Economic Outlook 2019: Chicago

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Hey, thanks everyone. I have the
incredible pleasure and privilege of introducing some amazing talent here on
the stage. I’m gonna start with Austan Goolsbee, the Robert Gwynn Professor of
Economics at Chicago Booth. Austan, of course, served in Washington as Chairman
of the Council of Economic Advisors and a member of the president’s cabinet.
Before Washington, he had done some great research that earned him recognition as a
Fulbright Scholar and as a Sloan Fellow. He was previously named one of the
Hundred Global Leaders of Tomorrow by the World Economic Forum. Austan now serves on the Economic Advisory Panel to the Federal Reserve
Bank of New York. He’s previously served on the panel of Economic Advisers to the
Congressional Budget Office, the U.S. Census Advisory Commission, and as a
special consultant on internet policy to the Antitrust Division of the Department
of Justice. And in 2009, he was voted DC’s funniest celebrity. So thanks to Austan
for coming back to Economic Outlook this year. Then next, we have Randy Kroszner
who’s the Norman Bobins Professor of Economics. And I’m very pleased to say
that we twisted his arm sufficiently andhe joined the Dean’s office this
year. He’s now the Deputy Dean for all of our executive programs here and outside
the U.S. So Randy was a governor of the Federal Reserve system from March 2006
till January 2009. He chaired the Committee on Supervision and Regulation
of Banking Institutions and the Committee on Consumer and Community
Affairs. Randy currently chairs the Federal Research Advisory Committee to
the U.S. Treasury’s Office of Financial Research. Randy, during his time in
Washington, took a leading role in developing responses to the financial
crisis and led new initiatives to improve consumer protection and
disclosure, including rules related to home mortgages and credit cards. Prior to
that, Randy served in the White House as a member of the President’s Council of
Economic Advisers from 2001 to 2003. Randy frequently comments in the
international media and also provides advice to financial
institutions and central banks throughout the world. Thanks to Randy
again for being with us. And our final panelist is Raghuram Rajan the
Katherine Dusak Miller Distinguished Service Professor of Finance at Chicago
Booth. Raghu served as the 23rd Governor of the
Reserve Bank of India from September 2013 to September 2016 and between 2003 and 2006, he was Chief Economist and Director of Research at the IMF. Raghu’s research interests are banking, corporate finance, and economic
development with particular attention to the role that finance place in economic
development. In 2003, Raghu and Luigi Zingales co-authored “Saving Capitalism
From the Capitalists” and then later he wrote “faultlines: How Hidden Fractures Still Threaten the World’s Economy” And he was awarded the
Financial Times Goldman Sachs Prize for Best Business Book in 2010 for that.
Raghu’s latest book, “The Third Pillar: How Markets and the State Leave Communities
Behind,” is going to be out next month. Thanks to Raghu for coming as well. Very pleased to have a fantastic moderator today. Kathleen Hayes, the global economics and policy editor for Bloomberg television
and radio. Kathleen has covered the U.S. economy and the Federal Reserve for the
past thirty years. And for the past couple of years, she has also broadened
out the scope of things she looks at. She’s increasingly been looking at the
economies and central banks of Asia, traveling regularly to Japan. Thank
you, Kathleen, for moderating the panel. Please formally welcome our
panelists and our moderator. This audience such a nice big crowd
to listen to these learned people weigh in on so many big issues, that who would
have thought a year ago, that we might be where we are now. We’ve had a bit of a
strong economy, we just had a great jobs report, Federal Reserve raised rates again.
We’ve also had a stock market steadily decline that went the rest the way
off that cliff after the Fed made that rate hike. We’ve got a trade war
that was kind of rumbling and it’s, you know, full speed ahead. And a government
shutdown for weeks and maybe months and who knows, maybe years. At any rate, an abundance of wonderful topics to address this question. Where
are we going? it’s 2019. 2018 had some surprises. What what can they see now. So
gentlemen, I think the obvious thing to start with is the economy, right? On one
hand, you can look at so many measures saying this economy’s in pretty good
shape. Consumer confidence has come back a
little bit, but it’s strong. Business confidence has been holding up. Again,
jobs growth, low unemployment, and yet many people are looking at recession. We
had a really flat almost inverted yield curve, right? That can be a recession
signal. We’ve got global slowdown. All these things going on. So let’s start
with you Raghu. Where are we in terms of recession versus “Yeah it’s really not
that bad. Things are just fine?” Well let me start by saying we’re terrible at
predicting turning points. So what I what I can say is yes, we have a very
healthy economy. we have a very healthy economy even in Europe. If you look at
the underlying unemployment numbers – 7.8 percent – really low relative to what it
has been over the last decade. The U.S. low, Japan really low. So everywhere if
you look at labor seems fully employed or near full employment. So what’s to
worry? You want to worry about debt. Which has built up. We talked about that last
time it still is there, it still is an overhang. You want to talk about
deteriorating credit standards that has been
happening .We have a lot of leveraged loans out there. And we want to talk
about rising interest rates. Well they were rising until we had the stock
market sort of kerfuffle and of course now there is an expectation that they
won’t rise as much as they were expected to rise. Bottom line – we’ve got a strong
economy but we’ve got the traditional reactions to the strong
economy which is rising rates. Now, if we didn’t have all this policy uncertainty,
you would expect that, you know, well, maybe we slowed but we slowed to a
plateau. What we have right now is a whole lot of policy uncertainty over and
above that. And we don’t know that the people in charge of policy know what
they’re doing. I think we know the answer to that. And that, to my mind, that’s the
biggest overhang today. There is a fear that some people
think the world is decoupled. What happens here doesn’t affect there. And
what happens there doesn’t affect here. So we can inflict some pain on them, it’s
not going to come back to us. The world is too tightly coupled, it doesn’t work that
way. So we really need to think about how we
move all this forward. We’ll get to all that later on. But, bottom line
answer – still there is some strength in the economy. I think that you know we’re
good for a little while. Interest rate sensitive sectors have weakened but of
course interest rates may be coming down or not going up as much. And that leads
to the point that a lot depends on how we deal with all this policy uncertainty.
The federal shut down but, of course, the trade wars which are in the way. Austan, I think
you wanted to jump in. I just get that feeling. I was just making a cheap joke. I wasn’t trying to jump in. But, a show of hands! How many people, this is their first one of these that
they’ve gone to? Oh so pretty, pretty good turnout. Okay, so I’m gonna
give you the summary of what often happens here and, if you’ve
seen it, I love watching The Simpsons and I usually try to find some sense of
thing. There’s when the soccer comes to Springfield and they show the
American announcer and the game is in zeroes and the American announcer is like, “and number five passes it back to number
four and four passes it back to five and he passes it back” and they then they cut to the Spanish announcer who’s talking about the same
thing and he’s “like number four number passed to number five and number five has passed over to four.”
And we play that role. We duke it and then we come to the
end we’re like “so what’s gonna happen?’ “Yeah we’re gonna grow about two and a
half percent.” I Maybe it’s worth taking one
step back and ask, in the past when recessions have come, A. Were we able to
tell that ahead of time and what caused them? No we weren’t really able to tell ahead
of time and the three big causes, if you take post World War II in the U.S.,
there depends how you want to count the double-dip recession, there’s been about
fourteen recessions. All but two-thirds of those – the biggest cause of
recession in the United States are the Fed tightening interest rates. And I
won’t use the phrase too fast because sometimes it was justified, they needed
to tighten rates and start a recession. But that’s a major cause a second is
either call it a popping of bubbles or a drop in in some kind of asset values and
we’ve seen that equity bubbles pop housing bubbles pop some with debts I’m
not with that but that can lead to other channels even if that thing itself is
not that big if it leaves investment to drop or consumer spending to drop ik and
lead to recession and the third I would say high oil prices and that one less
has become less relevant because partly because the US economy is less energy
intensive as it used to be and partly because we became a an oil producer at
least two of those three you gotta be somewhat nervous about
then I’ll put in category four we haven’t had a ton of them in the US but
if you look around the world they happen all the time and that is major policy
screw-up government created recession some government policy could be we’re
gonna demonetised the economy we’re gonna put in huge regulatory or d
regulatory changes or start a Wars or something like that I would say in that
category for which has been relatively rare in the United States you know there
are many things that could be an egg if we if the trade war escalates if we have
a government shut if we still have the government shutdown at the next one of
these next year there are a series of government things that I know at least
think we should be somewhat concerned and given that in past recessions we’re
never able to say oh definitely by nine months from now it’ll be in session I I
don’t I don’t think we should rule whether okay and is it always the fed
the first one he picked out who said the Fed getting things things wrong yourself
I bring it on but I put but I just wanted to mention
on that because there’s been so much focus on its rate that short rate by one
quarter of one percentage point in December that’s it these the economy is
going going down to hell they the stock marks going down to hell and if the
entire US economy and world economy is based on one quarter one percentage
point plus or minus the fundamental problems are much greater than than just
just the Fed so the Fed is a lot of power and and certainly and has made
mistakes in the past and so I have been to the Fed for many years but I think
that and so it’s not just defending what we had done from from more than a decade
ago but I think what they’ve done over the last few years has actually been
quite reasonable we’ve had the slowest tightening I think at least in post-war
history so you know when there was that pace that was likely to be measured that
Greenspan had which was one quarter of a percentage point every single meeting
which is every six weeks here was you know one quarter of a percentage
point maybe every other meeting or so and and so it’s been a very gradual rise
I think something that’s been different about this is they’ve been willing to
increase rates despite inflation being below their longer-run target usually in
rigor you know Snow’s this well it’s usually that central banks wait too long
and so inflation starts to get going exactly as austin said it’s something
it’s hard to see that then inflation genie gets out of the bottle and so the
central bank has to really raise rates rapidly to try to bring down inflation
and inflation expectations and that can tank the economy which you don’t want
inflation to get out of out of control certainly that hasn’t been the case even
though certainly when when I left left of had people and some my colleagues not
not here but that’s where it Chicago said Randy you’ve kind of lost your mind
that we’re gonna have this high inflation because what the Fed is doing
we haven’t had high inflation here really elsewhere I mean there’s some
extreme countries like like Venezuela is at it but but that’s that’s a different
kettle of fish so inflation has been relatively quiet but it’s been are now
over the last year so around the 2% 2% gold the Fed has but the Fed has been
gradually raising rates despite it not being above but being sort of around and
even a little bit below and and so I think the Fed has done done a reasonably
good job both of explaining that’s what they’re going to do and doing it and
then doing it ahead of ahead of inflation and so I just want to mention
about because this then relates to the yield curve which you’ve mentioned
because people get very concerned when the yield curve gets very flat or
inverts but you know there’s this joke that you know the the yield curve
flattening or inversion has predicted you know 20 of the last four recessions
because it inverts much more more frequently but you really need to do is
step back and think well what is driving that inversion if the inversion is being
driven because the Fed has been behind the curve and it’s a jack up interest
short-term interest rates really rapidly and people realize the economy is going
to go off that’s obviously a signal of a problem but that’s because the feds been
behind the curve I think in in this case it’s flattening because people have
don’t expect much inflation they don’t think there’s much risk of inflation and
so naturally if you look at the long rate
relative the short rate an important piece of that is what is inflation
expectations if inflation expectations come down not get into deflation
territory but stay pretty quiet you’re gonna have a relatively flat yield curve
and I think that’s more what it’s about I think there are risks you know exactly
as my colleagues were saying here and so those risks are real but I think it’s
not right now I wouldn’t say it’s pretending recession it’s really saying
that the Fed is making sure that people don’t have these on very high inflation
expectations okay can I just I know you wanna I could also say though that the
reason curves get flat sure low inflation expectations because the feds
hiking rates buy bonds because they may do too much there’s not that much
inflation by no ragga you I think you’re more in Randy’s camp about thinking that
inflation is an important indicator right now well no I I absolutely I I
wanted to say that Randy’s right and saying the Fed shouldn’t be blamed but
it’s actually the difficulty of the Fed coordinating with the government which i
think is really the problem today that to some extent the Fed was on course
given the tax reforms happened towards the faggin of the cycle when you’re
nearly at full employment it was going to create an economy which was going to
go red-hot by their counts given the that would spur investment and initially
did spur investment there’s a sense that with investment with a tight labor
market that the Fed needed to act to contain any inflationary pressures
especially given the rest of the world was almost at full employment also so
there wasn’t a lot of slack around in the world to pick up some of the
pressures when you have this growth the problem we’ve had towards the end of
last year’s even as the Fed has been signaling and Jim Powell’s signal quite
strongly in one of his interviews that we’re on track to keep raising rates
effectively there was a message the markets got and overly on that this this
trade imbroglio which many people now think is going to be more harmful in the
longer run than they thought initially because it’s depressing investment
investor minee has you know had based because after what does Germany do it
produces capital equipment a lot of which is bought by China when China’s
there’s a lot of uncertainly stops buying Germany goes down Germany goes
down of course the rest of the world rest of Europe slows and of course it
spills over the point is we have really much more interconnected than we think
and even the US is feeling some of that so when you have this trade wars hotting
up the Fed is not as well placed with it’s it’s steady rate of hikes as it was
before and that’s what we had in in December a sense that the sell fed was
on course the government was not doing things we should keep the economy
growing and that combination led to a lot of worries about where we’re going
the only thing I’d say is and if you are one of the people who’ve been here
before you know my thing has been the Fed has now for nine and a half years 38
quarters in a row been wrong in its prediction about how GDP would be
growing one year from now so every year they say next year we’re going to be
booming there’s imminent danger of inflation we better start raising rates
and I just want them to acknowledge that this is the 39th time’s the charm you
know that something is different now because I feel like the the argument is
back to the same argument that has been wrong a whole bunch of times in a row
then you agree with President Trump they were doing their hey away obviously I
think it’s extremely dangerous to attack the Fed chair but the spirit of what
he’s saying I don’t think is wrong in the sense that I think the Fed has been
doing a good job but the way they’ve been doing a good job is by backing away
from what they say they’re gonna do so if we have gone for nine years them
saying we’re gonna raise four to six times next year
then four then three then two then one actually we’re not gonna raise okay so
there’s a we’re we’re actively we’re gonna do it they feel curved but
let me just say about the yield curve and then I thank you you be careful not
to delude yourself about the yo car when my dad back when he turned 70 I said dad
you know if we don’t feel bad 70 is the new 50 and then any of the styles of my
dad said Noah day it’s still the same old 70 and the thing about the yield
curve maybe this time is different the yield curve is not predicted 20 of the
last four recessions been a very strong indicator that a recession is coming
almost there have been a couple of fails but not many and if the yield curve were
to invert I would say you know put on you put on your bad research departments
put on a couple of papers recently to that effect but Randy come on what’s the
other side okay first you heard it here first
Austin agreed with President Trump a round of applause bipartisanship here so
that’s that’s I’m happy to stop there but go a little bit further the economy
grew more strongly than the Fed had predicted this this past year so they
didn’t get it you know I mean we grew 4.2 percent in the throw there was one
quarter no good of the year it’s gonna be under three percent no it’s gonna be
more Tuscan to me which is gonna be more than it’s gonna be but but also they
actually made good on their their forecast from last year put also those
this is something that Ben Bernanke began Janet Yellen tried to move away
from it and Paulus tried to de move away from and also of what are they promising
so you’ve got the infamous dot plots so the Fed in an effort to try to be more
transparent gave forecasts of each of the individual Federal Open Market
Committee members of what they think the rate is going to be over time and and
that doesn’t necessarily represent what the consensus of the of the the decision
decision-makers are what you really should have is one really big dot for
the chair a you know so a medium-sized dot for the
prison at the New York Fed and for the vice chair and the kind of a
medium-sized dot for everybody else but it’s it’s represented equally and so
there’s a hawkish bias and love the people who are not the not the key
decision-makers so that’s one of the reasons why there’s been so that
differential between the two and I think Austin is right there has been an
optimism but I don’t but fortunately that has not led the Fed to tank the
economy I mean we do have you know we’ve created a lot of jobs over the last
eight nine years the economy is growing you know relatively strongly this past
year and it’s probably not going to grow strongly this next year and so I I
defend them a little bit more but I think the thing the takeaway is that
Austin and the president are on the same page when it comes to the fit so I wanna
I want under so many directions to go however I want to get back to the trade
war and I want to suggest something that I think the panel won’t agree with which
is that for years the United States made all kinds of agreements with China Oh
China’s gonna do this and I’ll cover too big we can’t help it if the intellectual
property gets stolen and we agree to it but you know what we steal it from
ourselves internally so we really don’t care that much about intellectual
property as soon as the the this got going again
and the US filed at the the IP complaint with a WTO Europe and Japan jumped right
in behind them this is an important issue China has been people have argued
an unfair trader and that’s why free trade has not entirely accrued to a to
workers benefits as so many economists argued for years if you argue
differently as recently as two years ago oh you didn’t know what you were talking
about now that view is getting a little more play and what’s always kind of
struck me is oh yeah great Americans can buy consumer goods cheaper and cheaper
and cheaper so they pile up a lot of stuff at home meanwhile some people
don’t have jobs because of that so I think that’s the case for you know going
to the mat and doing something and flits pain on both sides but Raghu let’s start
with you because I know that you have I want to I don’t want to give me the big
us-china view yeah but let’s start there because this is something that as you
said this is a real threat not just to our economy look what’s happening to
China and China also help drive the world yeah well if again in in
this in this debate or in what’s the right word this this this is what let’s
call it the war tension the tension in the tension between between China and N
and the u.s. clearly at this point China’s having the worse of it partly
because China was already slowing significantly because of the problems in
its financial sector add to that the trade issues I mean I’m not sure how
many people believe China’s numbers of six and a half percent growth I think if
you look at the details of what’s happening it’s probably significantly
slower now given that I guess the the real question is is this resetting the
relationship and clearly the relationship had to be reset at some
point every country when it’s small steals this has been true historically
the British stole from the Dutch the u.s. told trade secrets from the British
and and so on it goes on you start protecting trade secrets when you start
producing some of your own that’s been historically what has happened so China
is now producing a fair amount of intellectual property there’s absolutely
no reason for China to continue misappropriating it from the rest of the
world this is a good time for China to start enforcing property rights much
more strongly it’s a good that there is discussion on that today so that’s
that’s that’s that’s for the good and III but but I really think the change in
attitudes toward China some of it come from the military geopolitical side what
they’ve done in the South China Sea and how they have reneged on some
commitments there this is our evaluation of China especially in the Xi Jinping
government that’s one but the the other side is that China is becoming a big
market in its own right and earlier a lot of US firms went to China to produce
to send back to the US this is a point the Chinese make often and rightly
a lot of the exports into the u.s. is actually from Chinese from u.s.
subsidiaries in China what has changed as China’s become a big
market and those same US firms now are saying let us say don’t make us come in
through these joint ventures and this and that don’t put us up artificial
barriers for example we don’t have a hope in these IT platforms in China
that’s blocked worse so because China is a much bigger market
the attitude of US business has shifted and that’s the big strategic change you
said earlier they were saying are let’s let’s overlook what China did they
unwilling to overlook any more because they want a piece of the action
yeah I think it’s a very very interesting that you mentioned the
history because I think that’s true if you look back to let’s say Japan which
was the China 40 years ago world’s second largest economy you know
an Asian tiger coming out really rapidly you know just growing really fast high
savings rate going to take over the world and then and they were also not
very good in intellectual property there were enormous number of intellectual
property cases which which were brought and they they lost but exactly as Raguse
said as they developed they decided well it made more sense to protect property
rights because they became the innovators and wanted to do that but I
think so and and and that was the idea that we had both when I was in the Bush
administration back in the early 2000s you know bringing China into the World
Trade Organization into these international organizations you get them
to be part of the the international community that want to you know and as
they develop the want to enforce the property rights but we haven’t really
seen that and so I’m not quite as I used to think exactly that way that that regu
was arguing but I’m not as convinced of that for a couple of well for a few
reasons one is that the regime is very different
they are then and I think having the Communist Party in such control makes
things a bit different and they have a different way of thinking about things
so normally with free trade you know we sell goods and services to each other
and you know maybe it trade deficit but they’ll use the the resources they get
to to building you know better machines and lower-cost
goods they sell to you but I think there’s a concern that they’re not using
it for those purposes but maybe for military purposes or for further
purposes that may be used to to hurt hurt some of some of the others so that
simple standard argument for free trade maybe slightly short-circuited but I
think it has to do with with technology and so exactly what was rig was talking
about it is something that’s so different about China than virtually any
other economy is it’s just it’s vast size and so in the old days when it was
Japan was Japan like building little micro computers and things to sell
around the world or building cars to sell around the world
so Japan’s you know a reasonably large country about a hundred million people
but still they needed the rest of the world in order to take advantage of
their production and such and go forward the difference with with China is and
the difference today is you’ve got this enormous internal market and today
technology is about data and so they have enough technology that if you can
then feed a billion data points of from all the people who are in China into
these artificial intelligent machines or the machines you can move forward pretty
well even if you’re isolated from from technology and the rest of the world and
so I’m not as sanguine that without some you know much tougher approach they will
naturally go the way that Japan Britain and others do I’m not saying it’s easy
but I’ll let Austin speak and then I want to look David to there’s two
separate things one is the thinking about the nature of what are the what
are the Chinese violations are where are they headed on their policy and the
second is the more fundamental question is anything that the Trump
administration is doing addressing in the slightest way whatever you say those
problems are or are they just making the problem immensely worse and I think the
evidence is overwhelming it’s just making it worse it’s not actually
achieving any of the goals that even if you identify we would like Chinese to
change their approach to intellectual property you wouldn’t do this
you might not be able to agree on what you should you should not do this but
that’s not true and so let us begin there have been multiple there have been
negative of conflict between the US and China between the West and China over
economic factors one is intellectual property like will they pay for you will
they pay us prices for US pharmaceuticals will they pay us prices
for Microsoft Windows intellectual property like that the second is US
companies going to China forced to have a joint venture forced to turn over
technology when they invest in China that’s actually a very different
circumstance and we care about that one too a third was the Chinese engaging in
competitive devaluation and this should they be a currency manipulator and drive
down their currency now we have succeeded multiple times and the Trump
administration is not the first administration to notice that China
engages and mercantilism the Clinton people the bush people the Obama people
did various things we GART we got China to stop devaluing its currency how did
we do that we got a series of allies the rest of
the West together behind the scenes went to China outlined carrots and sticks and
said if you don’t stop doing this the following bad things are going to add
they stopped the question of do you think you can negotiate with the Chinese
about intellectual property let’s say you decide the joint ventures is the one
that you want to change should you start by declaring a trade war against Europe
that you then back away from then against Canada then against Mexico then
threaten Japan threaten Korea blow up the TPP so alienate all of your allies
then go announce tariffs having nothing to do with intellectual property on
every good from China will that leave the Chinese to change your behavior if
you do those and then quickly attack them I think almost the
opposite if you’re the leader of China you have to care about your own domestic
constituency it’s not a democracy but you have to care about your what your
own people think and they cannot publicly say oh you know what we’ll do
whatever you say president Trump you were right we were
wrong and the normal thing that you would do is go get your allies and I
actually think it’s more likely at this point that China files a grievance
against the United States at the WTO for the behaviors that we have engaged in
and that they convinced our allies to join them and oppose the United States a
thing which two years ago would be unthinkable you would never have
imagined that China could do that I actually think if they did so now they
they would have them I agree with you there but look
Rani’s right that the Chinese have a very different government and in fact
it’s going the opposite way to what most people thought it would become it would
become more liberal people thought it’s becoming a little more authoritarian
it’s intervening much more in the private sector than it used to
I do still think there are two reasons for hope one is China is aging fast and
we know that one of the effects of aging is much less domestic demand then I mean
we’ve seen that with Japan you you need to engage with the world how how much
are people going to trust who are away if they think that the Chinese
government has a strong interest in it how much are they going to trust and
financial or Ali Ali Baba more generally or Tencent or any of the new big Chinese
multinationals if they think behind them stands the Chinese government my sense
is if China wants to engage with the world and export other stuff than just
pure commodities if it wants to move up which is very interested in doing it
we’ll have to convince the world that these are in essentially protected
institutions that it’s not looking up what your post posts are every day and
Figg how to blackmail me it’s kind of an
interesting point though it raises this there is a chance that if you come back
in 20 years in the same way the tensions between the u.s. and Japan which were so
prevalent in the eighties kind of just drift away there is a there is a
significant chance that you come back in 20 years the Chinese economy is most
different from other rich countries in the very low share of GDP and incomes
that are spent on healthcare education personal finance and leisure
entertainment and if you think that as China gets rich they’re going to spend
more of their budgets on those four things as they do in the US and Europe
and Japan and Australia those things tend to be domestically driven so there
is a sense in which maybe this is peak conflict and some of those tensions
might drift away as China becomes a more domestically driven to man and less
export oriented so the long run that might be a possible ya know I the
incentives are there I could totally agree and I thought oh I made this but
I’ve been may I made those arguments for a number of years and precisely because
as you said you see things moving in the direction away from that so there have
been a lot of talk about reform of state-owned enterprise because you know
one of the reasons the China grew so rapidly it has this astonishing increase
in number of people coming into the labor force because you you can grow
either through having more people work or higher output per hour higher
productivity and it seemed like the Chinese understood that the state-owned
sector was not nearly as as productive as the private sector they could sort of
make the handoff move in more of that direction but it seems that they’re not
going in that direction when when she talks about reform it’s much more about
administrative reform it’s about in the role of the Communist Party in these
organizations helping to coordinate things rather than that move towards the
private sector and so that’s why I’ve become let but thinking that but very
less like did you get that and it’s because of the technology that they can
they can do it internally but you you you’re not giving them time to
change your sort of she walked in through a structure which allowed him to
accumulate power what is still out there is whether this new method of growth is
successful or not they certainly are talking about moving towards more
domestic demand as Austan said and unfortunately more state-owned
enterprise and so on does it work and my sense is if it doesn’t work China
will have to rethink because all the other problems aging for example are
coming fast down thee so if they don’t change they will face enormous problems
and it’s not clear that the Chinese population will be behind the Communist
Party if the Communist Party doesn’t deliver yeah which is I think exactly
what broadly the Trump administration is trying to do you know
there are a lot of questions about the particular particularity of the methods
what is it that so president Trump whether you agree with him or disagree
with him he’s a negotiator and so at least in the short run exact this ruku
had said he until that right now we have the upper hand in these things and we
can impose more pain doing these things it may not be wise in the long run but
in the short run it may be able to do that because I think broadly they want
to bring about this broader regime change if to move away from the
Communist Party control that more centralized control I think we’re seeing
a reaction right now that is centralizing things more not moving in
that direction I don’t think it’s going to be
successful I’m as you know from you know here anybody for you know more than a
decade here I’ve never been a China bear a lot of people have always said you
know China’s ready to go and it’s not gonna it’s not gonna be able to make it
I think they’re gonna be a lot more challenges now because the dead issues
because of the productivity issues they don’t have the same number of people
coming in the labor force because of the ageing of the labor force and just
actually on that data I gave a presentation three years ago on this in
Qingdao you that’s really most famous for the beer and actually was it was
interesting this was an old German colony and that’s why it’s beer was was
was was produced there and I presented some numbers on this and I had
most number people come up to me and said where did you get that data I said
well it’s just on the UN website and so it’s and this is just publicly available
data but it’s publicly available to people in the West not so easy for
people in Incheon do you want to fight over it on China well I’ll say you know
if you’re if you’re one of the real old-timers that here you’ll know that we
we have a long history of of making predictions about China and Marvin’s own
us use the company and each year remember his prediction ten straight
years as predicted was this is the year Doug jumping is going to die is gonna go
and he never did and then one year when he forgot to say that the turning point
looks he’s very tough to get those turning points right if I had if I had
to guess make a prediction for next year what would be the outcome of the
conflict between US and China I guess I would predict that number one they’ll
reach some basically bogus pública to China will commit to buy more American
intellectual property in the future and something and we’ll find a way to
somewhat tone it back maybe none of the tariffs we put in have gone away but
they’re not at a level yet where I think it would lead to recession so they find
some way to kind of reduce the tensions publicly but I think that the thing that
it strikes me that Trump administration is not fully appreciated is this we’re
gonna publicly humiliate you style goes over especially badly in China so I
think what they’re what you’re likely to see is them start messing with the US
indirectly so the North Koreans start saying a bunch of things that make life
complicated for the US McDonald’s food supplier is found to have major safety
violations in their food and a bunch of little levers that they have while
publicly saying oh no we all get along been yeah team we’ll figure out a way
for everybody to look good at the end but so we’ve got that I just want to get
it we’re gonna open everybody including themselves yeah
well you know I don’t know about working supposedly in someone who knows China
very well and knows a lot of people says that she actually really does like Trump
they really are very friendly when they meet so who knows anything could happen
in this world don’t you think after this year and be remembered – emailing your
questions we’re gonna start the q the question part soon I just want to ask
one more thing kind of big and you guys can take any part of it you want we had
tax cuts they did seem to help stimulate a lot of the growth which is one of the
reasons why the Fed was so upbeat about rate hikes this year at the same time
you could surmise at least that business investment didn’t pick up businesses
didn’t take that money invest it a lot because the uncertainty of the trade
poor you know and then you could add in the government shutdown although no
matter its we’d really don’t think it’s gonna last years right but that’s just
another little added frill I guess and meanwhile the Democrats took back the
house and now of course there’s a wave of progressives even those who would
call themself Democratic socialists right and one of the most eye-catching
things that’s got a lot of headlines but it’s kind of is not great when people
are tweeting about tax rates I mean this is great I predict it two years depends
what the level of the more New York City oh my god Trump’s gonna win and I said
you guys just relax you’re gonna see we’re gonna have the biggest wave of
activist political activism we’ve seen in this country in decades and I do
think we’re getting that so kind of like each one you like out of that stew
what’s important what’s gonna matter for the outlook in or the actual outcomes in
2019 where are we where are we going you got a lot in that question I mean I
guess I would start just on the GDP I don’t think I think the data Schnauzer
to come in pretty clear that the tax cut was not that stimulative so you had one
quarter of strong growth if the first quarter was 2.2 or something like that
you had one strong quarter in the force then the next quarter was in the threes
this quarter is likely to be in the twos and the forecast before the shutdown for
the first quarter was in the ones so I would just be a little careful
concluding because we had that tax cut that actually got our growth rate up to
something higher I think that’s not true and and I think that while the
government is shut down we’re not going to get any GDP numbers but unless the
fourth quarter GDP was above three point six percent the annual growth rate for
for 2018 is going to come in under three percent again and is the only forecast
to slow down going forward so I would I still don’t think we’re out of this
mucky period of modest growth where the jobs are good but it doesn’t feel so
strong that everybody’s like yes this is what a bouns not really like it’s not
it’s not the 90s and looking back the 90s weren’t the night it was there was a
bubble that was making it feel there’s some large percentage of first-year
graduates from college now who cannot find jobs in their own field if it was
such a strong labor market why couldn’t they but anyway so are they’re going to
say there’s young as the is one of the kids and our thanks if dead you were
alive in the 1980s I was like the financial crisis now the NBA is a lot of
them I think there were in seventh grade or eighth grade so you know it’s yeah
yeah for sure I’m gonna take it have a somewhat different spin on the the tax
changes that occurred about about a year ago so and also along with the
regulatory reforms so we started to see a pickup in an investment in in 2017 and
that’s continued in 2018 until the most recent data so it picked up quite
significantly in the first two quarters of of 2020 18 partially I think due to
the the tax reforms not completely but partially due to the tax reforms now
some of those tax reforms are ones that Austin had also promoted which were to
reduce corporate tax rates this is something that you know regardless again
roads what you think about Trump this is a bipartisan thing to bring corporate
tax rates down significantly this was something that President Obama and
Obama Council of Economic Advisors had talked about because thirty years ago we
were in the center of the pack with our our corporate tax rates the rest the
world brought their corporate tax rates down significantly we were still up very
high so bringing them down getting rid of these crazy incentives to keep
trillions of dollars offshore and not allow that to to come back or tax it
very heavily to come back onshore that made no sense so we’ve done some
things that I think have been sensible and the key question is how much of that
is true reform which is going to lead to sustained higher investment and more
efficient allocation of resources both you know interacting with potentials and
the benefits of some of the regulatory reforms and and so then lead to higher
productivity growth because ultimately as I said economic growth and I’ve said
this many years economic growth is the number of hours work plus times the
output per hour the the productivity and we also have an aging population the
u.s. so if we’re gonna grow faster than we have been before we have to have
higher productivity growth productivity growth has not been especially strong
that’s gonna take a little while to to come back but the first step has to be
increase in investment the second step is then increased productivity growth
I’ve seen we I think we’ve seen some things that are consistent with that but
we’re gonna need more time to know and that’s actually one of the big things
that the Fed is debating internally how much of these these reforms are leading
are going to lead to higher productivity growth if it’s higher productivity
growth than wages can grow faster without putting broader inflationary
pressure on the economy that was sort of Greenspan’s aha moment in late 1990s
when you saw that or is this just really kind of there’s been some short
short-term stimulus and so that’s gonna boost boost prices without boosting
productivity I think we don’t have the answer yet but I have I’m more
optimistic than than Austin but we’ve seen some evidence consistent with that
we have to have more data to be able to tell well I want to move away from the
very short-term to the medium-term one of the big issues today is the rising
anger in in different countries not just the West it’s also in India in
in China this a lot of it has to do with with jobs not enough not high enough
quality and you see the jeely shown in in in France I mean these guys are
really angry with the system and my worry is we’re paying too little
attention to this saying that this is just part of the cycle we get greater
growth these guys will go wait no no there’s not about a cycle in fact they
should be pretty happy given where we are with the level of employment no they
worried about the quality of their jobs much more worried about the kids whether
the kids will have anything decent and that’s where I think industrial
societies are really going off-track in terms of the opportunity they’re
creating you getting a group of people who have fantastic opportunities and
you’re getting guys who can’t read and who have no chance in the world of
tomorrow and unless we give them some hope you know it’s a wide spectrum there
but unless we give these people a chance of believing in tomorrow I think we’re
gonna get vey strong political reactions I mean whether you’re on the left or the
right today you think of more and more radical solutions 70% tax you said in
order to some people talking about universal basic income those on the left
on the right they you know I mean there’s a lot of anger and and I think
what economists as economists we need to think about is what can we do to
essentially diffuse this kind of anger and actually protect the system forget
the ups and downs the system itself is being challenged today yeah well that’s
it yeah and I won’t get into my whole lot I really how I’m I’m not happy about
robots okay because they could take my job and yours anyway
so and I think it’s a great jumping-off point and let’s we’re gonna go into the
questions now and I think it’d be funny how many we can get through so we’re
gonna let everybody comment on whatever question they want to everybody can
comment we’re just gonna try to see how many we can knock off that will
encourage them to keep sending us more questions but I think there’s a question
that that was in front of us now that comes right out of what you just said
rocky in this era of climate change in
stagnant wages record inequality is economic growth still irrelevant goal or
so the USA adopt a new paradigm well I think the distribution of growth is
becoming more important as it gets more skewed because the promise of democracy
is everybody will have a chance and that’s why you trust people with the
vote because they’ll vote in the right direction
for for things that improve the system so how do we give those people falling
behind a better chance and you know we need to to ask that question and get
different answers from the ones we’ve got so far
it’s not about pouring more money into the schools hasn’t worked that well it’s
you know economic growth itself doesn’t work that way we’ve got the lowest
unemployment for how many years now and yet people are unhappy so we need to
think differently and that’s that’s that’s the challenge we have going
forward I would say that the central question of economics is compared to
what and anyone who has worked at a company that’s gotten into trouble knows
that whatever management dysfunction you have in your company gets so much worse
when you run out of money and I think all of those problems that the question
described are valid and we should look at more than growth but if you want to
know what’s poison try putting the growth rate to zero and watch what
happens it gets demonstrably orders of magnitude worse the anger and the poison
so I still think it growth is still a relevant criteria and we shouldn’t we
shouldn’t neglect it it’s just it shouldn’t be the only thing yeah I think
I want to give a little bit of pushback on this on the focus on inequality
because I think that’s very important in the US and in some countries but not in
all countries so like in Germany where people are also very upset you have the
the the rise of alternative for Germany which is quite quite disturbing but it’s
not because there’s been rising income and
and in Germany and so so it’s so I think we’re a little bit too us-centric on
focusing on that I don’t want to dismiss that I think that’s a very important
issue but I don’t think that’s the only thing that’s driving things around the
world I think there’s there’s a more fundamental issue that’s going on that’s
about people’s people being upset and I think what it is or at least part of
what it is because I see this globally regardless of whether it’s more income
inequality or not technology is the thing that is is available everywhere
and I think the ability to use technology to get certain groups
together to organize them in ways that they haven’t been organized before we at
first thought of this you know the Arab Spring is all this is all positive but
we’ve also seen this in not necessarily in positive way so it has positive and
negative elements to it and so I think being able to organize people at very
low cost so you know whether it’s in in Brazil or in Germany or elsewhere and to
get at their disgruntlement it’s something that we have to think about
both as economists because the costs of organizing it has changed as well as
certainly in the political arena thinking about communicating differently
just just do your point that Germans don’t have much to worry about
I mean clearly inequality is not as high there but it is also true what is the
main focus what is he f we push the button they pushing on now you might say
this is culture they pushing on they also pushing on the fact that when those
immigrants come in their kids go into the schools that these people school
kids go to school it’s not in the rich upper class it’s in the working-class
schools and so those kids now need special attention because they don’t
know the language etcetera etcetera the smart kids but they take time to learn
in that time they occupy the teachers time these kids don’t get as much
attention these kids then have a less bright future in their view then they
would have if we didn’t have so much immigration so I’m not saying everything
has an economic cost there are cultural factors etcetera going on but I think
there is a lot of this is really anger about who bears the
costs who gets the benefits and I think that’s the key thing it’s not just about
the inequality because it’s not that Germany has a lot of income inequality
or that income inequality has has risen significantly it’s I think it’s exactly
this it’s about the aspirations to the future and I think the technology has
been able to capture people’s fears and build that in a way that is much greater
and and and is more immediate than maybe the actual case and I think we haven’t
that’s happened very quickly throughout the world it’s an interesting point both
of these are interesting points and with there’s a professor on our faculty
Armour Sophie who has looked at different countries after financial
crises and his argument is that it’s universal polarized politics rise of
populism but also just two parties or five parties everybody parties everyone
hating each other is a very common thing after financial crisis that everybody’s
like well who did whose fault was it it was rich people’s follows bank’s fault
it was poor people’s Falls immigrants fault you know and they it’s probably
something to the looking around the world as a as a lesson okay I wasn’t
like to interject what I’ve always thought about this whole thing about
inequality I think it’s gotten more extreme but also how I always thought
hey yeah if I have gonna have a good life my kids can go to a decent public
school I can have a decent home I can have a decent health care I don’t care
if every one of you in this room has a hundred billion dollars I just want to
make sure that me and mine can live well a nice little middle-class life and I
think that’s to your point people are more fearful that they can’t have that
and also now someone kindly asked a question about so I can get on to my
whole thing about robots says how important is human capital development
in economy today do you think automation and AI artificial intelligence will make
it less important more less important or I think they meant more important is it
less important or less important no choice there and I guess I’ll also
direct that all these things about oh yeah it doesn’t matter people will make
the robots so the job loss doesn’t matter well it takes this many people to
make the robots compared to that many people losing their jobs and I think
that why I know it’s early stages in 20 years
we’ll say all robots are the best thing that happened but I think there’s some
people who little more concerned about this we will say that gathering the
games a hundred years ago wrote almost 100 years ago wrote economic prospects
for our grandchildren it was an essay in which he predicted that you know in a
hundred years incomes would be eight times what they were at that time he was
spot on we are heading towards eight times what he were what was there
hundred years ago and he said with those incomes people will be really wealthy
nobody will have to work we can spend our time thinking about poetry and and
writing plays and and and really this will be you know our problem will be how
to enjoy life as opposed to working right and to some extent there’s nothing
wrong with that vision if we had robots doing all the work especially the Drudge
work you know we could all lie on the beach and think great thoughts and I
have debates like exactly so so why do we worry it goes back to distribution if
in fact we create all that wealth who’s gonna get it is it gonna be a few people
or are we gonna find some way to get it back and if we do find some way to get
it back how do we do it in a way that doesn’t kill incentives there’s that
that’s the debate we’re gonna have over the next so many years so my sense is
it’s it’s probably wrong to fear the technology it’s what is right to fear is
how we manage that technology how imagine the fruits of that technology
and we may well need a change in society in how we allocate property rights how
we get the fruits from those property rights in order to manage the technology
we still some distance away I you know generalize artificial intelligence where
we are replaced by machines who can think better than we can and super
intelligence that has been predicted 15 years from now from the 1950s hasn’t
happened so far and it’s still 15 years away but it’ll come sometime my sense is
it’s a social problem not a technological
problem I was at this conference that NBR put on and they brought a bunch of
prominent economists to come and think about then he brought all these computer
AI experts and they kind of it was a very interesting conference but we just
couldn’t basically every panel went like this the computer person says oh we’ve
had amazing you know now the the AI can tell the difference between a Chihuahua
and a blueberry without you know blueberry muffin Mannion and he showed
these pictures and they can say though that was a chihuahua and and they were
like and it’s pretty soon this is going to replace every job that the economist
would say well but you know hundreds of millions of jobs have been replaced over
the last hundred years and the unemployment rate is under 4% and we you
know it made us rich so maybe it’ll be okay no they say you don’t understand
the blueberry muffin it’s next cars it’s going to be cars it’s going to be
accountants it’s going to be doctors it’s gonna they’re gonna do surgery and
they’re gonna teach classes oh but then won’t we just do something else you know
and everybody went around around like that and I kind of think in the end
maybe that’s the same same argument all the time be kind of I note that the same
people saying AI there was a McKinsey report that said 40 percent of the
current jobs will be destroyed by AI in the next 40 years I think it said and
there’s a hundred fifty million jobs at the moment so what we’re gonna say 60
million so we’re going to destroy 60 million jobs and they were like isn’t
that terrible but think about it the average person has had 14 jobs by the
time their age 50 okay so the the proper thinking about the number of jobs is not
the number of people in a job right now it’s 14 times that and the monthly
numbers we had a great jobs month we generated 300,000 jobs
we actually generated 5.8 million jobs and we lost 5.5 million jobs from net of
300,000 in a world like that I find it weird to get too amped
I think the distribution issues will be serious but we we have literally seen
that movie for a hundred years and it doesn’t end badly
like it yes it looks like their car broke down there is oh no they’re good
but they they make it in the end I’m not gonna give you the spoiler yeah and and
obviously I mean the the counter-argument that some people are
making I’m very sympathetic to the argument my colleagues are making here
that that because people want to make it this time is different argument that
yeah because this stuff is moving rapidly and so in the past we’ve been
able to people have been able to build new skill sets because you know they
when they’re changing jobs often they have to do different kinds of things
it’s not just doing 14 versions of the same thing and so if you know most of
the 10 of those 14 are no longer available how quickly can they get the
skills to do something else there will be ability to do some of that I mean
exactly as these guys have been saying this thing has been predicted for the
last decade and where do we see labor shortages for truck drivers which is not
an especially high-skilled area and if you look at the the job growth the
astonishing job growth we’ve had over the last decade it’s being more at the
lower end than the higher end which suggests that those jobs haven’t been
hollowed out yet now that doesn’t mean at some point they can’t be I think they
might just quickly I wanted to mention universal basic income because a lot of
people have talked about that as well because everyone’s going to be out of a
job so we have to provide sort of basic income to to people and now of course
someone has to provide the resources from where that that comes from but
there’s a very interesting book that Ann Lowry wrote called give people money
which is advocating for this and the first half of the book believe it or not
could have been written by Milton Friedman even though it’s she is
certainly someone who would not think of herself as an acolyte of Milton free
or anything that would be considered to no liberal like an item liberal by the
traditional term you know European liberal or you know free-market
economics but it’s exactly what Friedman talked about her first ever book is a
criticism welfare policy which sort of gets that but you know particularly what
Raghu was was talking about what we do with welfare policy in the US and most
of the West is we try to micromanage poor people’s lives we tell them you can
do this you get a food stamp for that you can do this and this other thing
which she argues is that’s not very effective and very sensible but people
make their own decisions and and this is exactly what Milton Friedman argued give
people money through an Earned Income Tax Credit so give them an incentive to
find a job but effectively subsidize that that that job so people are
building skills maintaining skills but they may effectively get get get a
subsidy and so give people money rather than micromanage their lives and the
second half of the book I think is much less effective because to give the
amount of money that she suggests will cost about 40 percent of GDP and it’s
sort of dismissed as sort of a technical issue we’ll get that from somewhere well
it’s not so clear where you’re gonna get it regardless of whether they have the
the robot apocalypse or not Mexico will pay for it exactly and so but but the
idea that was behind it of I thought it was very surprising when I was reading
this book that like yeah you know this is this is what Milton Friedman was
talking about and so there’s some of these ideas at critiquing traditional
welfare policy that we were dealing with income inequality I think we really need
to think those very carefully and to the extent that we could bring the left and
the right together say you actually have the same idea here maybe the but you
know that actually implementing universal basic income may not be
something that’s feasible but talk about these issues the fundamental issues
about how are we dealing you know with people lower income people’s lives
representative Ocasio Cortez has already raised the possibility that won’t be
Mexico it will be people whose incomes are approaching ten million dollars and
will this take seventy percent who knows we’ll see it’s very interesting okay now
we’re gonna try to get some more of these in really quick and this is a good
question because this is when big bank robots bots algos you could call them
buy and sell in large quantities isn’t this market manipulation
how can every everyday investors compete with that okay yeah I would kind of
throw in you know a lot of people I don’t think anybody really even knows
right now but if you talk to any beat it before it who’s in markets it’s like
when you saw the swings and you saw the big big down last couple weeks of
December to a lot of people it felt like oh yeah that was a lot of that was
computer driven a lot of that was algo so it’s not even like to me it’s a even
a broader question it may be is it unfair the public and is it kind of out
of control at this point what you can you keeping away in quickly is that an
issue anybody out of thought well what’s funny is that well the stock market goes
down it’s the algos when it goes up it’s because of brilliance of all the
entrepreneurs so and investors so it does seem asymmetric and where the blame
comes in and I don’t see why it would necessarily be asymmetric like that I
think there are that more funds are are going in more automated directions
whether it’s through passive investment funds or through algorithmic trading I
think the jury is still out on that I mean I think part of what it is is some
of the unintended consequences of some of the regulations that that we’ve we’ve
implemented have made certain markets more fragile than they were before and
and so just even normal flows could lead to to higher volatility but I think
there’s also just a lot of there’s there’s more uncertainty about policy
issues that we’ve been talking about that’s a little bits of information can
perhaps make people move more rapidly I would just object to whoever sent in the
question I assume you didn’t have gene fama as your professor how can we the
little guy compete with that you can you’re a trader as we would call it so
be careful with any index bonds or things with low fees yeah
I mean Austin makes a good point that you know a Warren Buffett would say that
if it falls it’s a buying opportunity you’re a long-term investor you’re not
competing on a daily day-to-day basis so yeah there is there could be more
volatility because of coordinated trades but some extent that allows you an
opportunity to create against that it’s not because of fundamentals it
gives you a chance well let’s all just pause for a moment remember Jack Bogle
Jack died at the age of 89 yesterday a lovely gentleman and such a champion of
all this I mean this is a man who made such a difference to everybody’s lives
and I think that’s it index funds forget all that stuff okay we’ve got some great
questions there and yeah but when we let go by and I quickly I’ll give you a just
a couple minutes to weigh in on your signing it on the carbon tax statement
in the Wall Street Journal just tell us what that’s about if you guys want to
agree with him or tell him he said it was mine it was just some statement they
got 35 Nobel laureates and all the living CEA chairs and all the living fed
cheers that’s signed a if it’s almost a theater statement of economic theory
that the best way to confront climate change is carbon tax and rebate the
money to to to consumers and it was a kind of a general statement like that I
don’t know that there’s much more more to it yeah it was not Apple it was
bipartisan it was Republicans and Democrats and and it was kind of just a
statement of economic principle that if you have something that has a negative
externality you want to put a price on it okay how about Russia threat or sideshow okay I like this one because this I
think gets you and again we see if we get a nice concise thoughts from you
guys have economists considered modeling investor
oh no consumer sentiment actually this is the one one two sits at the top
that’s what I’m on to go to next you can see both of them well us thought
leadership ever shipped shift to focusing on the labor market and workers
betterment instead of consumerism as a metric of our country’s prosperity I
guess it’s first of all because you know retail sales a lot of your easier to
measure then workers benefit you know it’s funny
that’s the embodied in that question is GDP is about sales and should we look at
sales why don’t we look at income but actually in the
– IRRI you should be able to add it up the same either side and get the same
number so you could add up all the final sales you’re gonna add up all the income
they should have and the government actually does keep that the gross
national income and I would advise everybody to look at it because it
doesn’t matter it’s supposed to theory is supposed to add up to the same number
it doesn’t but if you want a sense of how how is the economy growing how fast
is it growing the GDP is one observation looking at the income side is a
different observation and they there’s content in both so so it’s a good
question but if somebody already thought of it and they already do that they do
measure it Rob what’s the most likely outcome and breaks it and what is the
best worst-case I I think nobody knows even Teresa mayor doesn’t know so you
know this is this has been debated back and forth my sense is they will find a
way to muddle through weather I mean they will stay in something that looks
like a a customs union who makes the rules who’s the rule taker that’s where
the big debate is will they continue participating as they did before in
which case they have to accept rules on on on immigration and so on that the EU
has or will they reject that and be Outsiders be rule takers my sense is you
know they’re gonna have to figure that out where when it happens how it happens
is that the best case or the most likely case or is that the same what about a
second referendum you guys you know so they have a very legitimate question so
what happens in the second referendum says no breaks it you you add them up
and say half breaks it one on either side do you have a third I think on
logical grounds the people against a second referendum say look we had a vote
the side note this is why you don’t allow structural permanent changes to
take place with a 50.1% majority requirement but I think logically
they they had an election they had a referendum in which they were told not
only is it gonna be free the EU is gonna pay us to leave we’re gonna save
hundreds of billions of euros by leaving and that was completely false
now there’s actually a price tag I don’t find anything logically inconsistent to
say but do you still favor brexit if we have to pay ninety billion euros or what
yet whatever you’re saying that it depends on what question is asked yes
the real problem is there are three possibilities not right it’s not but do
we leave do we not leave or is there a plan under which we leave you know so
there’s a third option what if it’s none of the plans get get a
majority do you go to in the debt ceiling fights of the u.s. maybe this is
a poor analogy but when they we’ve thought about the debt ceiling and
Republicans threatened Obama and they said ah we’re gonna we’re gonna blow it
up unless you agree to this and he said I won’t agree to that
and as the polling turned against them rather than surrendering if you remember
what Mitch McConnell would usually do is say ok we’re gonna sign a three-month
extension and we’re gonna revisit this and we’re gonna threaten you in three
months and then when it come to and then they say ok six more months and then
they just stopped bringing it up I wonder if this we’re gonna get to this
March 29 deadline there they say ok ok we’re gonna give ourselves till
September to debate this and if they get it and then – and then they’ve never
heard of it again but like that was faster for some time yeah and that’ll be
the worst possible outcome because there’s so much uncertainty
do I invest in the UK or do I invest outside I mean they already have a
collapse and investment and if that continues it’s gonna be bad for the
United Kingdom keep voting till you get it right all right well I think that’s a
perfect note that’s the Chicago no I so Chicago okay all right well thanks to a terrific
panel gosh I think interesting thoughtful thought-provoking I wanted to
thank all of you for coming I hope you took away a lot of sort of knowledge
from it all so some of the entertainment that we got here please join me again in
thanking Raghu Randy and Austin and Kathleen Hayes for moderator thank you
very much for coming today

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