The Munk Debates Podcast - Munk Dialogue with Mohamed El-Erian: A plan to fix a fractured world

Episode Date: November 9, 2023

The last two decades have seen the world economy cascade from crisis to crisis: from the global financial crisis of 2008, to increasing economic inequality and the devastating effects of climate change, to the COVID supply chain crisis and rise in inflation, we are living in a period of heightened instability. It is this economic unpredictability which is the subject of a new book by world famous investor Mohamed El Erian. Permacrisis: A Plan to Fix a Fractured World, written together with former UK Prime Minister Gordon Brown and Nobel Prize winning economist Michael Spence, identifies the common causes behind these crises, and offers a sensible plan for reform to create a fairer, more equitable and more stable world.   The host of the Munk Debates is Rudyard Griffiths - @rudyardg.   Tweet your comments about this episode to @munkdebate or comment on our Facebook page https://www.facebook.com/munkdebates/ To sign up for a weekly email reminder for this podcast, send an email to [e-mail].   To support civil and substantive debate on the big questions of the day, consider becoming a Munk Member at https://munkdebates.com/membership Members receive access to our 10+ year library of great debates in HD video, a free Munk Debates book, newsletter and ticketing privileges at our live events. This podcast is a project of the Munk Debates, a Canadian charitable organization dedicated to fostering civil and substantive public dialogue - https://munkdebates.com/ Senior Producer: Ricki Gurwitz Editor: Kieran LynchBecome a Munk Donor ($50 annually) to get 72-hour advanced access to the full length editions of Friday Focus and Munk Dialogues. Go to www.munkdebates.com to sign up. Hosted on Acast. See acast.com/privacy for more information.

When you're a journalist and people don't trust you, it's always your fault. These people need to be represented. They are Canadian. They deserve to have a voice and a seat at the table. It is time to go back to the office, and the time is now. Russia had reasons to be concerned. They had reasons to be fearful. We're at an absolute turning point in reproduction. This is the problem with realism. They just treat all countries the same. They don't distinguish between dictatorships and democracy. Jesus. Hello, Monk listeners. Reddard Griffith here, your host and moderator. Welcome to this, our continuing conversations called the Monk Dialogues. These are in-depth questions and answers with some of the world's

sharpest minds and brightest thinkers. On each monk dialogue, we go deep into the big issues that are transforming our world and shaping the public conversation. While the last two decades has seen the world careen from crisis to crisis, we all know the big milestones, the 2008 global financial crisis followed by a decade of rising inequality and the increasingly pernicious effects of climate change, all running smack dab into COVID and everything that that entailed from supply chain crises to the more recent rise in inflation. All of this has people asking themselves, have we entered into a new era of human history, one defined by crises? And if that is the case, how do we get out of it? or how do we manage these crises in more efficient and effective ways?

Well, that is the topic of an important new book called Permacrisis, plan to fix a fractured world. It was co-authored by our guest today, Muhammad Alarion, one of the world's most respected thinkers on economics and financial markets. His other co-authors, no slouches either, the UK Prime Minister Gordon Brown and Nobel Prize-winning economist Michael Spence. The book digs deep into the common causes, the threads binding these different crises together and offers up a plan for reform to create a more fair, equitable, and stable world that still

sustains the economic growth we need to ensure rising living standards for everyone. Mohamed Alarion, welcome to the Monk Dialogues. Thank you for having. It's wonderful to be with you. Well, you are a favorite of our audience. We had the opportunity to first get to know you around your important book, the only game in town on central banks. And boy, wasn't that a prophetic work in the ensuing... What is that now, Mohammed?

Is it almost a decade since that book was published? 2016. 2016. And then during the pandemic, you allowed us to check in with you in a period of great economic and general uncertainty. We're back this episode to talk with you about your new book. You've co-authored with Gordon Brown and Michael Spence, Permacrisis, a plan to fix a fractured world.

So I kind of consider this, Muhammad, a trifective conversations. We're going to move from your 2016 book to the pandemic to now some solutions that you're putting on the table that capture so much of what's happened in the last decade. So the word permacrisis, I think many of us have. a sense this is something we're living through. Having read the book, though, you've added some additional kind of nuance and context to the word and why it is gracing the title of this book.

So could you unpack it for us and explain what you mean by a perma crisis? First, let me just say, unlike the prior books, this one was not planned. This was the result of three friends getting together during the first. lockdown on periodic calls like we all did and we would ask about each other's families and then we would find ourselves talking about policy issues and we continued holding these calls for three reasons one that I'm proud of which is I was the only one who knew how to circulate a Zoom link two is because we brought together people from very different backgrounds I'm Gordon Brown lives and dreams public policy, my expense, and obarcrise winning economics, a very precise mind.

And three is that a conversation went from negative to positive. It went from lamenting that we seem to be going from one crisis situation to another, the global financial crisis, the inability to grow, the inequality crisis, the climate crisis, then the supply chain crisis and then the inflation crisis. And we were sort of lamenting that. And then we pivoted to simple explanations as to why this is happening and what can be done about. And that allowed us to come up with what we think are steps that can change the narrative. Then it became, what do we call this book?

our initial choice was changing the equation. And then as people who know about books will tell you, publishers have enormous power. And they said, what do you mean changing the equation? That sounds like a mathematics book. No one's going to pick up a book called Changing the Equation. So reluctantly, we had to opt for the word of the year in 2022, which was perma crisis.

Now, since then, the G20 came up with the notion of cascading crisis. that you go from one crisis to another. And we're just trying to capture a sense that a lot of people have, which is that we live in a very unstable world, a very unpredictable world, and that the resilience, be it human or financial, to crises, has come down a lot. Let's talk about some of the forces that are kind of stoking these perma crises, because in the book, you explore political, economic,

and again, social cultural factors that are creating this instability. Which do you think are the most important? How should we try to understand what's driving this phenomenon? Because as you just point out, I mean, it not only seems as if Muhammad that these crises are reoccurring, it seems to some extent that there's an acceleration. There's a reduction of the duration between these crises. And I think that's really part of at least my anxiety and maybe the anxiety of a lot of our listeners right now is this feeling of an acceleration of crises. Yes, and that feeling is real because one of the issues you face when you lose resilience, and we have lost human resilience, institutional resilience, financial resilience, is that your ability to absorb a hit goes down.

So you can't get up as quickly. so you're more vulnerable to adverse shocks. Look, we kept on peeling the onion, and that's the wonderful thing about meeting with the same people. We kept on peeling the onion, peeling the onion, asking what's behind it, what's behind it? And we believe that we came up with three issues that explain not all of the crises,

but were common in the vast majority of them. And the first one is the inability to grow in an inclusive manner that also respects the planet. That's problem number one. We've lost that ability to deliver economic prosperity and that has massive economic, social and financial implications. Two is the pattern of repeated policy mistakes. That we make things worse by the way we respond to the shock.

And three, was to lack of, of global corporations on problems that need common action that no single country can solve. And these three factors are present in most of the crises we've had. And then it becomes how can you address all three? And the hopeful part of the book is that all three can be at rest in a way that doesn't deliver immediate prosperity,

but changes that direction of travel. Well, let's talk about these kind of three legs to the rickety stool that we all feel like we're standing on that you've just elucidated. And the first is this absence of what you've characterized in the book and elsewhere in a lot of your public commentary as inclusive growth. You know the arguments. There's a sense of growing economic inequality, an unequal or unfair distribution of society's wealth, capital. within liberal democracies across the West, conspicuous rent-seeking by corporations and increasingly powerful non-democratic entities

in our society, largely corporations, algamations of capital. Talk to us a bit more about the problem of inclusive growth, but also where the seeds are to begin to return. I don't know if it's a return, Mohammed in your mind or this is something different, something new that could be achieved in a not-so-distant future? So what you said is absolutely right.

As Michael Spence, who was the chair of the Growth Commission and has a very unique understanding of growth dynamics puts it, we lost sight of two things. We lost sight of equity and we lost sight of climate sustainability. So whether you look at the domestic side or you look at the global side being globalization, we pursued this thinking that equity and sustainability would somehow be solved on their own. And that proved to be a big mistake for society. And the consequences of that was inequality went up. The consequence of that was the share of profits in the total pie went up significantly. And the world started marginalizing people both at the domestic level and the global level.

And what happens when you marginalized is you're alienated, you're angry, and then you start getting these outcomes that are problematic at the domestic level, and then you started getting great attentions between nations at the global level. So the inability to grow in an inclusive manner that respects our planet is absolutely critical to understanding why we tend to have these pervert crises and what to do about them. The seeds have been provided by us, and this is the exciting element, is that we have three major transformations that are ongoing. and that will accelerate.

And they offer the potential of change in the dynamics, because at the heart of them is labor augmentation. They augment labor. They make labor more productive. The first one is the technology and particularly the generative AI transformations. The second one is in the life sciences. And the third one is in the green.

transition. And all three can be the basis of a new growth model that results in more prosperity, that is more equally shared, and that is sustainable from the planet's perspective. But we stress, this is not in the next two years. Unfortunately, the next two years are going to be really tough. But if we get our act together now, it means that thereafter we can hope for and hopefully deliver much better outcomes. Mohamed, you would know better than most because you were there at the heart of the 2008-09 great financial crisis leading one of the world's largest bond funds. The response to that crisis, how it played out, the seeming mantra of privatizing, profits and socializing risk as a solution to a big crisis has created a lot of skepticism on the part of voting publics, on the part of many members of the so-called elite who would agree with you

all these issues, generative AI, the life sciences, the potential ability of agreeing of our economy to fundamentally transform growth and make it more inclusive. But, Mohammed, aren't we working, pushing against this kind of deficit of trust around how institutions, governments, and decision makers behaved during and after the great financial crisis? Yes, we are. And that takes us immediately to the second issue, which is disappointment policymakers. I remember coming out of the global financial crisis, trying to convey to policymakers that what had hit us wasn't a cyclical shock. It was a secular shock, a structural shock, and that we have to think long term and think structurally.

And that was dismissed as being narrow-minded because, after all, the industrial world, the advanced countries live in cyclical space, the developing countries that live in structural space. But that proved to be wrong. And policymakers, by using the notion of the three Ts, you need timely responses, yes, you do. You need targeted responses, yes, you do. then the view was they should be temporary because the system will adjust ended up with the problem you've actually said. We socialized the losses and we didn't fundamentally change what was ailing us, which is the inability to grow.

So policy trust is really important to restore. And the first thing that you have to do and that a few policymakers have done around the world but not enough, is to own your mistakes. Because if you continue to deny your mistakes when they are clear for everybody to see, then people will not trust you in terms of your ability to deliver better outcomes. So we go through examples

where some have owned their mistakes. Others are just refusing to own their mistakes. And that makes a huge difference in terms of credibility going forward. Well, let's talk about what some people might consider the biggest and most recent mistake and maybe the latest crisis, which was this surge run-up inflation that was allowed to happen by many of the world's leading central banks, including the U.S. Federal Reserve. You were out early warning about the threats of inflation, yet the Federal Reserve and other countries. central banks continued to flood markets with liquidity, continued to engage in quantitative easing of the large-scale purchases of different, you know, debt instruments to reduce borrowing costs.

Again, Muhammad, there's a, I'm struggling with my, just my, my, my lived experience of the last, you know, 14, 15 years, which is here again, another crisis and a response by the institutions who are arguably the most independent, the least contaminated with the short-term thinking of politics. And Mohamed, isn't it true that, especially the U.S. Federal Reserve, really failed initially in the test of this crisis of inflation? It absolutely failed. And I've been often accused of being too critical of the Fed in particular.

The Fed plays a very important role in the global economy, as you know, because the dollar is the reserve currency because the U.S. intermediates other people's savings and because the U.S. has such a voice in multilateral institutions. So when you see the world's most powerful central bank committing six mistakes,

six, analysis, broadcasting, action, supervision, communication, and accountability, six mistakes, most of which they haven't owned up to. It is a,

problem. In analysis, they got stuck on this inflation is transitory. And I can tell you, transitory is an incredibly dangerous word in the policymaking. Because the minute I tell you something is transitory, I'm conveying to you, it is temporary and reversible. I'm telling you, don't worry about it. Look through it. And therefore, we lose precious time to deploy first best actions. And the Fed for most of 2022, despite quite a few of us saying, look at the data, listen to what companies are telling you, got stuck on this narrative of transitory. Its forecasts were consistently wrong. Its actions were late. They were late, A, because they got stuck into the wrong narrative, but B, because they looked at their models, which didn't capture a fundamental change in the structural economy. Their supervision

was awful. That's why we had a banking crisis in March of 2023. The communication has added volatility rather than repressed volatility. And finally, the accountability has been weak, which is why the credibility is at place. So there is a fundamental problem. Now, if you look at the central bank community as a whole, there are best practices that are not being implemented consistently. One of the issues is the lack of cognitive diversity. There's a reason why the Fed fell into group think. Why not adopt the Bank of England's model

where two people on your policymaking committee come from outside? Accountability, why not adopt the Bank of England's model where the actual votes are being thrown? So in the last Bank of England meeting, for example, the decision was six, three, which gives you a sense of the discussion, supervision, forecasting, all these things, if you look around, we have good practices that have stood the test of time that's just not being implemented. And that brings in the hubris element,

the unwillingness to own your mistakes and learn from them and adjust accordingly. So you have this ridiculous situation today where the Fed is, operating with the wrong monetary framework. It's made for a world of insufficient demand when we're living in a world of insufficient supply. And there is more debate. And this debate is going to increase as to whether it has to write inflation target on that. So I completely agree with you. But the important thing is to look around the world and try to understand how we fix this. Because otherwise, these mistakes repeat themselves. And especially when you lack cognitive diversity, you will make mistakes.

Einstein's definition of insanity doing the same thing over and over again and expecting a different result, just to stay on a financial topic for a moment because it is really of the moment. We're seeing this incredible surge in longer duration bonds across advanced economies. It's come as a bit of a surprise in the last few months. There are indications that it may be part of a new normal. higher structural borrowing costs as things like term premiums and other things revert back to

their pre-great financial crisis kind of norms. Is this a crisis brewing, Mohamed? Do you think that the surge in yields will turn into something that could be a next shoe to drop in the perma crisis that we're living through? And if it is, if there is that risk, And you think this could be a long-term feature now of the global economy, a heavily indebted global economy.

What do we do about it? So, you know, it's interesting because we're going back to levels of interest rates that were normal before the global financial crisis. And the problem we have is that people believe the abnormal was normal. So people believe that central banks were pressing interest rates and flooring them at zero, or in the case, of the ECB negative levels was normal. People believe that central banks flooding the system repeatedly with money was normal. That was abnormal. So we're going back to something that's normal. The way we've done it is the issue that raises the risks you mentioned. Think of four-act play. Act one was last year when central banks had to move very aggressively because I was scrambling to

catch up with inflation dynamics. So we got the most aggressive and concentrated set of rate increases that we have seen for decades. That didn't need to be. It was the result of the mischaracterization of inflation as transitory. So shock number one came in terms of central bank action. Shock number two, which was for most of the first half of 2023, came in the form of a that central banks would stay high for long. And that meant that you had to reflect the higher interest rate throughout the structure. So you saw long rates go up. Act number three is what's going to play out in next year, which is the question mark,

are there enough buyers for U.S. treasuries? We're seeing a massive increase in U.S. treasury issuance. We're seeing deficits running at 6, 7% of GDP. We have bonds that are being refinanced at three times what they cost before. And that is always in the question, who's going to buy it? The Fed can no longer buy treasuries because it has to deal with inflation. There's a question mark as to China's willingness to buy treasuries, Japan's ability to buy treasuries. And institution investors are sitting on really big losses.

So that's the question out there. What are the implications? History, unfortunately, is not very encouraging here. When we've had instances of these rapid moves, especially when central banks have been late and are playing catch up, they tend to break something. And two things can break the economy by pushing, it into recession because people can't we afford to refinance their mortgages because credit

card debt becomes just overwhelming because companies cannot refinance themselves cheaply. So you end up pushing an economy into recession. And then the second risk is a financial system. And we came very close to this in March of 2023 when we had three. bank failures, community banks. And the only reason we didn't have more is because the U.S. changes policies. The U.S. decided to guarantee all deposits at those banks. And once you do it for the Silicon Valley Bank in particular that's viewed as banking for the rich, for the startups, for tech, if any other bank falls into problems, you would have to do it for them. So we avoid

more banking crises by actually being forced into a change that most people would have rather not seen happen. So those are the risks for 2024. In my writings in 2022 and 2023, when there was a huge view that the U.S. was going to go into recession, I kept on saying there was no reason for the U.S. are going to recession in 2023. The economy is fundamentally sound. We just need to avoid a policy mistake. For 2024, I'm not so sure anymore. I've become more concerned that we may slip into a much lower growth outcome because of the cumulative effects of all these interest rate increases. Fascinating. Do you see in that scenario inflation as less of a risk, something that takes a backseat, a moment, an episode in the perma crisis that moves stage left and issues

of growth, deficits, the kind of fiscal sustainability of public expenditures kind of move center stage? So I think that's happening. And issues of the funding, rather than sustainability, the funding of deficits and of refinancing is going to capture the market's attentions for a while. On the inflation issue, it fundamentally comes down to the following choice that I believe the Fed will face. Do you continue to pursue a 2% inflation target?

That's arbitrary to begin with and risk crushing the economy. Or do you accept for now a slightly high inflation rate, call it 3% and see whether it's stable and whether we can live with it? That's the choice that the Fed is going to be confronted with. I hope that they recognize that the world has changed. that we live not in a world of insufficient demand, but in a world of insufficient supply, and that the supply side isn't flexible enough, and that they will tolerate inflation running slightly above, which I believe will be a stable situation. Why? Because if you try to reduce it more,

you risk not only an economic accident about a financial accident. Look, there are things going on that we all know about. a critical energy transition. That's inherently inflationary. We have supply chains that are being rewired for geopolitical reason, what is called near-shore ring and French shoring. That's inherently inflationaries. Companies are now putting emphasis on resilience and not just efficiency. They're building more slack in their supply chains.

That's inherently inflationary. And then we have in certain markets labor shortages. That's inherited inflation. So if you look, if you were setting an inflation target for today and tomorrow, you wouldn't set yesterday's inflation target. But I'm the first to recognize that if you're a central bank and you've missed on delivering your inflation target, you're not going to be in any hurry to change it explicitly.

Did you know that you could give the gift to the monk debates this holiday season? That's right. we are offering both our curator and supporter memberships as charitable gifting opportunities. You can do that right now at our website, Triple W Monk, Munk, MUNK, Debates with an S.com. Click on the join button, go to the bottom of the page, and select either a supporter or curator membership. Supporters get access to our entire content library, a complimentary e-book, advanced ticketing privileges to our debates, our Friday, focus podcast and so much more. If you're feeling especially generous this holiday season,

consider conferring curator status on your giftee. That'll give them two guaranteed seats in each and every monk debate at Roy Thompson Hall. You can do this all right now at our website, triple w monk debates.com. Give the gift of the monk debates this holiday season. What Muhammad could be the risk is at your book, Permacrisis, you're trying to think through the implications of policymaking. If we were to reset our inflation targets to 3%. Some would say, and you've been active in this debate, so you know the other side well, that this would fundamentally erode the credibility of the Fed. It would accelerate inflation expectations. It would, in a sense, create that feedback loop of inflation that was so distrable.

in the 1970s, and it could have big knock-on effects in terms of the U.S. currency as the global reserve currency and people's perceptions of it, not as a unit of exchange, but as a store of value. So I say that risk is there, but that rate pales in comparison to the other possibility that we've got the wrong inflation rate. If you try to run an economy at an inflation rate that is below its natural inflation rate, then you're going to sacrifice livelihoods and you're going to hit the poor particularly hard. Look, we have to remember where the 2% inflation rate came from. New Zealand in the early

90s decided to run a pilot, a pilot of inflation targeting. It picked 2% out of the air. That was no scientific. 2% was viewed as high enough from zero so that you don't get stuck in what's called the lower bound problem, but not too high so you wouldn't destabilize inflation expectations. Next thing we know, as more and more countries started shifting to inflation target, that 2% became the norm. Now, it's as if I tell you that regardless of how tall we are, we're all going to have the same inflation target, the same weight target.

Now, if I sent the weight target high enough, then sure, we'll all agree to that. And the 2% was high enough because we were bringing in so much supply onto the system, globalization, China, eastern and central Europe. More and more people are coming in and the supply side was inherently deflationary. That has ended. So now the weight limit for all of us is binding. and someone who is six or seven feet tall may have a different weight than some level

than someone who is four feet tall or five feet tall. So we have to think about where this thing came from. But I understand the hesitation. I really do. But it's the same hesitation that got us into all sorts of other problems. Is this inability to be broad-minded. And, you know, the behavioral scientists will tell you that that's not surprising.

If I take you out of your comfort zone, there are three behavioral mistakes you like you to make. The first one's called a blind spot. You don't even recognize you out of your comfort zone. You don't even want to debate the issue. You just have a complete blind spot. And some of us are born with blind spots. And we need mechanisms to get over them. Just like when you get into your modern car these days, there's a little light that comes onto your real.

you mirror to tell you there's a car in your blind spot. It doesn't deny your blind spot. It helps to identify your blind spot. The second issue and married couples tend to do this is to reframe things. You hear something that's not comfortable. So you reframe it to something that's comfortable. And we tend to do that, but we lose sight of what issue. So I tell you the 2% is not the right target. And you come back to me and say, well, we can't possibly change the target. because 2% is our God-given. Or I tell you, we have a risk of recession, and you tell me, don't worry, we short and shallow.

Or I tell you, we have an inflation problem. You tell me it's transitory. All that reframes, but loses sight of what is the issue. The third one is the one that is most dangerous. And it explains why successful companies fail. It's called active inertia. you suddenly on a different paradigm, you recognize it. That's the active part.

You recognize it. And yet, there's so much inertia in the system, you're unable to adjust to it. The big example that comes from Don Sull at MIT is IBM on the eve of the PC Revolution. I would have better on IBM. They had the brand in technology. they had the biggest research and development budget, and they were equipped. His work has shown that the board and management identified the destruction of the PC and understood what to do.

And yet two years later, IBM was almost bankrupt. Why? Because middle management did not understand the reorientation. The less validity correct example, and I can say it, I carry an American passport is an American tourist in Paris, goes up to a French person, asks something in English. The French person either doesn't understand English or doesn't want to understand English, shrugs their shoulder. The most likely response of the tourist is to say the same thing in English, but louder. The louder bit is the active, the inertia bit is still saying it in

English. So we've got to recognize that when paradigm changes, behavioral traps can really be problematic. And that's why you'll hear me go over and over again to keep an open mind, have a lot of cognitive diversity, and have a risk management mindset. Ask the question, not, I am right, and I'm sure I'm going to write, and this is all going to happen, but what if you're wrong? Central France asked the question. question, what if we're wrong in Russia to the conclusion that inflation is transitory, they would have done something different. But they never asked a question. They were so sure of their call. There's the world as we want it and the world as we receive it. And it seems

like many institutions sometimes have had difficulty in accepting the latter can sometimes challenge the former. Muhammad, what would be, you know, the investment thesis that might flow from a re-framing of the inflation target to 3%. I mean, that would suggest to me that, you know, a bare market and bonds might continue for some time because there would be a need to readjust to a higher R-star, a different perception of the run rate that central banks are going to allow the economy to operate at. Do you have any, have you thought through what a, what the investable world would look like with 3%? inflation targeting across the advanced economies?

Yes. So when we look at what matters for us as investors, it is the expected return. It's the volatility, because volatility often forces you to do silly things. And it is correlation, the ability to have risk mitigation in your portfolio. When you deconstruct these issues, it ultimately comes down to three, where they call risk factors. Can you manage interest rate risk?

Can you manage credit risk, the extreme of which is default, where you lose everything? And can you manage liquidity risk, which means your ability to do something when you want to do it? Because if you can't do what you want to do, you'll end up doing something else that is far, far from optimal. So if we acknowledge that we can run the system at a slightly higher inflation rate that is stable, there may be some inflation risk, but you reduce credit risk and liquidity risk. And interest rate risk is recoverable over time because your bonds don't default. That's why a lot of banks, for example, are holding loss-making. bonds in their hold to maturity bucket because there is no question about the principle getting

repaid. If, however, it turns up you are targeting an inflation rate that's too low and you push the economy into recession, then you're going to cause credit risk to spike and liquidity risk to spike. So those are much harder to manage as we discovered over and over again over time. So yes, there are implications. I think the major implication for investors is the recognition that the golden days are over. You know, when a central bank flaws interest rates at zero and injects liquidity, it will push up every asset. The example I use is what used to happen when I was at PIMCO in the investment committee. Someone would come forward with an investment proposal, invest in this company, invest in this country. They would be pushed very hard on

balance sheet resilience, management, market outlook, everything you'd expect. And assume that they satisfactorily convince the investment committee on every single lot of these, it was necessary but not sufficient. Because I would be asked one more question. Who will buy after us? Now the subsequent buyer is very important because the subsequent buyer first validates your own purchase, pushes the price up, and brings other people in. But also the subsequent buyer provides liquidity in case you have to change your mind.

And we change our minds for many reasons. So if I tell you the subsequent buy is a central bank with a printing press in the basement, infinite willingness to use it, and guess what? non-commercial. They don't care about the price. They'll buy at any price. You will end up taking a hell of a lot more risk than you would have otherwise, which means that all asset prices get pushed up. And that's the golden age we lived in. It didn't matter whether you owned equity,

bonds, everything went up at price. Why? Because there's so much liquidity, because the subsequent buyer was seemingly an infinite buyer. That's why the notion of a BFF got up. The central banks are your best friends forever. But that has all changed now. So I also think we need to adjust to the fact that we did live through a golden age. And that golden age had consequences, which is the inflation and the sense of malaise we're dealing with now. Let's end, Muhammad, just on the third leg of that stool that we've been discussing throughout this interview, your book, Perma Crisis, a Plan to Fix a Fractured World. That's international coordination. The importance of understanding that while the world is now increasingly being divided into blocks and the rivalry

between China and the United States accelerates, you and your co-authors believe that returning to the work of multilateralism, restoring some muscle to the big international agencies and institutions that provide global governance and coordination is just essential to finding our way out of this perpetual perma crisis. Yes, and we have Gordon Brown really to thank for framing and really advancing our understanding on these issues. Look, we are no longer in a world of Uber globalization. And we did live through a world of the 90s, the 2000s, the 2000s were a world in which

we somehow believed that ever closer financial and economic integration was, you to road forward and will go on for a very long time. But as we discussed earlier, we lost side of equity and sustainability. So we're not going back to that world. But we can avoid a world of total fragmentation by going to a model which we call managed globalization light. So it's not the globalization. And you hear politicians say, we will compete here, but we'll cooperate here.

Or you hear them say, we will de-risk, but we will not decouple. That's the concept of managed globalization light, where we agree on common issues that require common solutions and common action, and where we have functioning institutions that support this process, which is the revamping of the IMF, the World Bank, and the WTO in particular. All this is feasible. It requires political win. And we believe that if countries understand that you can have a managed globalization light model, that that political world will be more forthcoming than it has so far. Because the alternative of a completely fragmenting world is a lose, lose, loose, proposition.

And not only is it lose, lose, lose, lose for now, it's also lose, lose, lose, lose for the future. Well, Muhammad Ilerian, thank you so much for spending. time with us today with the monk membership to discuss permacrisis a plan to fix a fractured world. I really recommend to our listeners and our community to get a copy. It's an important book and continue as I'm glad to see Mohammed's follow-up to his other excellent book, the only game in town where we first talk to him. So we'll include the notes to order in the show notes. We'll include links to order both books. And Mohammed, thank you again for all the insight. I always enjoyed these conversations with you greatly. And let's find a way at some point

to get you to Canada to meet a warm and enthusiastic audience for your thinking and ideas. I would love that. My wife was Canadian would love that even more. And thank you for having me. It's a great pleasure and a great honor. That wraps up today's monk dialogue. I want to thank our guest, Mohamed Alarion, certainly gave us a lot to think about. Please send us your feedback or reflections to podcast at monk debates.com. And also a reminder that you can catch our most recent main stage debate on the crisis of liberalism, touching on many of the themes in Muhammad's book, Permacrisis, with Jacob Rees-Mogg, George Will, Ash Sarkar, and Sorab Ahmari. It's all available right now to stream on our website exclusively for monk donors. You can become a monk donor right now for

as little as $25. Think of that, 50 cents a week. You get access to, you. Get access. to not only our live events and archived recent debates, you also get our weekly current affairs podcast Friday Focus. And again, you can do that all right now at our website, triple-w monk debates.com. Thank you for lending your time and attention to our efforts to bring back the art of civil and substantive conversation, one dialogue at a time. I'm your host and moderator, Rudyard Griffiths. The Monk debates are a project of the Aurea and Peter and Melanie Monk Charitable Foundations. Rudyard Griffiths and Ricky Gerwitz are the producers. Be sure to download and subscribe wherever you get your podcasts.

And if you like us, feel free to give us a five-star rating. Thank you again for listening.