Odd Lots - Why Governments Haven't Learned The Lessons Of Japan

Episode Date: October 14, 2019

It's well known that Japan has (until recently) been mired in years of mediocre economic growth. And policymakers and economists use Japan as a warning for how developed economies can enter into prolonged slumps. But has anyone learned the lessons of Japan? In our latest episode, we talk to Richard Koo of the Nomura Research Institute, about his concept of the "Balance Sheet Recession" and why developed economies with lots of debt don't behave the way they do in textbooks. He explains how the lessons of Japan apply to Europe and the U.S. and what policymakers have failed to learn.See omnystudio.com/listener for privacy information.

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And welcome to another episode of the Odd Lots podcast. I'm Tracy Alloway. And I'm Joe Wisenpal. Joe, do you think everyone knows what a balance sheet recession is by now? I don't think so.

Only the cool people know what a balance sheet recession. Only the real nerds who are reading up on this stuff pre and post crisis were into that. But I think for the vast majority

of people, including, I would say, the vast majority of economists, unfortunately, I don't think that concept is one that's, like, really in their language or their terminology typically. Yeah, I kind of have to remind myself of this, because I got into financial journalism right after the 2008 financial crisis. And balance sheet recession was sort of the hot thing then. It was the parallel that everyone was reaching for to explain what was happening to the U.S. at the time. But of course, it's still a relatively new concept and it's still a relatively rare type of recession, I guess. Right. And, you know, again, this sort of one of the questions that developed market economies are dealing with right now is why have the traditional tools that governments and central banks use to stimulate the economy not been effective?

Why have lower interest rates not caused faster growth and more rapid inflation? Why don't we see more rapid growth and inflation thanks to budget deficits that are essentially near their highest levels of all time in places like the U.S. and elsewhere? And so it kind of in keeping things we've talked about a long time, like, well, what is really wrong with the framework? And is there a different way to think about the malaise that we see across so much of the world's economies? Right. And I think we are seeing more and more policymakers who are arguing that fiscal stimulus is the way forward or that fiscal is the new monetary policy. And a lot of that thinking stems from the balance sheet recession ideas. So why don't we go ahead and dig into it? I'm really happy to say that our guest on today's episode is Richard Koo, the chief economist of Nomura Research Institute. And the man who the term balance sheet recession is actually attributed to. So Richard, thank you so much for coming on. Thank you for having me here. So why don't we start with the obvious question. What exactly is a balance sheet recession? And how did you come to start thinking about recessions in that way? Geography, because I've been in Japan for the last 36 years.

Starting around 1990, of course, Japan fell into this what I call balance sheet recession. And B.OJ brought rates down to almost zero, tried to stimulate the economy. and nothing seemed to work. And it took me about seven years to see our ordinary, you know, private sector always maximizing profits kind of framework to understand what's going on. And one day I stumbled upon the chart

that indicated the Japanese companies are not borrowing money at all. They're actually paying down debt. And then it came to me that why would a private sector company willing to pay down debt when interest rates are zero? And then, of course, the only reason that can happen is that they have a financial problem of some sort. Perhaps balance is underwater.

And then when I start thinking in those terms fell in place, that is to say during the bubble days, people typically leverage themselves up, thinking that they're going to make lots of money very quickly. When the bubble birth, asset prices collapse, all that liabilities remain, their balance is under water, and people all start paying down debt at the same time. and paying down debt becomes kind of a survival issue for them because if people outside the companies, for example, finds out

that your company is actually in a negative equity, they will stop trading you on credit, they demand everything to be settled in cash, your best employee could leave because realizing that this company might be underwater for many years to come, when all these things come to surface, you're basically dead.

Well, inside the companies who understands the actual situation, keeps their mouth shut, they want to hear. They try to repair the balance is as quickly on individual level, the right thing to do. If I were running one of those companies, I'd be doing it. Many of the people listening since podcast in the same situation will probably do the same because if you have a cash flow, and in the Japanese case, a lot of companies still had cash flow, Japan was running the largest trade surplus in the world, people wanted to buy Japanese products all over the world. So the main line of business was okay. They had a cash flow, but their

balance sheets were horribly underwater. So all these people start paying down debt to repair their balance sheets. And that way, you don't have to tell your shareholders, it's all, it's not, the shares are a piece of paper now. You don't have to deal with bankers. It's not all non-performing loans. And most importantly, you don't have to stay workers. There are no more jobs tomorrow. So for all the stakeholders involved, using the cash flow to pay down debt is the right thing. to do. But when everybody does that at the same time, we fall into this fallacy of composition problems in that even though everybody's doing the right things, collectively you get the wrong result and you get this wrong result because in a national economy, if someone is saving money

or paying down debt, someone else has to be borrowing those money and putting them back into the income stream. If everybody's saving money or paying down debt and no one's borrowing money, the economy will just implode. When all these people start paying down debt, economy began to decelerate and the situation got worse and worse and worse. They tried to do monetary stimulus, but if you balance it is underwater, you cannot borrow, and the banks can't want lend you money either. So I read your book, like many people, I think, in our field did. I probably I came across it in 2010 or 2011, the book, The Holy Grail of Macroeconomics, where you lay out this theory essentially by looking at exactly what you described, the Japan scenario post-190, where despite lower and lower interest rates, nothing could change on the corporate behavior because corporates were incentivized to pay down debt. How much, though, is this concept of the balance sheet recession?

And what you see is sort of like, you know, on the individual level, corporate level makes sense to pay down debt. But in the aggregate level, it's really problematic. But how much is this different or essentially a new reframing of sort of very old Keynesian ideas about how what might make sense for one household or a company suddenly becomes very problematic when it's the behavior of the overall economy? As you mentioned at the very beginning, is a real occurrence of this type of recession. Right. Because most of the time, people are very careful with their finances. They're very careful with their balance sheets. But during the bubble days, that discipline disappears.

And people just leverage themselves up as much as they can so that they can make tons of money very quickly. And when that bubble burst, the number of people who are affected will be, far larger than in ordinary circumstances. And when they all collectively start paying down debt, even if there were some people who are still borrowing money, on a net basis becomes a net saver. And in that case, we fall into balance sheet recession. So I'm curious, where do you see, given that these are relatively rare types of recessions, where do you see balance sheet recessions now in the world? Is it still in Japan, possibly? still in the U.S. or in Europe? Where would you say at what stages?

Because bubbles are relatively rare occurrences. And so balance sheet recession, which typically follows the bursting of the bubble, is rare because of that reason. Now, Japan, the bubble burst 1990, and it's already 30 years from that. Corporate balance sheets in Japan are in very good shape now, the balance sheet recession powers probably ended around 5 to 10 years ago. Some companies may still be struggling, but on average

Japanese companies are in pretty good shape. But even after the balance sheets are repaired, because of the process of the leveraging process of paying down debt is such a big. Most companies that comes out are still saying to themselves, oh, that was terrible. experience who never borrow money again. So this is a kind of trauma that gets stuck with this mindset.

And when you look at what happened to Americans after the Great Depression, the Great Depression was this type of recession. Everybody was leveraging up. Once the bubble burst, everybody started paying down debt all at the same time and GDP collapsed, but people still paying down debt. And those Americans who lived through the Great Depression never borrow money until they died. Because the trauma was so bad. Or Japan, we have a mini version of that. A lot of people are still not borrowing money because the previous experience was so bad. Now, U.S., I think, household sector balance is becoming much cleaner,

thanks to all the help from the government and the Federal Reserve. And so I think U.S. is almost to the end of this process, but I think the trauma part will be still with us for maybe some more years. In Europe, because they had a double-dip recession with the European crisis starting around 2011, 2012. The problem got a lot worse, beginning to look better, but European economies at the moment are very much dependent on exports. Sweening all around the world, they are slowing down even faster. And so for Europe, it might take much longer. And even after the balance sheets are repaired, this trauma period,

we're also going to be lasting for quite some time. So if we go back to Japan and you mentioned that maybe the balance sheet recession in Japan only and maybe about 10 years ago or less. So essentially it was a 20-year balance sheet recession in your view. During that time and the sort of standard view, I think that people would say is, okay, the way to, or at least within your framework, the way to address too much debt overhang in the private sector is essentially to move the debt onto the government's books because the government operates differently and that sort of theoretically relieves the burden and the government has all the debt, but the government can service the debt because it's the government. Now, Japan did that to some extent because the deficits in the national debt soared sky high during this. balance sheet recession. So at the same time during this long, painful de-leverging prices, the Japanese public debt absolutely soared. But why wasn't that enough? Why wasn't some of the

most eye-watering levels we've ever seen of debt to GDP anywhere in the world? In fact, Japan is famous for the size of the stock of its public debt. Why wasn't that enough to more quickly alleviate the private sector's problem? At the beginning, no one has this framework in their minds, including myself, I have to admit. And so when they put on the fiscal stimulus to keep the economy going, they thought with one big jolt, who acted as a pump priming, an economy will come out very quickly, and then they can rescind the fiscal stimulus afterwards. You know, when US fell into one in 2008, it was Professor Larry Summers who said, all we need is a big job, to get the economy going again.

A bit jolt of fiscal stimulus. Same argument was made in Japan 18 years earlier. So they put in the fiscal stimulus. And fiscal stimulus, government spending money, of course, economy responds very quickly. But at that time, the balances are still under repair.

But people didn't realize that part. As soon as the economy began to show improvement, they decided to cut the deficit because we don't want to leave any dead to our children and all that kind of argument. And so even though households and companies were still repairing balance sheets, the fiscal stimulus was cut, economy tanked again, and then they put another fiscal stimulus, the economy improved again, and they cut the fiscal stimulus again. So we had actually this on and off situation for a very long time, and that is not the way to fight this recession. It has to be sufficient and it has to be consistently sustained.

And that was not how it was applied, unfortunately. And in 1997, we made even bigger mistakes of really trying to cut the budget deficit, thinking that economy is already strong enough. And at that time, IMF, OECD, who also didn't understand anything about balance recession, strongly insisted that Japan should reduce its budget deficit. And when that was put in place, we have five consecutive quarters of negative growth, complete breakdown in the banking system, and that became the double dip, the real double dip. And once you have a double dip in already this very difficult circumstances, people become

very, very pessimistic. And that's why it took us nearly 20 years to come out of it. If these were understood from the very beginning and fiscal stimulus were applied in a sufficient amount in a sustained way, I'm sure that time period could have been cut significantly. Today's show is brought to you by Vanguard. To all the financial advisors listening, let's talk bonds for a minute. Capturing value and fixed income is not easy. Bond markets are massive, murky, and let's be real. Lots of firms throw a couple flashy funds your way and call it a day.

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corporation distributor. So talk to us about how fiscal stimulus actually affects private sector borrowing and how you get companies specifically to move out of this debt trauma because it seems really difficult, at least in the case of Japan. And I think even today, you know, Japanese companies don't actually borrow that much. I think we have the first ever Japanese junk bond sale just this year and something like half of Japanese companies have no outstanding debt at all. So to some degree, it seems like we're still struggling with this debt trauma issue, at least in Japan. Once everybody start paying down that at the same time, there will be no borrowers. But household sectors still saving money, the deleveraged funds also count as a savings,

and the economy begins to shrink, right? If I may give you a numerical example, suppose I have $1,000 of income and I spend $900 myself. $900 is already someone else's income, so that's not a problem. It's already circulating in the economy. The $100 that I decide to save go through financial sector, and will be lent to someone who can use it. When that person borrows and spends it, the total expenditure would be $900 I spent

plus this $100 that this borrower spent combined would be $1,000 against my original income of $1,000. And the economy moves forward. If there are too many borrowers, interest rates are raised, too few borrowers, interest rates are lowered, sometimes with the help of the central bank to make sure that this income cycle is maintained.

That's the usual economy. Then when you're in balance sheet recession, what happens is that I have $1,000 of income. I spend $900 myself. $900 is already circulate in the economy, so that's not a problem. But the $100 I decided to get stuck in a financial sector because there's no borrowers, even at zero or negative interest rate, because everybody's repairing balance sheets. When this $100 gets stuck in the financial sector not coming out, only $900 is spent in the economy. So economy shrinks 10% from $1,000 to $900.

The person who receives that 900, if that person says, okay, let's save 10%, and saves $90, spends $810. The $90 gets stuck in the financial sector, again, because repairing balance sheet takes a long time, 5, 10, 20 years. So economy could go from 1,900, 810, 730, very, very quickly, even with zero interest rates. And the last time this actually happened was the Great Depression I mentioned to you earlier, when the United States lost 46% of its nominal GDP in just four years

because of this process, 1,900, 8, 10, 730. Now, if the government comes in and borrow the $100 at the beginning, then economy will be kept at $1,000 because I spend the $900, government borrow and spend $100,000, so combined it would be $1,000. So the income is maintained. If the income is maintained, people have the income to repair their balance sheets. and that's basically why the government acting as borrower of loss to result is so important in these type of recessions because by keeping income from falling, people have resources to repair their balance sheets.

And after the balance sheets are repaired, then of course you have to reverse the situation, private sector borrowing money and government repairing balance sheets. But we haven't got there yet in any of these countries, unfortunately. So we recently did a episode with Michael Pettis and we talked about China and the challenges it's facing right now with its gigantic or burgeoning private sector debt load. And I've seen a lot of people lately talking about this idea that there's been this huge private sector debt buildup in China. Opportunities are coming to an end and that there is now the risk of a long drawn out. style balance sheet recession in China simply due to the high level of private sector debt. Do you see a similar situation playing out with what we know about the Chinese economy? Well, I would like to throw these huge debt numbers and see people going, wow. I'm afraid I'm not one of them.

Really? Even though I'm the one who start talking about debt before others, And so I'm kind of glad that people are paying more attention to this issue. This big debt numbers that people throw around, I am not about. And the reason is quite simple, and that is that unless someone is saving money, you cannot have a debt, right? Right. That cannot come out from nowhere. Someone has to be saving money for someone to be borrowing money.

So that's one key point that a lot of people have forgotten. And the second point is that if someone is saving money, money. Someone has to be borrowing money to keep the economy going. This, you know, 1,900, that issue comes from there. And when you look at some of the debt numbers, they're huge. But when you look at the savings numbers and compare with it, savings numbers, of course, those are available from flow funds data. And they're, of course, growing, but growing nowhere near the debt numbers. how do you describe, how do you explain this discrepancy? And I think this discrepancy exists.

Of us in the financial sector has all sorts of ways to increase these numbers through so-called structured products, for one thing. And in a more simplified way, suppose a large state-owned enterprises in China was able to obtain funds from banks at a relatively low interest rates. It supplies, let's say, smaller private sector companies at a slightly higher interest rates in a debt number because SOE borrowed it first and it lent the money to another private sector companies. So the debt is doubled, but the numbers could grow. The debt number can grow very rapidly. And if you look at Chinese flow funds data carefully, I don't see the kind of craze that happened in Japan or in the United States.

prior to 2008, where, for example, household sector, which should be saving money, becoming a net borrower, it actually happened in the United States, Spain and Ireland during the really bad bubble days. That is not happening in China. Household sector is still saving money, and corporate sector still borrowing money, but nothing especially irregular, that you would really bubbley situations that happen in Japan and other places. So yes, I think Chinese house real estate prices are high and the bubble could burst. The corporate sector did not really three 2008 period. Well, a related question, but in trying to resolve a ballot sheet recession by getting the private sector to lend again, how do you make sure that you don't end the,

up inflating another bubble. Because at least in the U.S., and, you know, you can agree or disagree that what happened in 2008, 2009 was a balance sheet recession or not, there does seem to be a lot of concern that the corporate sector is borrowing too much, and we are on the verge of another sort of corporate bond bubble of some form or another. So how should policymakers walk that line? And so monetary policy is the shortest way to get another bubble in place. Because during balance recession, privacy, absent themselves. So the fund managers, people in the financial industry, will be flooded with cash because household sectors continue to save, as they have done in the last 5,000 years.

And there's the leveraged funds coming back into the financial. financial sector, basically the debt repayments. And then the central bank, believing that they have to maintain a 2% inflation rate or something, continues to add funds through QE. Russian recessions. Everyone else are short of money except the financial sector, flooded with money. The government is the only borrower left. A large portion of that funds will move toward the government bonds, and that's the reason why government bonds come down to these ridiculously low levels. during balance recessions, even with ever larger public debt. For example, U.S. today, public debt is pretty large compared to what we were used to before,

but 10-year treasury is only 1.7%. Japan, even before B.OJ went on to this QQE under Governor Kuroda, the public debt was already close to 250% of the GDP, but JGB was yielding only 0.7%. That all comes from the fact that this excess funds in the private sector all head toward the only borrower left, meaning the government. But if the government doesn't play its role and absorb all these excess savings, the remaining funds, the remaining funds will have to go to fix existing assets, right? Because companies are not borrowing money for investment. So these funds have to go to some sort of fix and things like that. And that's where you could have another bubble growing.

And U.S. commercial real estate prices, if I see my last number, it was 44% higher than the previous peak. And when Janet Allen and those people talked about the problem in the bubble in the commercial real estate, well, it is actually there. And part of that, I think, comes from the fact that it's over-reliance on monetary policy. If we switch from reliance on monetary policy to fiscal policy, fiscal policy means government will be borrowing more money. So the excess savings that have to go to existing assets will be absorbed by the government. And so there will be less chance of having another bubble. So you worry about bubbles right now, or how worried about bubbles are you right now if you look at, say, the U.S. economy? Share prices and commercial real estate prices worry some in my view, yes, I am somewhat worried.

And many companies, U.S. companies also use this very low interest environment to buy back their shares, right? That's why the corporate debt is so much higher. Buying back shares still keeps money in the financial sector. It just changes the abilities from equity to bonds. But the money is still in the financial sector to invest in. something and creating more bubbles while weakening the corporate balance sheets. So you've identified one of the key sort of themes, which is that in all these post-balance sheet recession periods, there's this reluctance to lean heavily on fiscal policy and

over-reliance on monetary policy. You talked about the fits and starts of fiscal stimulus in Japan after 1990 and how that's setback. You talk about the bubbles that we've seen here or that may be brewing here in the U.S. because we've relied so much on monetary policy. I'm curious in your conversations that you've had over the years with policymakers, investors, and so on, what is it that explains this sort of like innate reluctance or distrust to add public debt? And it doesn't seem like it almost doesn't seem to matter what period of the cycle we're in. you could go back to 2009, even then Bernanke was talking about the need to eventually take care of the public debt or fiscal consolidation. Why this pervasive view among policymakers

everywhere, including those at the IMF and so forth, to be very reluctant about public spending and to be over-reliant on lower interest rates. It comes from the fact that all the economics we learn in universities based on this Keep this maximizing profits. Maximizing profits, two conditions will have to be met. One is that they have clean balance sheets, and the other is that they are flooded with interesting investment opportunities. If government comes in and tries to borrow,

you end up crowding out private sector investments, pushes up interest rates, maybe misallocate resources because government is not very good at spending money. It's all negative, very few positives. And that world where household sector saving money, but corporate sector was very eagerly borrowing money to expand factories and so forth, that world did exist all the way to maybe around 80s in the United States and Japan maybe into the mid-90s. In that period where there's very strong demand for funds from the private companies are borrowing. In that world, I fully agree with them that fiscal policy should be discouraged and it should be handled with monetary policy because monetary policy works very well when there are lots of people who's out there willing to borrow money. In that case, when the central bank raises rates a lower rate, it will have immediate impact on the economy.

We are not in that world anymore. Households are still saving money, but corporates are not borrowing money. And once you enter this, to change our mindset completely, that we don't have borrowers there, savers are still there, but the borrowers have, but this is so hard for economists who are trained in this whole notion that private sector is always maximizing profits. And so they kept on saying, well, if you do one more monetary stimulus, let's say go to helicopter money, a negative interest rate, or deepen the negative interest, say something got to happen. that they're still working on this premise that we are still in the textbook world.

Right. Private sector borrowers out there are world anymore. But no one has told them that in this different world, we have to think differently. Except you, you wrote the book, the Holy Grail of Macroeconomics, which we, Tracy and I read. Why hasn't everyone else read it? Well, maybe not. Hopefully they're listening to the podcast. Wait, I have one more question.

So I mentioned in the intro that the idea that fiscal is the new monetary policy seems to be gaining some ground. And you just hear a policymaker after policymaker talk about the need for fiscal stimulus, but rarely do they actually get into detail about what that fiscal stimulus could be. Does it matter to you in your model what type of fiscal expenditure governments actually use like corporate tax cuts, infrastructure spending? Is there a difference to you? Right in pointing out that a lot of people are not talking about fiscal stimulus because they argue that multi-policy has reached its limits, zero lower bound, you know, that kind of talk. And what I find that one thing is that they should not talk about fiscal stimulus just because interest rates are zero. Playing to the people, why interest rates are zero to begin with?

Because that's the key. Interest rates are zero because people are not borrowing money. But if in the national economy, someone is saving money, someone has to borrow money to keep the economy going, then what do you do? With the private sector is not borrowing money, the public sector will have to borrow money to keep the economy going. That part of the explanation hasn't come from Mr. Powell or Mr. Draghi or even from Ms. Lagarde, even though they all three are now talking about importance of fiscal stimulus. and was it September 18th talk. Chairman Powell even said fiscal policy is more powerful than monetary policy.

The key reason why fiscal stimulus is needed is not given, in my view, that they are actually lack of private sector borrowers. So I like to see that. And the second point, your point about the nature of fiscal stimulus, it matters a lot in this instance because if you give them a balance sheets, they will use the tax cut to pay down debt. So in that case, GDP will not be affected situations. I'm afraid one has to use public works,

government actually spending and creating demand to make sure that income level is maintained. And only by keeping the income level, people have resources to pay down debt and repair their balance sheets. And so during this type of recessions, government has to be the borrower's last resort and the spender of last resort.

The balance sheet repair takes, you know, many years. Japan took nearly 20 years, although it didn't have to be 20. Once we know that in advance, put together, for example, an independent commission, put our best and brightest people in it, find out public works projects that we see on government bonds today. For example, if it's 10-year treasuries are yielding 1.7% or so today, if we can find a public works project that earned about 1.7% by all means we should do it

because those projects will be self-financing. It will not be a burden on our future taxpayers be thinking. And unfortunately, in Japan back 20 years ago or after 2008, people needed fiscal stimulus right away because otherwise it would be in the 1,900, 800, 730 cycle. So they had to do all sorts of things very quickly were not very well thought out. And that's why you ended up with bridges to nowhere, rose to nowhere. If we knew in advance that these things can take a long time, gap measures are necessary.

But we should have set up some sort of an independent commission to make sure that we pick good projects that are self-financing at these ridiculously low government bond yields. Then everything will be sustainable. Well, Richard, I really don't understand the excuse that people have because I thought your writing has always been very clear. But nonetheless, I hope people listen to this podcast and continue to read your work because it makes a lot of sense to me. And as you point out, these issues aren't going away. Large private sector debt loads still exist in the U.S. There's bubbles in the U.S. There's unwillingness to borrow that we're obviously seeing in Europe and that's going to scar the region for.

for a long time because of the double-dipped nature, as you said. So hopefully we've done some good here, but really appreciate you coming on. I've always been a big fan of your work. Oh, thank you very much. Thanks so much, Richard. That was great. So, Joe, I don't have to ask you. I can tell that you enjoyed that conversation.

I love Richard. Like I said, I read his book in 2010 or 2011. I was like, ah, this makes sense. And you called it the Holy Grail of macroeconomics, and that might seem, you know, all he was saying is that Japan has a lot of lessons for the rest of the world. That's what you're saying. You look at Japan and you can see what how the economy works in a way that elsewhere could be applied, but there hasn't been much application of it since then. Yeah. And one thing I really like about his whole theory is the behavioral aspect of it all, the idea of this debt trauma, because you don't often see that in traditional economics textbooks. People don't talk about what past experience actually means to the way economics is supposed to work. And a of course, if people have a bad experience, then they might not act rationally in the future. So they might not borrow money even if interest rates are really low or below zero even. Totally. I think there's a lot of economists have this sort of like overly mechanical view of how the economy is supposed to work and how firms maximize profits or households maximize incomes. and if you have X opportunity to invest and your cost of capital is below X, then you're just going to do it.

But that, of course, ignores, as you say, and as Richard pointed out, how one's historical experience may inform in a very significant degree, to a significant degree, how you behave. Yeah, exactly. Well, one other thing that really struck me is it's kind of interesting to me how Koo has this sort of middle ground, I think, between sort of main. mainstream macro on one end and MMT on the other end. Because in the MMT framework, it's almost, you should always rely on fiscal policy makers and that there's deficits are never really a problem extent, except to the extent that they cause inflation due to an economy at maximum potential, where it's clear that he does not quite buy this view. So he like more sees this sort of sectoral balances view in a way that I think mainstream hasn't come around to. But

But he still thinks that in normal times, the basic idea that the central bank should do demand management and the government is dangerous to run up debts is something he agrees. He just doesn't think these are normal times for developed economies. Right. Well, he argues that eventually governments should concentrate on fixing their own balance sheets, but only after they've sort of substituted the private sector and stepped in and done a bunch of stuff. and in a way that I think would probably happen decades after the fact anyway. But it is very different to MMT in that respect.

You're right. It is a nice middle ground. Radical but middle. Okay. This has been another episode of the Odd Thoughts podcast. I'm Tracy Alloway. You can follow me on Twitter at Tracy Alloway. And I'm Joe Wisenthal.

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