Odd Lots - Why Studying Keynes Is More Important Than Ever

Episode Date: July 13, 2020

In response to the economic crisis, governments around the world have engaged in stimulative policies that might be characterized as “Keynesian” in nature. But what did Keynes really believe, and how did he form his own ideas? On this episode we speak with Zach Carter, an editor at Huffington Post, and the author of the new book The Price of Peace: Money, Democracy and the Life of John Maynard Keynes. We discussed Keynes the individual as well as his ideas and their importance today.See omnystudio.com/listener for privacy information.

The news doesn't stop on the weekends. Context changes constantly. And now Bloomberg is the place to stay on top of it all. Hi, I'm David Gurra. Join us every Saturday and Sunday for the new Bloomberg this weekend. I'm Christina Rafini. We'll bring you the latest headlines, in-depth analysis, and big interviews. All the stories that hit home on your days off.

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Listen on Bloomberg Radio, stream the show live on the Bloomberg business app, or listen to the podcast. That's Bloomberg this weekend. Saturdays and Sundays starting at 7 a.m. Eastern. Make us part of your weekend routine on Bloomberg Television, radio. and wherever you get your podcasts. Hello, Oddlots listeners. It's Joe Wisenthall.

I want to let you know about something cool that's coming up on Wednesday, July 15. Oddlots are holding our first ever live stream event. Tracy and I will be interviewing Carson Block, founder of Muddy Waters Research. We're going to be talking to Carson live on Bloomberg.com, the terminal, Twitter, etc. It's going to be 8 p.m. Eastern Time on Wednesday. July 15. So be sure to follow at podcast to catch the live stream of the event. So check it up. Thank you. Oh, and welcome to another episode of the Oblods podcast. I'm Joe Wisenthal. And I'm Tracy Allaway. So Tracy, we're still in the middle of a crisis. Yes, we are. Three months on,

still crisis mode. You know, like one of the things we've been doing throughout this whole crisis is we've been making sure that listeners know the dates. that we were recording this. And I feel like it's especially important because, A, this, as you mentioned, it's been going on a long time. B, you're in Hong Kong. And Hong Kong, you just had one of its worst days of new cases ever. And you guys were like the exemplars that everyone, or one of the best that we're all supposed to aspire to. And it's not even over there. Yeah, it's pretty worrying. One of its worst days on record, as you just mentioned. And also Tokyo had a really bad day for infections as well. So the concern is that even in countries that have done reasonably well

in containing the virus so far, there is a risk for a big resurgence. Right. So the date is at least in U.S. time, it's morning where you are, but it's July 9th, 2020. And yes, several months after this began, we are still in the thick of it. You're in Hong Kong. I'm in Texas where everyone is where cases are very bad. This crisis is a long way from over, and it doesn't seem like there's any obvious path out as of this moment. That's an accurate, if depressing description, yes. And the thing, you know, obviously we've talked about this a lot, it's a multi-crisis crisis, because there's the health crisis, there's the political credibility crisis, because even if leaders want to do something or have a, you know, a plan to fight the,

virus itself, there's the question of whether they can actually sort of get the country behind it. And then, of course, there's the straight up economic crisis, mass unemployment, a major slowdown in activities. Yeah. And of course, all three of those different crises seem to feed off each other and make each one worse. You get this really bad feedback loop, I'd argue. As the economy worsens, people get more upset with their politicians and politicians,

arguably get more distracted when it comes to dealing with the health crisis and then people get more upset. It's a very bad cycle. It's a real like stress test, I feel like on the entire system all at once. We had a conversation a while back with Adam 2's. It's sort of like the everything crisis. And I think, right, as you said, like maybe there was some appetite in the U.S. for a fairly hard lockdown policies early on. But, you know, come to summer, it's really hard. So, Yeah, it's a bad situation. Okay, so we've set the scene, which is pretty dire. What are we talking about today?

So, if you're listening to the podcast, we're actually, this is a, you can view this on YouTube. We are going to be talking today with Zach Carter. He is a senior reporter at the Huffington Post. But right now, he's also a best-selling author of a new book, The Price of Peace, Money, Democracy, and the Life of John Maynard Keynes. And I feel like, you know, in the economic crisis that we're experiencing, I think a lot of people are talking about Keynesian economics, arguably even more than the great financial crisis. We're seeing the sort of greater willingness on policymakers to just spend, like a pure recognition that that has to be part of the playbook, much more aggressive fiscal policy.

But it's even more. And I think one of the things we're going to talk about with Zach is that Keynes was dedicated his life to a lot more than just spending when the economy is bad, which is how many people think of Keynesianism, but as actually many more lessons and implications of his work than just what people know him for. And I think the fact that we are in this everything crisis sort of makes this a very timely conversation. Yeah, I think this ties in with the theme that we've been touching on, which is there is a purpose to economics, which is, is supposed to be to make everyone better off. And it feels like that sometimes gets a little bit lost, especially in times like now. All right.

So without further ado, Zach, thank you very much for joining it. Thanks so much for having me, guys. I'm really excited to be talking to you. So, like, you know, why is it so hard to read? Like the general theory. Like, I've tried reading it a bunch of times. I have my, you know, chapters, like the one about, like, the beauty contest. It's pretty interesting.

Like, talked about the stock market and some of that I really get. And then other times I read, I'm like, man, it's really tough. Like, what's the deal with that? Yeah, you know, if you want to get through the general theory, and I feel like this is a pretty highfalutin audience, so we can just go straight to the general theory, you know, you can get a lot out of that book if you just read chapters 12 and 24, and those are the most readable chapters.

They're those that seem to make the most intuitive sense about the world that we live in today. You know, I think there are two things going on with the general theory, but in its unreadability. One is that Keynes is actively still trying to work out his ideas about what's going on as he is writing. And he is, in a sense, uncomfortable with the sort of radical implications of the ideas that he's developing.

Because by the time he gets to chapter 24, he says, you know, I think we'll have to have some sort of semi-comprehensive socialization of investment. And by investment, he means, he means, you know, corporate investment, you know, spending on equipment. research and development, things like that, in order to prevent the type of thing that we're experiencing right now in 1936, this is the Great Depression, which in Britain had been going on for 17 years. So he's, you know, someone who comes from this very, you know, traditional liberal enlightenment

tradition. And that is not a place that he is like super eager to go to. But he does want to preserve all of those liberal values about freedom of conscience, freedom of choice, all of these things that individual liberty that we associate with liberalism. But he's getting to the point where he just doesn't think those things can be saved without massive government activity. And he's not totally comfortable with that. The other thing, though, is that when Keynes knew what he wanted to say, he was very clear. He was a very accomplished financial journalist. And I think one of the reasons why we still remember who he is is because he had this incredible ability to connect with the public over the course of his lifetime.

So for most of the 20s and the 30s, he's easily the most popular sort of financial press person in the world, not just in Britain or the United States, but all over the world. People read his columns and his magazine articles and they understand the way the economy works through what Keynes is saying. He has almost no influence throughout this period on actual government policy. So he's a guy who's capable of communicating when he wants to. But I honestly think that when he got to the general theory, he said, you know, we are, like, I'm, I've had this great success communicating with the public. I have not been able to persuade the policymakers. What if I make this really hard to understand so that a bunch of economists will read it? Like, if I make this really hard to understand, economists will spend forever diving into it and trying to decipher, you know, liquidity preference and all these things. He'd been making the sort of basic policy arguments for about, about seven years before the general He was talking about the multiplier. He was talking about deficit spending. He was talking about public works, all of these things that we associate with Keynesianism today.

That long predated the general theory. I think he just tried to sort of mystify it so that economists would spend a lot of time digging through it. And as a result, it became this big work of economic theory that only the great brilliant economists could understand. And then the great brilliant economists could take it to policy. and to legislatures and to, you know, to presidents and say, well, only we can really understand this incredible work of impenetrable genius. You know, you must listen to us now. And that empowered a whole generation of, you know, what we now call Keynesian economists to push for deficit spending, essentially. I think there was a lot more to Keynes than deficit spending, but I think that's

how he ends up becoming so influential in the late 30s and in 1940. Zach, maybe just to stop and back up for a second, can you walk us through how radical Keynes' ideas were actually considered in the 1930s? Because I think nowadays, everyone just assumes Keynesianism is kind of the economic orthodoxy, but obviously it wasn't always considered that. Well, it's been the orthodoxy that's fallen in a favor. I think now it's back in vogue. Today, when we think about the gold standard,

which was the dominant mode, not only of economic exchange, but of sort of international economic cooperation, it was the global geopolitical order. Today, we think about the gold standard as sort of an instrument of conservatism. People who like the gold standard are typically associated with the hard right.

They're associated with the very right wing of a Republican Party or anti-internationalist movements, things like that. That wasn't the case in the early 20th century. The people who were committed to the gold standard, there were right-wingers who were part of it. But there was this belief that liberal internationalism, that free exchange between different peoples and different countries would help bring the world to a sort of peaceful place. And Keynes was saying, I like those ideals, but this doesn't actually work. And we're not getting more peaceful, we're becoming more warlike. And this is leading us to domestic misery and international conflict. And what he's doing when he says that is blowing up not just sort of a conservative

paradigm, but the paradigm that dominates conservatives, liberals, and centrist. It's sort of be like coming to the United States today and saying rule of law is a bad idea. The Constitution is stupid. Don't do that anymore. I've got a better idea. It's very, very radical. And in the sense it's a deep departure from what the understood way of doing things in the international order is, there's an almost sort of quasi-religious moral significance to this order. The gold standard isn't just about growth and balanced trade and prosperity. It's about respecting different countries. It's about, you know, sort of loving your neighbor in this really, in this way that people

really do take seriously at the time, even though I think in retrospect it seems kind of silly. And so Keynes is saying, we have to throw all that out. If we care about these values, we have to totally change. He's not totally comfortable with the policy implications of changing that. And he changes his mind over the course of the 1920s and the 1930s many times. But by the time he gets to 1940s, in the United States, he's famous for being the deficit spending guy. But in the UK, his biggest policy achievement is being the financial architect for the National Health Service. So he follows this logic through and comes to the conclusion that they have to socialize not just health insurance, but actually the entire medical system in the UK. And he helps push that through politically.

So the implications of this are much more radical, I think, than what we've come to understand him as in the United States, where he's this sort of deficit therapist who says, spend money when things go off the cliff. He was talking about realizing and false. fostering a more harmonious democratic society in good times and in bad. I want to get to that soon, like the gap between what we call Keynesian economics and Keynes-zone ideals. But before we do, so we set this up, obviously it feels to me like your book is very timely, given this massive international crisis, which you probably weren't anticipating when you decide to write it. But why did you? Like, what prompted you as a journalist to say, like, I want to write a Keynes biography, because there are Keynes biographies.

We've interviewed Lord Skidelsky, at least once on the podcast, who's probably the most famous Keynes biographer. But from your perspective, what was it that, in your view, is like, there needs to be another Kane's book, and I want to do it, because it's got to be a tough talk. 2008 changed the way people looked at Keynesianism in a kind of foundational way. Keynesianism was already sort of, if you look at the academic literature on the stuff, it was already sort of coming back into vogue over the course of the Bush administration, but it had been really, really deep in the legitimacy ditch before that.

So it's just barely coming back into respectability among academic economists. And 2008 makes a lot of the criticisms of Keynesianism seem very silly. And for me, I was working as a banking reporter at a trade publication called SNL Financial, which is now part of S&P Global and doing, just analyzing banking data and looking at credit quality and, you know,

delinquent loans and all the rest. And I really loved that job, but it became very clear that in 2008, all the people that I talked to went from saying, markets are rational, they reach equilibrium, and we've got to obey

the verdict of the rational market to saying, we have to bail out the financial sector. And that was clearly, people weren't stupid. Like, people are talking to, knew they were, changing their tune, right? They weren't just like hypocrites. But it was very clear that

there was an intellectual shift that was happening. And I said, okay, well, let me read this Cain's guy. I've only, I only knew him from my Econ 101 classes. But when I went back and read him, and I tried to read, to be perfectly honest, I tried to read the general theory first. And I found it sort of like, it was as pleasant as

like eating a pretzel covered in thorns, right? It's just not great. I'm glad I'm not the only one. I was like a little nervous. I'm just glad that No, it's terrible. It's terrible. I mean, Kane's most of the time is a beautiful writer. His friends are people like Virginia Woolf and Litton Straiti and Ian Forster. And he is capable of doing beautiful things with language about economic policy. But the general theory is just not his most lyrical work. So I went back and read the economic consequences of the piece, which is the book that he writes at the end of the negotiations over the Treaty of Versailles. He is the top representative from the British Treasury at the talks about how to establish both an economic and political order at the end of World War I. And he is furious about what his own government has done and about the ultimate agreements. And he says, look, the economic terms that we have committed ourselves to and this treaty are going to march

the entire continent toward dictatorship and war. And I think it's just, you know, there are people who have quibbled with some of his figures here and there over the years. But I just think it's very difficult to argue with that basic premise. He was talking about something that came to pass and for reasons that are very closely connected to why they came to pass. The reparations that were assigned to Germany were essentially unpaidable. They destroyed the German economy, and that economic wreckage sort of created the breeding ground for fascism. And when I read that, it became clear to me that Keynes wasn't just talking about money and numbers. Economic consequences of the piece is not about deficit spending.

Keynes hasn't even thought of that yet. He's just talking about international cooperation and figuring out a way to link economic policy with global harmony. He's still committed to the gold standard in 1919 when he writes this book. But it seemed to me like it was a work of political theory like the works that I had studied when I was an undergraduate. I studied philosophy. So, you know, Hobbs, Lop, Rousseau, Enlightenment philosophy stuff. and he just seemed like one of those guys to me. And so I started reading and I kept reading.

And when you read Skidelsky and other accounts, these are very good biographies. I don't want to denigrate them at all. But they're written from the perspective of looking at Keynes as an economist and how he came to develop his economic ideas. They're very, very useful for that purpose. But if you think of Keynes as a social theorist, and if you think of him as a statesman, there's a lot going on in the economic theory that is happening for these moral political reasons that I think are really the things that are driving him. I think in a lot of ways,

Keynes comes up with a solution that he comes to believe is morally or politically necessary and then sort of reverse engineers it to be economically acceptable to people in economics. He has a really great essay on Isaac Newton. A lot of people don't know is what was an important economist in the British Empire in the 18th century in charge of the British men, all sorts of monetary policy stuff he's doing. But he talks about Newton and It says, you know, Newton's great genius was this ability to have a flash of creative insight. And then he would dress up the creative insight with mathematics after the fact. And I think Keynes was doing the same thing in economics.

And that makes him, you know, sort of more of an artist than an economist, as we would think of the economist today. It's really interesting how you mentioned. It sort of took the 2008 financial crisis to bring Keynesianism back in vogue. And then, of course, it kind of took the Great Depression to make people take Keynes seriously in the first place. But just to back up for a second, can you talk to us more about his social vision? Like, what is it that he is trying to reverse engineer here? So with Keynes, you always have to be careful because he changes over time.

He's not monolithic. But he does have this very consistent vision of beauty and the good life that he gets from being an undergraduate at Cambridge. being a member of the Bloomsbury set. So friends with Virginia Wolf, the great writer, Littin Straiti, the great writer, Ian Forrester, the great writer. A lot of painters who are not as well known today, but people like Duncan Grant and Vanessa Bell, who was Virginia Woolf's sister,

who in their day were considered very great artists. Vanessa Bell would go and hang out with Pablo Picasso in Montparnasse all the time. They were part of this big international cultural milieu, and Keynes himself ended up marrying a ballerina, named Lydia Lopakova, who's from St. Petersburg, who's basically the most famous ballerina in Britain. This is at a time when ballet is sort of like a combination between like football and like Netflix.

It's easily like the most popular and powerful cultural thing that's happening in Europe at the time. So he's very deeply involved with this cultural life, and he thinks that this vibrant thing where you can hang out with Stravinsky and you can and you can, you know, make out with ballerinas and drink champagne with Virginia Woolf while having your haircut by somebody who's just got back from seeing Gertrude Stein, he thinks this is really

the life. And it's hard to, you know, it's hard to disagree with the guy. I mean, that sounds like a pretty good way to live. And he wants to preserve that. And when he starts out as a, as economic thinker, he's really just trying to preserve that for his sort of upper middle class quasi-elite milieu. But as he continues to develop his thinking, he says, you know, if we don't open this space up to other people, the rabble are going to revolt and they are going to overthrow us and we are not going to be able to have these parties anymore. And that is going to be terrible. So in order to preserve this sort of lifestyle, we've got to democratize it. And he starts thinking about ways to essentially alleviate the very high inequality of the late

Gilded Age that he's living in, in order to preserve the sort of high cultural achievements of that of that era, thinking that, you know, it's better to democratize these things than have them be smashed by what he's particularly worried about is the March of authoritarianism, which he thinks is brutal and violent and terrible, but also just kind of gauche, just, there's bad art from the fascists. So if you want to have a beautiful world, you're going to need to democratize it. And as he continues to develop his thought, he, believes that the sort of possibilities for democratizing this are wider and wider. So he ultimately ends up concluding that economic scarcity, which at least when I was studying

economics as an undergraduate, I was told you, first thing, first day in Ecom 101 is economics is the study of scarce resources and infinite wants. Canes just says that's not the subject of economics. The subject of economics is uncertainty in human decision making in the face of uncertainty. Scarcity is not the thing that we have to worry about. We can give all this stuff to everybody. That's a very, very radical, I think, rethinking of what economics is. And I don't think it's ever really been integrated into the policy agenda of people who call themselves Keynesians in sort of government politics. Like, I don't think Paul Krugman, for instance, talks about uncertainty very often. He talks about deficits and debt-to-GDP ratios and things like that.

You don't see these guys talking about uncertainty. One of the great contributions, I think, that Lord Skidelsky made, I think, was trying to re-center uncertainty as the key to Dick Keyesian Thought all the way back in the 1980s. You said he was scared of fascism. I'm just wondering, was it fascism or was it communism? Because I think people forget in the 1920s and 1930s how absolutely terrified most of the world was about rising waves of socialists and communism in the East. It's both early on. But he has a very interesting. quote. In 1920, he goes to this big international conference at Genoa in Italy, which is designed to renegotiate the terms from the Treaty of Versailles from 1919. And he's writing all of these dispatches back that are being published all over the world. He's syndicated, it's very famous guy.

And he basically says, there are people who think the big challenge of the world today is between the sort of bourgeois liberal states of the 19th century and the social. stuff that's happening in Soviet Russia, which is, you know, there's very recent Russian revolution stuff. I disagree. I think the real challenge is between this thing called militarism, I'm paraphrasing here, and liberalism. And militarism believes in the imposition of a culture, in the imposition of sort of social

hierarchies against people. And liberalism is about free ideas and free individuals. And socialism is sort of this, this, you know, kind of weird, very important. of liberalism, that he's not totally comfortable with yet, but he doesn't see it as being a totally alien thing the way he sees the hard right that's rising in Europe at the time. And I think we forget when we talk about Keynes often in the rise of fascism. There's like Keynes in 1919 and then there's Hitler in 1932, but there's the Beer Hall Putsch in 1924.

There's Mussolini in 1924. There are, there's just all of these very intensive. outbreaks of far-right political violence that are happening across Europe very quickly after the end of the First World War. And that's what's really animating him. He doesn't, he actually goes to Soviet Russia in 1926 and comes back and says, this is a disaster. Don't do this. These people don't believe in the good life. They're totally acetic. Like they, they refuse to enjoy anything. It's, it's, he's against the sort of political oppression that he sees, that the sort of paranoia. The, the sort of paranoia that he sees the government breeding.

But he also just thinks that it's sort of like a colorless, lifeless existence, that it's made people joyless in this really sort of spiritual way. So he's a critic of communism, but there's a reason why a lot of his critics who arise after World War II are on the right and not on the left. He sees the coming of right-wing militaristic authoritarianism, as the great threat facing society. And he also says, well, yeah, we shouldn't do Soviet Russia too at the same time.

He's often saying we need to find ways to move left, what we'd call left today on economic policy. In his time, it's not clear whether what he's doing is left, right or center to be very clear. But he's often saying we need to do left-wing economic policies to prevent this sort of right-wing dictatorship politics from taking over. So how did that change? So here you have this sort of social theorist, philosopher, even perhaps as you characterized him, something of an artist, who then sort of built a economic vision to sort of buttress those ideals. And those ideals, as you said, about spreading his vision of the good life to more people, maintaining that lifestyle.

How did we get this thing called Keynesian economics, which is, oh, the unemployment is here? so we have to set interest rates here and we have to spend this much. How did that become a thing where it got so seemingly divorced from the philosophy? Well, I think this gets back to your first question, Joe, when you were talking about why is the general theory so hard to read?

And we have remembered Keynes because the economics profession took him up as sort of this important idol icon that they could hold up and say, look, the great Keynes said we must do it this way, therefore it is legitimate. He's like a historical figure who had great prestige, who was well respected around the world. And in invoking his name had this sort of legitimizing power over policies that people would invoke. And the policies that people wanted to pursue in the United

States, which became the sort of global economic hegeman after World War II, and that's important because the UK was the global economic hegemon before the U.S. took over. And so because Keynes is the most prominent economic figure from that, Americans are very, very eager to take somebody from sort of the last old order and say, look, this guy, this guy is very serious. You knew what he was doing. We can refer to him for our policymaking. But in the United States, the economics profession doesn't really want to abandon its basic assumptions. It likes the Keynesian policies because they can see that they worked. I mean, they watched the New Deal and the World War II and saw the war spending, but they don't really want to shift the focus of economics away from rational actors

and general equilibrium theory. And so they start saying, well, you know, I think the most, the most popular version of this is Paul Samuelson, who's, you know, probably a lot of viewers here, you know, like me, you've read the Samuelson textbook as your Econ 101 book, right? I mean, this is how Keynesian ideas really get out into the mainstream is through these textbooks. And Samuelson basically says, look, things get. get kind of wacky if we're not at full employment. Markets are rational. You know, you've got supply and demand and they hit their equilibrium. That happens unless we're not at full employment. And if we get into full, if we get out of full employment, things go into this topsy-turvy world.

So we just have to figure out a way to make sure that we have full employment and we'll do fiscal policies. And he doesn't really investigate what that means for the nature of the broader theory. You know, why is it that things would not be at equilibrium if people are rational actors and things generally do reach equilibrium. Why do you, they start talking about external shocks and things like this that have no, they're sort of ad hoc additions to the theory, but they don't require you to break from these other things about economics, which look, they're useful. It's not, you know, people talk about these things because they're intuitive.

They make sense. And when you're talking particularly about like a small business or a household and supply and demand and how monetary flows work there, they make a lot of sense. They don't tend to work, I think, on a large social scale, but they just sort of keep hand-waving that. And in the United States, this principle is really useful because it just says, look, the government can spend on anything, and it will be good for the economy. So whatever it is that your Democratic or Republican government wants to spend on, whether it's the war in Vietnam or the invention of Medicare under Lyndon B. Johnson, in the 1960s, these projects are all good for the economy because they will increase demand

and they will get the economy back to equilibrium. And Keynes wasn't in favor of spending as such. He wasn't in favor of deficits as such. He had a social vision and it mattered very deeply to him what you actually spent the money on and why. But if you turn him into this sort of sterile economist who only thinks about money and numbers, who is only a scientist who, you know, pushes up his glasses on his nose and just tells you how the equations balance, then you can use that guy to justify different moral considerations. And he's not this sort of partisan or philosophical or moralist figure who would have an agenda, right?

And he's dead so he can't defend himself. And this is what happens over the course of the 50s and especially the 1960s. And then, of course, you have this inflation crisis in the 1970s. people say, well, Keynesianism is responsible for inflation, so it doesn't count anymore. But you have about 20 years where people are just trying to justify the political agenda that they have for, you know, good and bad reasons, for conservative and liberal reasons. And Keynes is the guy who can be invoked. Nixon invokes him, you know, LBJ and Galbraith invoke him.

There are very different types of presidents in the United States who are saying, this is our guy and this is why we are doing what we are doing. Just to dig into that a bit more. I'm curious, who do you think misused Keynes the most in that content? Oh, it's really hard. It's really hard to say. You know, I think LBJ is a really fascinating person to me because I think his social programs that he was doing in the United States

are exactly the types of programs that Keynes thought were necessary. So, you know, LBJ creates food stamps. A lot of the New Deal programs that we like, like in the United States, States like Social Security, they become the thing that we understand that to be because LBJ expands them so much. And he creates Medicare. There's just a lot of this social safety net kind of work that seems very Keynesian to me that is protecting society from the swings of the market. You know, when things go up or things go down, you've still got this stuff and you're not going to be just sort of thrown to the wolves. But LBJ is also doing the Vietnam War. And Keynes wanted to

do all of that stuff so that people wouldn't go to war. He thought you could use economic policy to both create social justice and prevent international conflict. And so there's just this deep contradiction within that administration from a Keynesian perspective, where they're doing all of these things that Keynes would approve of, but they're simultaneously using his ideas to spend an enormous amount of money on this conflict in Vietnam, which bills, you know, at least a million people in Vietnam. It's 50,000 Americans, but it's a complete catastrophe for people living in Vietnam. And I think he would have been extremely, extremely uncomfortable with that. I think it would be furious, frankly. And you get to Nixon, and Nixon basically does, you know, the same thing.

But with a more explicit focus, he invokes the name of Keynes, you know, a couple of times, saying, I'm going to do deficits. I just think that, war stuff. He was so scarred by World War I. He came of age thinking that everything was fine. He didn't even have to become a famous economist. He didn't have to become a famous writer. He could just sort of frolic in the lawns of Cambridge and talk about, you know, philosophy and Plato with these other smart people. And everything would be fine because they were all working their way towards progress and beauty. And war was going to be a thing of the past because all these great ideas were making society more and more harmonious. And then the war comes along and it just shatters that vision entirely.

And so he's just spending his entire life trying to prevent another war. He just thinks that this, he's deeply, deeply shaken by this. And so the idea that his theories would be used to create massive international war machines, I think would have absolutely horrified him. Let's bring it forward a little bit to the present. Because as you mentioned, you know, basically since the last financial crisis, Hainesian ideas have been on the rise somewhat. He's been invoked a lot lately. And I, you know, there was a lot of reluctance to spend money during 2008, 2009. Now everybody's spending money. Even the Germans who are like famous for like not spending money, even they're spending money. Like, let's talk about like some of the other things. So obviously, okay,

spending money. It seems like that's necessary. We need to do a lot more of it. There's not a whole lot of disagreement. It's kind of impressive. No one even really talks about like deficits that much with the national debt. Like nowhere near where in 2008, 2009. But A, we have a problem of, we haven't been able to end the virus crisis, especially in the U.S. where there's a serious political legitimacy problem. It's really, it's been really hard to marshal the resources to get it done to suppress it to an acceptable degree. And then even if we do, our, you know, we, We just came off of like almost a decade of underemployment from the last, there's such a slow recovery.

I don't think anyone wants to know, you know, wait until 2030 until we have the unemployment rate below 5% again. So like beyond just the acute need to spend money, what can the next set of leaders, whoever it is here, elsewhere, like what are the ideas that they should draw from from Keynes so that we don't have this like ongoing political legitimacy crisis and we don't have another 10 years of underemployment. You know, with the caveat that it's always a very dangerous thing to raise the day. From your view of like what, you know, yeah.

You know, I think, you know, I think your point about the public health crisis is, it's very simple, but it's really important. You know, Keynes didn't want to be remembered as a deficit therapist. wanted to be remembered as a guy who addressed the great problems of his day. And the great problems of his day were war in depression. The great problem of our day is this pandemic. So you have to address the pandemic. You have to figure out how to cope with that and how to build credibility with the public in particular about how you're going to deal with that. A lot of Keynesian theory on economics is not about equations balancing just so, but about uncertainty and building

a competence among not only investors, but the public, that tomorrow could be better than today. Because if you don't believe that tomorrow can be better than today, you're going to keep hoarding your money. You're not going to go out and spend. And investors are not going to go out and invest. You're going to keep your money under the mattress, right? I've spent a little bit more money in the pandemic because I've had some pretty decent books sales. But, you know, I'm still not like, you know, I didn't buy a house, right? You'd be crazy to, right? That's the weird thing. How is it actually doing really well?

No, it's true. It's weird. It makes no sense to me. But anyway, keep going. Yeah, I keep waiting for New York rents to go down and so I can move, but it doesn't happen. So the key thing there is to find a way to make the public believe in what you're doing. I think for the U.S., this is not so much a problem of dollars and cents as it is a problem of just straightforward leadership. Like, nobody believes the Trump administration, right?

And I don't know if anyone's going to believe them until they change. There's sort of this, the closest parallel I can think of is the ECB in the 2010 to 2014 austerity crisis in Europe. ECB just kept saying crazy things for years and years. And people were like, there was just no reason to believe that anything they were going to do is actually going to solve the problem. And then all of a sudden, Draghi says, know what? We're just going to provide unlimited support. We're just going to do it. And there's this huge shift in investor sort of confidence in the general sort of belief about

how the world works. That's just with a decree, but he backs it up with actual policies. I don't know if Trump is capable of making a decree like that because I don't think people believe him the way they believe other public officials. They don't trust him. But somehow or other, the government's got to be able to convince the public that they can actually control the pandemic to such an extent that when they say, you know, if these kids are going back to school, it's actually pretty safe. If you want to go to the beach, it's actually pretty safe. But if you want to go to a bar, maybe it's not, you know, there have to be ways to figure out what we can do in such a way that people aren't just, you know, hiding in their apartments all the time, becoming miserable and angry and getting ready to protest, right? Not that I have a problem with the protests that have been happening, but. I think it's pretty obvious that a lot of the energy that's being expressed in the streets is pent up pandemic anger. So you have to deal with the crisis first, the actual public health crisis.

You have to care about the optics and sort of the communication with the public and why they would, why they would believe in you. But you then also have to convince the public that the government actually works for them. You know, the United States has had 35 years of accelerating inequality. And as a result of that, I think it's pretty clear that there are different people who are living in different political worlds, different societies, really. And the pandemic is really underscoring this. There are people like me who get to, you know, hide out and I'm in my in-laws house in Northern Virginia here. I'm hiding out here talking to you guys and collecting royalties for a book. You know, I don't get to do all the fun things I used to do, but this is not like mass suffering for me. I take my dog down to the creek. It's okay. There are other people. who have to like go to work every day and risk death in order to to serve the rest of the country. And that is just an accelerated, intensified version of the way that the country has been sort of bifurcating for decades now. And if we're going to be part of the same political project, I think Keynes would look at that and say, you know, forget about even social justice. Those guys are not going to hang together.

These people are going to be at war with each other if you don't find a way to make them feel like they're part of the same project. and economically, you've got to just bring them closer together so they're living in the same worlds. And so, you know, he would talk about inequality not so much as a, not even, not even for, you know, he came up with reasons to say, here's, here's why, you know, giving poor people money is more effective than giving rich people money so that, you know, you get more growth out of it. But, you know, his real motivation for this was that he was afraid society would fall apart and descend into chaos. And I think, I think addressing inequality would be something that he would have very very high on his list. But I think he would also be looking at the breakdown of these international

systems. The relationship between the U.S. and China is just awful right now. The relationship between the countries of Europe is awful right now. And he would come up with some brilliant sort of grand plan that would probably be politically impossible, where he would try to alleviate inequality in the United States, fix the trade relationship with China, and cure the pandemic all at once. And, you know, I don't pretend to have his, his, like, creative genius, but he would try to find some magic formula that would attack all three of these things. And then he would pitch it to everybody across the world. And then he would watch and dismay as everybody refused to do it. And the world then descended into chaos again. Just on that note, what do you see is the major

weakness of Keynesianism? Because as I listen to you talk, and to me, it seems like if you want the government to be a stabilizing force, not just on the economy, but on society at large, then that government needs to be capable in various ways and aligned with a certain form of society. So to me, that seems like a flaw in the plan. But I'd love to get your thoughts on what you see as the big problem here. No, I think that's exactly right. You know, Cain's believed, he's very much this philosophical rationalist. He believes that there are real eternal truths that are out there sort of in the ether that we can, you know, divine through pure reason. And once we see them, we will, you know, a light will go off and we will recognize that.

And that by arguing with people and presenting good, good arguments to them, people will come around and they will agree to these things. And he is, he is reacting very sharply against Marxism, against particularly the like very hard materialist versions of Marxism presented by Lenin that are very, very popular in Europe in the 20s and 30s. where the argument is that people don't listen to arguments at all. Everything is determined by the economic structure of society. And so it's a fool's errand, do you even engage in philosophical debate? And he thinks that's just totally outrageous. But I do think that while, I mean, I think it's very clear that people can be persuaded, I think Keynes' belief that people are persuaded just based on the eternal truths of arguments

is it's politically naive. You know, people find different things persuasive. People do listen to arguments, but the reasons they find them persuasive and not persuasive are often dependent on all sorts of other factors. They don't have to necessarily be, you know, the forces of production or whatever that you would see from, you know, certain sort of crude Marxists from the 20s and 30s. But it's hard for me to believe that, you know, you could talk to somebody from the Mortgage Bankers Association and tell them that we can really save the economy if we just write off, you know,

second liens. There's a reason why people don't find that persuasive. They don't even have to be acting in bad faith to not find it persuasive. But there's, there are factors in their lives that have made them think in certain channels that make that difficult. You know, when I used to work at SNL Financial, we had CNBC on in the office all day. You start thinking about the world through that media that's being pumped into your, the horizons of what is possible start to, start to feel that way. And it's not because you're stupid. It's not because you're venal or corrupt or something. It's just this is the way you become accustomed to thinking about things.

And when I came to HuffPost, suddenly he had MSNBC pumping into my head all the time in the office. It's a totally different set of assumptions that just sort of start undergirding your thinking. And you have to be careful in all these situations, right, to try to maintain your independence. But people are stamped by the sort of social forces around them. And for Keynes, I just think he was too, he had this very majestic. and kind of childlike belief in people's ability to be persuaded that that sort of took them to be these these sort of rational atoms that had nothing, no social forces at play on them. And that's just, that's just not the way people are.

You know, I love your point about the sort of the state that we're in is sort of this accelerated version of the pre-pandemic state, particularly with respect to inequality. and there are people whose jobs require them to work often at very little pay and expose themselves to potential health risks and death every day. And then there are people like the three of us who get to talk about Keynes professionally and safely. And it's, but it's also you see it in the market too. And you see like this acceleration where tech stocks, which were already doing very well pre-crisis, have absolutely soared, interest rates, which were already headed down, headed out further. Like every trend it feels like going into this crisis has actually been accelerated. It hasn't been a reversal at all in some sense.

But I'm just curious, like, you know, you said Cain sort of lived in fear of chaos and society falling apart. I've always sort of been paranoid that myself even before that. So I feel sympathetic. Like, do you think we're sort of like, this is a big moment? Like just, you know, obviously it's a big moment in terms of a crisis. but in terms of like these trends potentially hitting their breaking point or their possible limit if we don't take a different approach or can we put it back in the bottle and just sort of go back to December 2019 and so you know I think the sort of nice response to the 2008 crisis

was the Occupy Wall Street movement where you had all these hippies hanging out in Zuccotti Park and they're pretty much harmless right they're just they're just walking around talking about love and trust and having really unproductive sort of strategy sessions, but like, but meeting well and like talking about a better world. They succeeded in, I think, reframing the sort of narrative about what was wrong in 2011. It stopped being about if you, if you were watching mainstream cable news at the time, it went from being, everything went from me about the deficit to being about inequality. Very, very clear shift in the narrative. But, but then it was over. I think the really nasty response to 2008 is the Trump candidacy. And the way that Trump demagogues against

immigrants and scapegoats people who are vulnerable, I think that's another way of expressing and channeling the anger that happened as a result of that of that crisis. We are, we were out a point, I think, before the pandemic where it looked like we might just sort of glide past the Trump administration to something like might might miss the, you know, a lot of people have suffered in the last four years from, you know, Hurricane Maria, all the rest. But we would have missed these, these massive, massive calamities that I think people who were very worried about the Trump administration in 2015 had been talking about. And we've now not missed those. And I think the question is what comes next? We've watched on the right,

people armed with, you know, these massive, crazy-looking guns just sort of storming the Michigan state legislature. On the left, We've had uprisings in every American city for the last month, basically. I think they're dying down a little bit now because the pandemic's getting so bad. But, you know, that's a combustible situation. And this situation economically, it does not improve, right? Things are going to get worse. We have even seen this as a financial crisis.

It's possible that all of this stuff that's happening in the, you know, real economy transfers to the monetary economy. And we have a banking crisis that comes. compounds all of this. It's possible it just gets much worse without that. The uncertainty that's hanging over people's lives, I think, is extremely damaging. People don't know when they're going to be able to go back to work. They don't know when they're going to be able to have fun. No one knows if they're going to be able to watch, you know, basketball in the fall. I mean, these very simple things about people's lives, simple and then emotionally compelling are up in the air. And that just

creates a great deal of anxiety. So I find it very hard to believe that we're not at some sort of inflection point. I cannot believe that the global economic order that we are going to see in 2022 or 2024 is going to be some sort of moderately tweaked version of the global economic order in 2019. I think something is going to have to change because the system is just breaking. It's not working, right? We were already having stresses, particularly for globalization, before this happened. But right now, I mean, all sorts of trade, you know, supply. chains are breaking down and trade relationships are just falling apart because of the pandemic. And it's really hard to see how you rebuild in a globalized way without either massive international

coordination, which would require a total rethink of the way that we're doing things now, or sort of a sort of retreat into economic nationalism where people just, where countries just try to do things on their own so they don't have to be dependent on these international, you know, legal issues. Either way, things are going to change very radically. And there will be a lot more social unrest before it's over. Zach Carter, thank you so much for joining us. I've started your book. I haven't finished it, but I'm really looking forward to finishing it now.

And that was fantastic. And it really does feel very timely. I know, I'm sure, multi-year. What year did you start it? I sold the proposal in March of 2017, but I've been working on it for a year. So I really started taking it seriously in March of 2016. So right around basically when the Trump campaign seemed to be taking off, I was like, I just can't keep covering American politics day to day all the time without something else because I'll go nuts.

Because I was covering the 2016 campaign. It just was an unpleasant thing to cover. It just was not fun. And so I sold the book as like a way to retreat into a different part of the world that still felt intellectually serious. to actually allow you to like emotionally engage so that you could retreat from what was going on. Tracy, this is a good reason for us to write our book. I was going to say I wish I was this productive because when I want to retreat from the world, I watch like old movies and eat junk food.

But I very much admire that you went off and wrote a book about Keynes. And yes, Joe, we should write it. It's really cool. Old movies and junk food have a have a place. I did plenty of that in 2016 too. But, you know, you can only distract yourself for so long. You have to find something to, like, invest yourself in. And that's really the way to escape.

And for me, it was British monetary policy in the 1920s. Well, Tracy, let's get on our book. Let's start working on it. All right. Zach Carter, thanks for joining us. Thanks, guys. I thought that was great. And, Tracy, in the, you know, what Zach talked about at the end, specifically,

this sort of like the difficulty of, really even imagining just going back to like some version of 2019, you know, just beyond the economics and the life. Like, you know, just from an investor standpoint. That's a huge question. Yeah, I agree. I'm actually really surprised that we managed to go through that entire podcast without mentioning MMT once for you. I was waiting for you to bring up anymore. It's always someone else. It's always you. You know, I don't bring it. It's not me bringing it. I wasn't. Okay, but really? I mean, there is that. Well, you either call it a criticism or a compliment, I guess, but there is that line of thought that MMT is just another version of Keynesianism.

Yeah, we could have asked him. I'm in a, like, a chat room where we talk about MMT is accident too. I'm in a chat room where we exclusively talk about MMT. All right, right, right, right. But it was a really fascinating conversation. And I don't know, like, it sort of, it sort of makes me think that the problem isn't necessarily economic. It's political, which is what I've. said about MMT over and over.

Tracy, you're the one who keeps me. This is like three or four times now in a row where I don't say anything about it and it's always you bring you. Okay. Okay. I'm not going to say MMT anymore. I'm just going to say, listening to Zach, it really makes me think that, again, the problem is about politics and not necessarily economics. It's these different visions of the world. And no one can actually agree on where we're supposed to be going and get aligned on them. 100% agree. And I really do think that like, even if like, you know, you're purely just an investor and even if like you just want to like make money, I think that point is so crucial that you can't avoid politics. And I think like people think of like politics and like, oh, maybe Joe Biden

is going to win and raise the tax rate by 2%. What's that going to mean? Or maybe he's going to, you know, put a higher tax on prescription drugs. What does that mean? Whatever. But I think that right now, like, there is a deeper question politically, and it's in the U.S., but also around the world, but also like specifically the U.S. is like, will this force us to go in some different trajectory? And I almost feel like if you're an investor, it's like, and you want to figure out what's going to happen with inflation or what's going to happen with wages, you know, we're like, so everyone's, you know, they look at like the Fed balance sheet or they deficits or whatever. But I do feel like these fundamental questions of like what kind of like world will political leaders try to rebuild

when the virus is gone is going to just be this huge thing and there's so much uncertainty and the question of like, can we, will they, will they try to just get back to 2019 light is a huge unknown question. Absolutely. All right. Well, on that big question, shall we leave it there? Let's leave it there. Okay.

This has been another episode of the Odd Thoughts podcast. I'm Tracy Alloway. You can follow me on Twitter at Tracy Allo. And I'm Jill Wisenthall. You can follow me. on Twitter at the stalwart. And you should follow our guest on Twitter, Zach Carter.

His handle is Zach D. Carter. And of course, check out his new book, The Best Seller, The Price of Peace, Money, Democracy, and the Life from John Maynard Keynes. And be sure to follow our producer on Twitter, Laura Carlson,

at Laura M. Carlson. Follow the Bloomberg head of podcast, Francesca Levy at Francesca Today. And check out all of our podcasts under the handle at podcast. Thanks for listening.