the Fed just before World War I and then critically from 1916 onwards. So that's how I ended up engaging with it. And then the publishing opportunity of the anniversary, the 10-year anniversary, came along. And that's how the sort of the book came to be released when it was. There is, I think,

if you go back to 08 and subsequent, like a strand of analysis and you think of the likes of Salt and Posa, peri-Modling, all of the people you've had on your show who have been, had been, in real time, teasing away at the problem from that side. And really what Crash tried to do was to connect that rather technical literature on the dollar system, on the financing, the market-based financing of the global banking system, connect that to a grand narrative, which had previously really revolved around current account deficits, the standard story of, you know, the nightmare of the Chinese treasury sell-off, that entire fantasy, which of course is not what actually happened.

So that was really the wager of that book, was that you could take this technical analysis, which in some people will refer to as the plumbing of the system and connect it to broader issues of political economy, which is now, of course, very much the dumb thing. This is really the analysis where you guys obviously are pioneers, but you could also think of Alphaville, Perry, Salton Pozar, Daniela Garbo. There's an entire genre of macro finance, really, now,

as critical political economy, of which crashed, I would take just to be one example. I was about to ask just on that note, how much of that sort of dollar dominance of the financial system slash US hegemony would you say exists today? Because people we certainly talk to seem to suggest that if anything, it's become more entrenched than it was pre-2008. Yeah, I mean, I think Prasad's idea of the dollar trap is a quite compelling idea, right? Because after all, the reliance on global commerce, on global finance on the dollar is not simply reducible to politics or geopolitics, right? And so therefore it's not vulnerable to the shenanigans in Washington or the character of Donald Trump or any of these other sorts of things. I mean, it's an incredibly powerful entrenched system which originated in power political shifts in the early 20th century and the rise of the United States economy and the rise of Wall Street and Wall Street-based banks.

And now, of course, is sustained by massive networked effects. So, you know, if you have major commodities being traded in this way, if you have major sources of trade finance being organized around the dollar, if you have the depths and sophistication of America's financial institutions, then all sorts of actors around the world will begin to coordinate, will begin to use the dollar as their basic vehicle. And you're absolutely right. I mean, the drift of the emerging market world, I mean, which is a sort of, you know, a moniker, which is becoming less and less helpful, because you never remember it.

used to include countries like South Korea, highly sophisticated 21st century players in a multipolar globalization, those countries are also piggybacking on the dollar. We know that private borrowers and China even heavily rely on the dollar for funding. So that indeed does tend to create a sort of a bandwagon, a snowballing dependence on the dollar, which is very pervasive. So I remember when I read Crash, and you focused a lot of, of attention on the necessity of these dollar swap lines or swap lines that the Federal Reserve set up with central banks around the world so that domestic borrowers and other countries

could get access to dollar liquidity since that was the central problem. And I remember thinking at the time, man, if they ever had to do this again, this would probably be very politically controversial. Maybe people weren't as aware at the time of that. But now here we are, and they've done it again, and yet there's about a million other things that people are focused on, so it actually has not gotten that much attention. In a sense, the issue that you identified is as central then is just like, it almost feels like a minor chapter, in a sense, given the enormity of this crisis. Well, I mean, I think from the point of view of the recipients of the swap lines in the current moment,

it's been pretty important. And in 08, it was critical because the people on the other end of the swap lines were essentially the big financial centers in Europe, right? So if you look at the flow of funds through the swap line system in 2020, it's completely different from the flow of funds through the swap line system in 08. I mean, the biggest recipients in 08 were basically the ECB. And that was because we had these gigantic, monolithic, European banks, which were engaged, in, deeply entangled in the American mortgage boom and the financial engineering of the early

2000s and were in serious, under serious funding stress. And the Fed was doing its best to support them in Wall Street. And when they ran out of good dollar collateral, it needed roundabout mechanisms for supporting them. And that's why at that moment the swap lines were absolutely critical. They already then rolled them out to a select group of emerging markets. But if you look at the flow of funds through the system, it's overwhelmingly to the ECB. This time round, A lot of folks are monitoring this in very closely in real time, and it's pretty obvious, I think, that this time around the main flow of funds in absolute size and also proportionally is to above all Bank of Japan and other borrowers in Asia, where we think various types

of currency mismatch exist, shall we say, on the balance sheets, not even necessarily banks, but some non-bank actors in Asia. So in a sense, I agree that the swap lines are, as it were, less quantitatively significant than they were, but then this is also a very different type of financial crisis. One thing that is very telling is that they were rolled out almost immediately as part of the first big spontaneous action by, or the first big action by the Fed on the weekend of March 15th. So swap lines were immediately part of the package.

The Fed wanted to eliminate the possibility really of distressed selling, I think, or stressed selling of treasuries, which they saw some of, I think, in the second and third week of March, and that, of course, would have been profoundly destabilizing. So that's what they wanted to eliminate. Right. Another then here is a very good news from the Treasury's point of view. This is a bit of the system which seems to be working quite well. And then I think it's also quite telling that they created this new innovative mechanism through which, at least notionally, other central banks are going to be able to repo treasuries. Again, I think basically devise. as a mechanism. It was something that Brad Setser at the CFR was arguing for as a way of allowing

central banks in the emerging market world to gain dollar liquidity without actually having to sell off any parts of their treasury portfolios. I've been trying to sort of get this idea straight in my head, but 2008 feels to me like a very, very financial crisis. Like all the problems were sort of isolated in the financial system, and then that spilled. over into the economy, whereas what we're experiencing now is arguably a very, very big economic crisis and it doesn't feel like the problems are as serious in the financial system. Is that the right way of looking at it? Or what would you say is actually different about now versus 2008? I think that question is going to preoccupy all of us till Kingdom come.

I mean, historians will be trying to pinpoint, you know, quite up, you know, apart from the absurd 90-degree We pivot in several of our major indicators, the contrasting headlines of the Financial Times, I think, this morning with the oil going indomnegative and the unemployment number in the New York Times cover. Yes, clearly this is a very different event. I think 2008, in retrospect, looks like an absolutely massive transnational version of a classic boom-bust cycle driven by the classic driver, which is the harnessing together of real and financial in the real estate construction, mortgage finance sector, and then various other things spinning off from that.

But that's kind of what that crisis increasingly, I think, looks like. Very, very enormous. So quantity and quality at some point, when a classic crisis gets that big, it changes nature because all of a sudden, you know, the American mortgage finance system enrolled, basically, all of European high finance too. Never had to manage a crisis quite like that before.

But I agree, that has a kind of classic feel. And it's a classic cycle also in that it's tail wagging dog. In other words, you have some small dynamic, over-leverage, cyclically sensitive sector, which then causes a ripple effect, systemic shock to the rest of the economy. The truly unusual thing about this crisis is that we were just full body checked, if you like, the largest slice of the modern economy, which is the service sector and household consumption, would just stop dead or if not stop dead, then subject to an act.

absolutely massive shock. So there isn't the tail wagging the dog quality. In fact, it feels a little bit more as though anticipating that, because the shock hadn't even really quite arrived yet, let alone the virus itself. In March, financial markets then really began to panic. And that is in a sense where we suddenly get the very close analogies between, or at least some similarities between March 2020 and 2007-8. It's in that moment, in a sense, when the financial markets realize, oh, my God,

something utterly unprecedented is coming our way in, let's call it, the real economy, that you begin to get, as it were, anxiety around the whole range of products and the whole range of credit markets that the Fed also found itself intervening in in 2007-08. But I agree, for a very different, the causation is radically different.

And we, of course, also don't know what our system looks like under the sorts of stresses that we might be headed into at the pace we're heading into them. I'm not sure that we really know what the world economy or the American national economy, how it functions when it's subject to the kind of hits we're going to be absorbing over the next two or three months. So is the difference this time around or one of the differences the speed of the regulatory response? maybe because the Federal Reserve sort of had the experience of 2008 and had tools ready to go in some sense, such as the dollar swap lines and a few other programs that were quickly revived. Yeah, I mean, asset purchasing, you know, you've got people like Laurie Logan and so on at the Fed who just really know how to buy if they have to, epic quantities of assets incredibly quickly. They know what the legal instruments have got to be.

They know who their partners are in the market. And so they can just do this. Again, we have to recognize the novelty of what they're doing because it is asset purchasing. But it's asset purchasing at a rate. You know the numbers like a million dollars a second, 90 billion a day. That's the sort of rate of business that the Fed was doing once a month under Menanke. And they're doing it on a day by day basis. And they're doing it day after day after day.

I mean, we're down to $45 billion a day now. But it's still absolutely astonishing in its scale. And for that, you need teams of people who know what they're doing and for whom it's not just a completely crazy request. So, yes, they had all of those instruments in place. I do think, again, we're going to be historians and for a long time going to be puzzling over the makeup of the Fed. In fact, the ECB at this moment, I did a post last night just trying to pull together the input from all of the journalist teams around the world who've been doing these stories on who are these central bankers. Because with Benanki, we kind of had, you know, we felt at least as an academic, I felt I had some. kind of read on Benanki because he was actual economic historian.

We know that he was a student of, you know, Friedman and Schwartz. There's that famous birthday address where he, you know, he speaks to Milton Friedman and Anna Schwartz and says, you know, you were right. We the Fed were wrong in the 1930s. And thanks to you, we won't do it again. So we kind of had a sense that this was a man who had met his moment in history and was acting that script. With Powell, I think most people's read was that he was a bit of a blank somehow.

And then now he's ended up as, you know, he's going to go down in history. is the most activist Fed chairman we've ever seen. And furthermore, breaching all sorts of boundaries in terms of the sorts of assets they're buying. And in an incredibly close relationship, it's making me want to revisit, like, what I think the conventional story is on the Fed and the Treasury in 0809. I'm not sure that it was then as close as it appears to be between Treasury and Fed with Newkin and Powell, because that's one of the innovative things about what they're doing

is how closely coupled it is. So there's another dimension to this crisis that we haven't talked about. So obviously, of course, there's the financial dimension, there's the extraordinary political crash, the virtual complete halt of much aspect of the services sector and household consumption. And then I'm wondering, and then, of course, there's this just enormous stress test that we're seeing of state capacity all over the world. And the fundamental questions of can governments simply do what's necessary, not on the spending side, not on the regulatory side, but on the basic question of can they get their act together on testing? Can they implement a public health strategy that involves quarantines or lockdowns

in the sustainable way while maintaining the underpinnings of a civil society? And I'm curious, you know, as you're, I assume in your mind, percolating your ideas for whatever the next crashed is going to be, maybe it all come out in the year 2030, hopefully for readers, it will be sooner, how much that is an important dimension to you of what the story will be? Yeah, I mean, this goes back to this point, Joe, that I think we sort of slipped away that you had earlier on where you were saying a lot of us when we were thinking about the swap lines, you know, going forward, we felt that there was a real problem here, because the swap lines in 0809 were a kind of Fed internationalism, if you like, a fed cosmopolitanism.

The Fed was providing liquidity to the entire world, and surely in an era of Donald Trump, this wouldn't be possible. There'd be some difficulties with the Trump administration or someone in Congress, one of the, you know, one of the hawkish or more slightly mad elements of the GOP would stick a spanner in the works and would trip up the world economy. And this wasn't just us. I mean, I've had conversations with extremely seniors people in the IMF, who wanted to ask me that question specifically. And, you know, I don't have any better read on Congress than later. In fact, I'm clearly they're better informed, but that is what they wanted to talk about. So if that kind of Fed lender of last resort thing was as crucial as it is, will we be

able to do that again? And as you pointed out, the answer turns out to be that if you've got Powell and Eushin and the Republican in the White House, which I think is probably the absolutely crucial thing here, there aren't a lot of people in the GOP in Congress who really want to make trouble. Though I actually think in the spring week meetings last week, it was probably a constraint on what Neuton thought he could do for the IMF. I mean, because everyone wanted, you know, new SDR issuance. It didn't happen. I think it's a reasonable hypothesis that Mewchin really thought it was a bad idea to stir up the sleeping dogs in Congress over that issue because, you know, Ted Cruz and people like that had played up very badly under the

Obama administration onto precisely that issue. So that constraint didn't arrive or have hasn't arrived. And instead, something else did blind us, side us, which is just simply this issue with state malfunction. It wasn't, as it were, the manifest at times to most people, I think, sort of craziness of the GOP that turned out to be the issue. It was in fact structural capacities and, to some extent, also obviously the negligence of the Trump administration, which allowed this crisis in the United States to become a really profound shock. And of course, you could say that's far from coincidental because where would you expect that but the American health system except of course America's public health its pandemic preparedness is in fact you know world

class so there are other series of you know there are a series of other links which snapped in a in an unpredictable way it did turn out that as it were this linkage between global financial management governance on the one hand and domestic governance on the other was critical but not critical in the way we expected. It wasn't the simple nationalist populism interrupts, you know, benign, hegemonic functioning kind of model that was the problem. It was just simply that several, both European and European states and the US, turn out just simply to have failed to manage this problem competently. That then did land us in a position where all of the tradeoffs are terrible. Your economic choices and your public health options are both bad. And that then caused

a panic in the financial system which the Fed and the other central banks have had to react with absolute massive force too. But I think that for me is where, you know, we kind of, we do come back to that story. In other words, how does national state capacity link or not link to global governance capacity? It just wasn't on the axis that we necessarily anticipated. Yeah, it feels like there's a big divergence between, I guess, the authorities in the US who are managing the financial aspects like the Fed and the authorities who are managing the public health aspects at the moment. Yeah, no links at all, it seems to me. It's really strange. If you think about what was hooked up, right? So last year, trade policy and the Fed were in a really bad clinch,

right? Every time the Trump people and the hawkish security people raise the temperature on China, It would send panic signals. And we did get, after all, remarkable reversals in central bank policy last year, broadly motivated by the sense that globalization and the world economy were in trouble. Expectations were really uncertain. There was risk of deflationary pressure building up. There was massive radical uncertainty.

And so monetary policy needed to ease, right? So there was, it wasn't a functional relationship, but at least there was a connection. And the other area that folks like me were very interested in building out the relationships and the connections was climate policy. I mean, as people began to get serious about climate, you have folks like Mark Carney speaking up and saying, well, could we have a climate Minsky moment, right? Could we be facing a really serious disruption to the financial system from stranded assets? We need to be thinking about this. Hypothetical, but at least there you've seen a joined-up connection ship between a kind of, as it were, the climate field of policy and

financial regulation and monetary policy management. But exactly as you're saying, I'm Tracy, there was clearly there were people in the pandemic world and the national security world who knew there were risks there, but it's not clear to me that it would be easy to point to anyone on the financial governance side who could really say they had thought through what central banks would have to do in the event of a global shutdown as a result of our failure to contain a pandemic. That's just a connection which I don't think had ever been May, there is a paper by Larry Summers, it should be said, on pandemic flu from, I think, 2016, but he doesn't look at financial stress.

It's just a standard macroeconomic modeling exercise based off SARS and hers saying, like, how big would the shop be? And it's very big, and the losses all come from the containment policy. But the paper doesn't look at the financial stability implications of that diagnosis. Adam, you wrote an essay a couple of weeks ago, I think for the London review of books, and you sort of talk about all the different structural flaws that this particular crisis has exposed. And I think three that you identified, at least on the political front, are sort of domestic U.S. politics, the sort of incompleteness of the European project. And we see that with a lot of the tension building up about Eurobonds and fiscal sharing. and so forth, and then China's own over indebted domestic economy. No one is doing great. When you look at

the sort of regions and each one of them having to do, you know, sort of make pretty huge steps in a short period of time to address this, who do you think has sort of the best shot of emerging, I don't know if it's better from this, but at where there is the will or the capacity to meaningfully address some of the structural problems that they faced going into it? Well, I mean, it's, I mean, I wrote that piece in a very gloomy mood. I mean, as you were saying earlier on, and I completely agreed with you. I mean, I've done several podcasts recently where we've had to add add add a dender late at night or early in the morning.

I mean, I wrote that piece, you know, in full max glue moment, I would say. And I, you know, broadly speaking, still think it stands up. And clearly parts of, you know, from the perspective of a kind of, you know, left liberal kind of Westerner, I mean, one of the things which I think should make us feel gloomy is that it's difficult to avoid the conclusion that our governance regimes of which we're proud have failed this test. And, you know, either short answer to your question, and I think it's tempting and I think it's difficult to miss is it that it's China that looks as though it's going to emerge from this strengthened in relative terms, because apart from anything else, their authoritarianism gives

them an ability to sculpt the narrative, to put it euphemistically, very brutally, if necessary. And as it were, maintained a degree of control over the storyline, which is not something the Europeans or the Americans are capable of, or, if you like, have a very convincing story to tell. I mean, the Germans and the South Koreans come out of this looking not bad at all, but in Abreu other case, it's clearly dispiriting. And for all of the kudos, I think the Germans will rightly earn for their domestic management of the public health problem, their contribution to the resolution of the constructive resolution of the Eurozone crisis is rather different, shall we say.

So, yes, it's difficult, I think, to avoid the conclusion that China's coming out of this first. It has at least contained the first wave. I was scanning the other day, just the inside story of the global auto industry, because it's very fascinated by how the shutdown and actually happened, and it's an extraordinary and interesting case study. And again and again, you read, like, VW currently only has plants operating and selling cars in China. So that shift in the balance of the global economy that has been looming on the horizon for over a decade now, you know, he's radically real.

I believe the only Apple stores in the world that are open are also those in China, though there may be some others in Asia now. Like that sense of a really quite fundamental shift in the balance and a quite sudden shift in the balance is, it's difficult to escape that. There will be, of course, answers and responses that we can make, and I'm sure that, you know, the story of China's success will be chipped a way out because it's clear that they have things that they are hiding.

And there are clearly costs to it, after all, this was an extraordinary mobilization of Maoist kind of discipline within the party and this extraordinary, repressive system of lockdown that they operated for a few weeks there. But nevertheless, the outcome in terms of their ability to essentially contain it to one big province the size of Italy is remarkable. We are actually talking about some really big picture stuff, but how do those different political systems exist alongside each other going forward? especially given the sort of economic relationship that you described earlier with the dominance,

the dollar, how do you square those two things? Well, I mean, this is how I completely agree. It is sort of jaw-dropping, isn't it? You know, and last year, we were getting quite panicky about the fact that we were realizing just how serious the Gulf between China and the United States might become. You know, we were getting quite panicky about Huawei and Apple and decoupling and all of those kind of memes. And there was a lot of talk about whether the markets had really priced all of that in. And that is, to reiterate, why the central banks, you know, it was extremely costly for them

to perform the pivots that they did last year. Both Powell and Draghi, even more, in Europe, took huge flak. And all of it pales by comparison with the reality that we confront today. I mean, it's just quaint our concerns for, you know, remember that meme of like everyone's smart in finance is talking about radical uncertainty. Well, this is what we're experiencing right now it's actual radical uncertainty. None of us can really, in any reasonable and confident way, predict what we're going to be doing this for. And that's a level of existential uncertainty,

which is just novel in that form. And it does expose really quite fundamental differences in our political systems and their ability to frame, authoritatively frame, and I mean that in a general sense, not just in an authoritarian fashion, but just in a convincing way, frame an outlook. And without that, how do you do long-term investment? What is the horizon against which you invest now? We could make some wild gambols, as you were saying, that tech comes out of this looking

pretty good. But beyond that, what is our sense of how these things fit together, given how stark these differences are? And it isn't a matter simply of political regime and constitution and the rule of law. it's also quite fundamental issues just simply about governance capacity. Who's quarantine system do you trust? Who can do the tracking that you really need? Whose tests are going to be tests that you think are actually reliable?

Those kind of questions are going to become key to just basic questions of whether Americans can travel to Europe anymore and vice versa. So I joked earlier about your sequel to Crash, which will probably come out in the year 2030, which probably is not a joke because I suspect you will write another book on this. But I'm just curious, sort of from a personal perspective, after you finish the last book, in your mind where you're like, okay, well, that was sort of the one big financial crisis I would see in my career. And now I can go back to being a non-well-known academic. Like, how surprised are you to see so many of these things erupt yet again in such a short period of time based on where you're, where you were headed?

Well, I would go back to trace this point, you know, a while back to say this isn't a financial crisis like 08. True. What it is is an absolutely epic, unprecedented economic crisis. And it is also, to pick up, you know, President Macron's rather more kind of optimistic, typically sort of broad gauge reading, it's a sort of anthropological shock in the sense that, I mean, I don't know whether you've seen this ILO number, but the ILO estimates that 2.7 billion of the global workforce of 3.3 billion people are currently under one or other form of lockdown or exiting a lockdown. That's 81% of the total global workforce. They think 1.3 billion kids

and young people have been furloughed from education. The entire planet's doing it at once. I mean, it's a completely unprecedented event. So on the one hand, it's totally shocking. On the other hand, for those of us who are interested in late 20th and early 21st century history as being the history of a kind of global interconnection, a global interaction,

a sort of strange synchronization of our activities, of which the global dollar is one very powerful and important expression but just one. This is the most mind-blowing confirmation of that premise. Think back 100 years to the worse epidemic of the Spanish flu. No one's talking about shutting India down. The British Imperial Administration doesn't really get to grips with the problem at all. And now you could argue the toss about whether or not Modi's strategy was right, but nevertheless the government in Delhi felt it completely.

the incumbent to respond as a powerful global state, as a member of the G20, to roll out a crisis response package and to do it at warp speed in a society with the limited resources of India. So that in and of itself is an absolutely sort of dramatic confirmation, if you like, of the fact that we're in the multipolarity, which was one of the big themes of crash. So I will absolutely, you know, hands up to saying, I don't. And I still don't think we're going to see a back. bank-centered crisis like 08.

That doesn't seem to be our prospect at all. But I'm on the other hand not surprised that we're seeing this escalating series of crisis. I will, on the other hand, like most people also agree, that I was very much, the book I was writing at the beginning of this year was political economy of climate change because I still am convinced that that, you know, is the biggest structural challenge facing this.

But pandemics fit within that in the sense that they are, you know, as it were, this symptom of our unbalanced relationship with nature and the extraordinary risks that we run through the interconnections of the global system and our struggle in a very uneven but interrelated way to grasp that. So at that level it fits the moulds neatly. It is, however, specifically not a shock that I had spent at any time to think right. Adam, it was so great to finally have you on. I feel like you're one of the guests that's definitely a lot of people want to hear and in our mind is like, oh, we got to have Adam on, we got to have Adam on. And finally, we had the right moment on it. So really appreciate you joining us.

Well, thank you for having me on. It's been good. Great. Thanks so much. Thanks, Adam. That was awesome. So, Tracy, I do think it was a little bit risky to, in the middle of this, like right at the peak, start talking big picture and long term. But I do think Adam is particularly skilled at tying really big themes together. I totally agree. But I have to ask, have we done our standard disclaimer about when we are actually recording this podcast. We haven't. So for those who are curious, because the world could change by the time you hear it, it is Tuesday, April 21st, 2020, and right now it's at 941 New York time. So, you know, if the world changes by the time you're hearing this, or if this entire conversation sounds completely out of date, that's why.

I'm trying to think of those big picture topics that we just discussed, which one of them is most vulnerable to sort of changing or flipping in the near term. I mean, we're talking about international political economy type stuff. It's hard to see an entire political model really flipping in the next week. But in this environment, you never know. The only one that could modestly change to my mind is probably Europe in the sense that in theory, You could have, you know, China isn't going to change its economic model overnight. The U.S. is not going to change its political structure overnight. You could, in theory, have, you know, the leaders of Austria and Germany and the Netherlands

come out tomorrow and say, okay, we support some form of debt mutualization. It probably would not happen, and it seems very unlikely. But like in terms of, well, like a few people could change their minds on something. thing. That seems plausibly it, but honestly, I mean, who knows? Are you making a forecast, Joe? No, I'm not making a forecast. I'm just thinking like in theory, what's the, the thing actually that I think was really sort of striking about, I mean, he made a lot of good points, but this sort of cliche of radical uncertainty and everyone talks about it, the good times and the normal times, how we don't know the future. But I do think, like, I've been thinking about this a lot. Like, as he said,

like we don't really know what life is going to be like in the U.S. in the fall right now. Right. You just don't. I mean, we might have some guesses of some different ways things could be structured, but no one like can really guess. I can't remember ever at time, anytime recently, in which not only was the future so uncertain, but the future was so uncertain about a few months from now.

Yeah, absolutely. It's also one thing that strikes me is all these uncertainties. Sort of, you know, last year when we had the trade war between the U.S. in China, we were thinking about a lot of these uncertainties, like the clash of political systems and economic systems between the U.S. and China, but we were thinking about it at a sort of low level of concern. And now with the coronavirus, basically everything that we worried about with the trade war has gone into complete overdrive. So the dominance of the U.S. dollar in trade financing, the clash of social and political systems.

between the U.S. and China, like, big picture stuff has just gone into really overdrive. Yeah, it's all at once is really, just everything happening at once is really how it feels is the sort of defining characteristic of this crisis. Yeah, yeah, that's a good way of putting it, putting it, the everything crisis. All right, well, on that note, this has been another episode of the Odd Thoughts podcast. I'm Tracy Alloway. You can follow me on Twitter at Tracy Holloway. And I'm Joe Wisenthall. You can follow me on Twitter at the stalwart, and you should be sure to follow our guest on Twitter, Adam Toos. He's at Adam Tews. Be sure to follow our producer on Twitter, Laura Carlson. She's at Laura M. Carlson, the Bloomberg head of podcast, Francesca Levy, at Francesca Today. And check out all of our podcasts under the handle at podcasts. Thanks for listening.