Hi you're listening to Kobe time, a podcast series on markets and economies from DBS group research. I'm Taimur baig chief economist. Welcome to our 69th episode, I promised a deep dive in global macro in the last episode and here we go. With great pleasure. We welcome back Mark sobel to our podcast. Mark is us chairman at official monetary and financial institutions forum, better known as um 50.
He has been at the forefront of international financial diplomacy for several decades, Representing the us at the International Monetary Fund's executive report till April 2018. Prior to that, Mark was Treasury Deputy Assistant Secretary for
International Monetary and Financial Policy. Between 2000 early 2015 he helped lead Treasury preparations for G seven and G 20 Finance Minister and Central Bank governor meetings, formulating us positions in the I. M f coordinated treasury and regulatory agencies work in the financial stability board as well. Mark, welcome back to Kobe tai,
thank you for having me. I'm flattered that anybody would want to hear my views a second time. So how can I help you today?
Well, you were highly articulate and present in your last appearance. I expect nothing less this time either. Um Mark, you came to the show exactly a year ago and the biden administration was just getting going at that time. A year has gone by and we have been vaccinated, boosted, gone from delta to omicron And on the legislative side, the 1.9 trillion American rescue bill passed successfully through Congress, as did the 1.2 trillion bipartisan infrastructure bill.
The Fed until now has kept extraordinary accommodation in place and as a result, we've got tons of job creation, wage growth and also inflation. So let's start with that. What's your take on all this?
Well, thank you again. Um you just painted a semi positive picture. I agree with that. There's tremendous pessimism division in our country at this time. Um But I I think as you look back on the past year, there are good reasons to be sanguine and see the big picture as positive with astronautics of course. And we'll come back to those.
Um You said that the vaccines came online. This was a modern miracle of science that so many people were vaccinated so quickly and could have been far worse, especially when you look at other plagues in history. Um, us GDP is above its pre pandemic level. It's close to potential unemployment's 4%, it was 15% I think at the peak of the crisis. Uh there are lots of debates about the biden team, but um it's much more cooperative and multilateral internationally.
Um I'm sure we'll have words about china and Russia as well where it isn't so hunky dory, but okay. Um and notwithstanding the political divisiveness in this country, even under the trump administration, there were two fiscal bills passed, working with between the democrats and the republicans, you just mentioned, um the um biden bills, The 1.9 trillion bill. So the us has managed to use fiscal policy to compensate for a massive shortfall and private demand and if anything, we overdid it.
Um, and the over Being overdone as seen in the excess savings that Americans have. This 2.5 trillion I think, which is a little bit more than 10% of GDP I guess Now I believe that the 1.9 trillion bill could have been better targeted and means tested, especially on the personal checks and the state and local government support.
But it did provide support for americans and we don't have the extensive automatic stabilizers that the Europeans have and you know, um as our Congress habitually proves, um bismarck talked about sausage making the legislation well, it's not a pretty process. The infrastructure bill is a great accomplishment. Um, it's one that eluded Obama and trump administrations. We need it, we need it to be done well. Um, it will only unfurl over a long time. Of course there are
are caveats to this positive story. Um you know, we'll come back to high us inflation. Um, we um as I said, we're a very divided society over how to respond to the pandemic. These epic fights about masks versus not masks. Um there's this question of the great resignation where we just had great job numbers and who knows what they mean for labor force participation, but labor force participation appears to be down.
Um we have supply chain vulnerabilities. Um, and who knows uh, about with those where those will head. Um, the labor share of income doesn't seem to be rising yet. So you hear about big wage gains, but given the inflation and the wages don't seem to be keeping up. So um, putting it all together, I think we've done a good job and mending the pandemic damage. We've helped protect the vulnerable, We've made some good strides forward in our social safety net. We maintained some demand.
Um, and I think we were right to use fiscal policy to extend accommodation, um, even if it was too much of a good thing. Um, so you know, announce I'm positive notwithstanding Some of the kind of the negative mood one detects in America these days.
Mark I, I take your point entirely, I mean, a year ago things were not looking that great. And now it's like, you know, Janet Yellen's dream, high pressure economy, lots of inflation, lots of job growth and lots of employment now we're talking about
five, wage growth being not enough to keep pace with inflation. Well, that of course is not the best thing in the world you want real wage growth to take place, but at the same time it creates this massive nominal expansion of the economy, which is in the short term helps address debt issues,
creates, you know, margin for companies and so on. So I can't really see um, it's the developments fully congruent with, you know, the dismal ratings that the government gets right now, but the administration gets right now. Of course This takes us to the natural transition towards inflation mark, looking at 2022, That's issue # one, the first four or five weeks of this year has been entirely driven by that narrative.
How strong will the Fed go and how will the whole world sort of adjust to this regime of higher interest rates? And we're seeing the Bank of England move, we're seeing even the CCB which was like, you know, completely in a stupor now trying to suggest that, you know, somebody real normalization is warranted there. So and and of course within the U. S. Former officials, current officials have varying views on the transience of inflation on the Fed being ahead of the curve or not.
Your former colleague Larry Summers wrote an article in the Washington post a series of many articles that he has written, basically saying that the Fed has sort of dropped the ball to some extent. I want to hear your view both on inflation as well as you know where the Fed is going.
Okay, well this is a can of worms and I think one needs to demonstrate great humility in this terrain and I think critics don't exhibit sufficient humility.
There's so much, we don't know, there's so much the Fed doesn't know, you know, there's no pandemic playbook for the Fed or crystal ball on what's going to happen with the pandemic um supply chains is not something anybody any economist is an expert in and one doesn't really fully understand this skew or the the shift in the relative prices between services and durables and whatnot and and then we have energy prices up and down but mainly up.
Um So a lot of the mainstream forecasts for the U. S. Have fourth over 4th 22 inflation um going to the 2.5 to 3% range Further towards 2% in 2023. But inflation forecasts keep getting marked up including core prices and the risks are to the upside. I think most people would say you know, we've had some anomalous things pushing up prices in the US everybody always mentions used car prices. It's hard to continue that hard to continue seeing that
happening at such a pace. But then again um rentals and other things maybe adjusting upward. Um, and who knows what's gonna go on with the pandemic and supply chain issues. Um, so I think as you alluded, you know, some people emphasize supply, other people emphasize demand. I think the argument on the demand side is if the economy is has a fixed potential and then you inject tons of stimulus in the economy that takes it beyond its potential. It just builds up prices um and you get inflation.
Um So both monetary and fiscal policy have contributed to inflation from that standpoint and we'll need to play a role in its withdrawal but if the issue is more about supply or relative price shifts um then I guess there's a question about how much monetary policy can deal with the matter and how much of a forceful role do you apply ascribed to monetary policy to deal with a supply demand imbalance?
Um But then again you have to be worried well if it persists, will this cause uh expectations to be de anchored and will this cause a wage price pile and all that? Um So um now this year I know fiscal is gonna turn consolidated. So I think if we had a 12% of GDP deficit last year, a lot of the estimates this year are kind of around 56% something like that. So that will take quite a bit of a demand out of the economy.
You know, I'm not worried about our ability to finance ourselves etcetera et cetera. Um But on monetary policy again, well it can't fix supply chain issues, it can address demand. We're we're in uncharted water. Um At this point yeah the Fed seems to be signaling for hikes this year or so. They've speeded up the balance sheet. Um The ending of tapering.
Um Mhm. We haven't seen what their bounce sheet plans will be but a lot of people think there's going to be a good bit of bounce sheet reduction this year, they have said it will be um faster. Um And the Fed has said it's going to be data dependent which is appropriate because the data are very uncertain and that will leave the door open to more than four hikes or less than four hikes if needed.
Um I can't really say if I think if I know whether inflation is 50 demand, 50% demand, 50% supply or 70, 30, 3070 or or whatnot. Um So I think you know every meeting should be live if needed and uh and we'll see what gets done. Um Let's just say I think it's hard being a central banker these days um and I would want to have to be jay Powell having to go before the cameras all the time with 1000 critics waiting in the wings but
he's of course promised to be humble and nimble, which I think is something that you would endorse. Um Mark
actually one other thing, can I say, one other thing um It's about financial conditions in the U. S. Um I should have said this, you know, I think financial conditions indices are very imperfect
and whatnot. But I think they they provide useful information um and you know, equities have come down in recent weeks but I think they're pretty stretched probably still Um we've seen the short rates move up considerably two years for example, but the 10 year that's up but uh I wouldn't say I'd say moderately so real rates remain very negative. You know, fx is less important component of financial conditions index for the U. S. And for others because we're such a closed economy. Um And
I see financial conditions still is overly accommodated. And I also do think that the Fed in recent years has perhaps overly. Do I dare say coddled markets through its various puts. Um And so I think the market's need to take on board to a greater extent the evolving shifts in the monetary policy landscape. So back to you.
So to follow ups to that first, as you know as we speak, we're speaking in the first week of february 2nd to february, the the Atlanta Fed now cast suggests that you know thanks to the surgeon omicron, the current run rate for the G. D. P. Is probably close to zero. It'll probably come back and snap back very quickly. But activities did get disrupted in the first few months of the first few weeks of the year. Uh and then this is happening at a time when
inflation is running at 7%. So we're already at a bit of a weird combination like a misery index if you will with such as that. You know, things are pretty bad. I mean you could argue that you know by the time the quarter ends it'll be not as miserable growth will pick back and pick up. But is there a risk if the Fed indeed has to signal four or five rate hikes that the market's ability to absorb that or the economy's ability to absorb
that is not there. And then we end up with a bit of a stagflation scenario where growth is low inflation is high and that's basically the worst of all worlds.
You know, growth always bounces around from quarter to quarter and we did have, oh macron and the like. So You know, I guess the question you have to ask yourself is, what's your outlook for 2022? Um you know, you know I see forecasts 3-4 I think is the number and unemployment 4%. So uh The misery index of 7-8% is pretty darn good, especially when you compare it with The 70s stagflation. So so uh I'm perhaps a bit more upbeat on this question than uh than you are very
good. And on the rule of the exchange rate you just alluded to the the dollar not being a major factor in terms of the financial conditions index. Um But higher interest rates ought to be associated with some degree of stronger U. S. Dollar, which also means lower imported inflation. Is that a tool that's useful for the Fed?
Uh You know in the US we don't think about the dollar as a tool. Um Mhm. The view is the dollar floats. Let the markets float, There is information to be gleaned from the dollar that obviously factors into the way policymakers think about
um the stance of monetary policy or macro policy. But um you know I I don't, yeah there can be cases where the dollar weighs more heavily on policymakers thinking I'm thinking back to the global financial crisis when there were times when the dollar was really really weak against the euro and that might have constrained monetary policy options. But in general um I don't
I don't think so. And you know, you could argue, well if us is raising rates um that's going to uh make the dollar go much higher. But you know, I I personally think the dollar is a bit on the top heavy side. Um I think that when the dollar does well when there's a big risk off environment or there's a big risk on environment, but if it's somewhere in between, I think conditions can be calm and the dollar isn't going to be
substantially bit up. And let's remember we have a pretty big current account deficit and that has to be financed. So when I put it all together, I I you know, I always say nobody should ever make an exchange rate prediction, anybody who does is a fool. But I kind of being foolish think if the dollar range trades, I won't be all that surprised this year.
I have to say Mark when you said that you know in the US we don't really talk too much about the dollar. The former president did talk a lot about the U. S. Dollar. I think he was very gung ho about a weak dollar for most of his presidency. And then at the end of flip I
have to defend myself on that, you know, um The period when I was a Treasury kind of running that bit was 2000 2015. So II was of the view um that you just don't talk about it and talking about it all and get you in trouble. And that was the constants of the Bush and Obama administrations. So you're you are totally right. Um And I'm reflecting my experience is indeed
indeed. I'd like to think that your experience is reflective of the present administration to some extent and their policy framework. Um
I think it is
indeed indeed. Um Okay fiscal. Um we had some momentum building up for build back better but now it seems to have sort of dissipated entirely. Is that a big deal?
Um So I think that two build back better in name and current form is not going to happen. Almost certainly dead months and months of effort and um there we are. And another complicating factor is that there are a lot of legislative priorities so we need another bill to keep the government open. Um They're working on an competitiveness bill that addresses china there's going to be the supreme court vacancy.
Um So I one never knows what's going to happen in D. C. Politics but if Something is going to happen it will be scaled back. Um I've heard some some of my friends who follow the hill say you know something 500 billion to a trillion. Um It certainly won't be what the progressives wanted. Um Now the politics are extraordinarily different difficult. The republicans will oppose anything
in the Democratic Party. You have the splits between progressives and centrists and differences over what should be emphasized. Um And I have to say I think the democrats really badly handled communications about the matter. Alwyn heard it first was $3.5 trillion dollars and uh they didn't do a good job of getting into people's psyche what's in the bill and why that would be helpful to them.
Um And I think that there was a perception that it was a very activist bill and given the current inflation situation um in America I think many are just wary about the idea of activism from the government. Um Now is it a big deal if it dies. Um So two answers to that one. Look it doesn't help the president and his agenda. Um If you can pull off something it's it's it'll be a win, it'll be good.
Um The perception that democrats are at loggerheads with one another between the progressives and the centrists is hardly helpful and biden is pulling low and so when he doesn't achieve his agenda that doesn't help him now. beyond that. I think you're asking a question about social preference and you know in my view, I think initiatives like child tax credit, universal pre k childcare support, paid family leave,
um more climate spending. I think there are issues that the american people could get behind if they were led um to do so um properly. Um but again the odds don't seem to be on the side of passage of even a modified reduced bill at this point.
Right unfortunate, especially in the climate part, I was hoping that this administration would be able to trickle charge some of it. I know that there are some climate provisions in the earlier two bills but hopefully, you know at some point, you know, some parts of this bill can be put back and trained. Um Mark, let's sort of you know, switch gear a little bit and talk about international economics.
Um when the biden administration came to power, I think we never really expected it to undo everything that the trump administration do immediately. But here has gone by trump era tariffs have not been touched.
CPP Cp Tpp is not going anywhere as far as the U. S. Is concerned, it's going ahead without the U. S. And in the last two years, global coordination on vaccine production and distribution which really ought to have been led by the U. S. Has been somewhat patchy, am I being too pessimistic in my prognosis or or this is how things have been.
Um Well, uh nobody who knows me has ever accused me of being optimistic and cheery, but I'm going to say that I think the proverbial glass is more than half full. So um in the world of international finance and diplomacy tone matters. Um and let's remember that a little more than a year ago, our rhetoric in the U. S. Was nativists, it was bilateral ist, it was anti multilateralists.
We had a president who threw away a G seven communique ripped up international agreements, denigrated other countries with less than polite words. And, you know, our president and frankly preferred Vladimir Putin and kim jong un to Angela Merkel and Justin Trudeau. So um that is gone, That tone is gone and rightly so. Um biden and his team are working with others. They're trying to be constructive.
Um you know, look at the role they're playing and on Russia and Ukraine and how closely they are working with others. Um At this point, I mean, the West is more unified now than it probably has been for for years. Um There have been some marginal moves on trade tensions. Um you know, the there going Airbus have a deal. The Treasury worked out the international tax agreement, whether Congress passes, it is another question um
on financial sanctions. The biden team is working much more closely with allies trying to work with them, especially on the Russia Ukraine um sanctions rather than following a unilateralist um path. And they definitely are trying to work more closely overseas on climate issues. And then since I'm old Treasury ex Treasury guy always have to say the U. S. Remains a very open economy, very open financial system. The strong U. S. Economy is imparting huge global demand and
I don't hear anybody complaining about that. So um that said um I think it's important americans do not want to be the policeman of the world. The afghan departure will reinforce that. Um basically americans want to see our country's global footprint reduced. Um Now CP TPP um is an example of less than desirable constancy between trump and biden in my mind, you'll get no argument from me. I think the abandonment of TPP by the U. S. Was a huge colossal mistake.
Um It hurt us in ASia and only seeds ground to china and um I'd like to see us return but I'm not holding my breath over that. Um It's just not gonna happen. The republicans aren't the free trade party of the past. The democrats have their own fissures on trade. Um And so so that's why I'm not even more effusive. But again I do think that the rest of the world should feel positively about the change tenor coming out of the United States on international diplomacy but we
should not hold our breath on the trump era tariffs. They're going to stay
um I think there are a lot of people that would like to um chip away at them move away from them, but they will do so very, very hesitantly and perhaps you'll see more exceptions and exclusions and things of that nature. But it's it's not easy political sailing on trade on the trade front, the United States at this
point. Right. Um you recently wrote an article and I really, really enjoyed it. It was a very provocative title. German and chinese growth models are outdated. I wonder if it was your editorial, you who came up with that title. Um and let's begin with china, Haven't we been predicting china's collapse for decades and hasn't it's widely flagged structural challenges like excess investment, leverage, overhang aging have been around for a while.
So why is this moment in China's economic history and Inflection point?
Well, it'll come as a shock to you. But every once in a while I can have a catchy thought and I actually came up
with the title myself.
Um tough question. Fair question. And I'll bet you it's really important question to Southeast Asia in particular. I always think of the african proverb about when the two elephants fight the grass gets stomped on and I'm not calling Singapore grass, but you get the draft. Um, So I want to start um in a different place. I want to ask, um, a lot of people ask, you know, why is the US being so hard.
And to me, I think a fundamental question in thinking about uh how china's approach to this administration and really rests on the question of how has china changed. President G is a very different animal than his predecessors and much more authoritarian, much more status, much more controlling, putting power in the Communist Party, liberal reforms have been set back.
Um and uh so it's a much more aggressive china in my view and a lot of the concerns over industrial policy and technological theft etcetera etcetera quite valid. These were concerns that were on the plate of the Obama administration trump, put them on steroids and whatnot.
And um you know, I think in the past when the two of us have chatted, we've, you know, you've wondered if the biden tone was that different and and I think that um it is different but that a lot of the substance very much remains um the same. Um now why is china different um now, well I guess sometimes I think about stein's law, something can't go on forever. It will stop. Um President G. himself said Chinese GDP would double by 2035.
Um so that means growth needs to average four and 3/4% over this period, but if it's higher at the beginning part it'll be lower at the In the 2nd part of the period. Um I think there are other, I think there are reasons why things are different now. I think first of all the demographic kink is soon upon china, it wasn't a decade ago, but now it's beginning to hit china,
china's heavily relied on trade in the past. Um Yeah, You and I both know in the early 2000s or 10% of GDP current account surpluses now. Um the current account Before the crisis was getting close to the balance, but they still run a trade surplus now around 3% of GDP and this isn't an $18 trillion dollar economy. So, um, I think that
global growth is gonna slower this decade. Um you know, we see potential slowing in fairly modest in europe and Japan, um Under two in the us china itself is slowing, so um um it just seems to me that china is the world's number two economy now, it's global footprint is just way too big for it to rely on the external sector uh as a major support for growth and that if it does, it's going to cause uh ramping up of protectionist pressures around the world.
Um the china economists often say that much of the growth over the last two decades was driven by the absorption of rural labor. Um I don't know if that process is complete, but many experts say it is largely uh completed chinese growth has relied on savings and investment, high levels of them And the efficiency of investment is plummeted. So basically it's taking over 7% of GDP and investment these days to generate 1% point of growth um that was 3-5%,, you know, many seven a decade ago or so.
Um Much of the investment has run through large state owned um commercial banks um to going to S. O. E. S. And um meanwhile the government is cracking down on the private sector At a time when according to the recent IMF article for report on China that the total fact TFT total factor productivity growth is under 1%. Um and I'm one who believes that the private sector is a better engine for growth and state owned enterprises. Um So I don't see that as auguring well for growth.
Um debt and leverage our high the authorities want to seem seem to be wanting to crack down on debt and leverage. They know that if they do so to forcefully it's going to um further cause growth diploma. So they let their foot off the pedal a little bit. But the overall trend towards restraint I think is there um weaknesses in the real estate sector, even if managed Financially are going to have to put a crimp on a growth. It's 30% of GDP um
consumption growth. So china wants to transition to consumption and services led growth. But consumption remains very low. I think fiscal policy could play a
role in
helping build the social safety net to a greater extent in china, but again, I think that the overall direction of fiscal policy is modestly in restraining. Um, so, um, when I put it all together, um, I think that the future growth drivers could face a challenge and um, I kind of wonder whether china's and this is other analysts have raised this point. You know, we'll be able to escape this middle income trap.
So I hope that well, and of course, coming back to where I started us, china tensions, geopolitical tensions are not going to improve the picture. So when you put it all together, that's why I think this time may be different.
Okay, fair enough. And your article was about both Germany and china because you talked about Germany sort of history of focusing on heavy industry and and large enterprises and in the context of Germany who provided a playbook for economic revitalization for the shows government, you talked about climate change digitalization, infrastructure investment are three areas where they can push for growth.
So, in the context of Germany, my question is, do you think they can deliver and also in the context of china, why can china grow through climate and digitalization.
Okay, um, so yes, the article postulated that Germany has traditionally been an export led economy and we still see that in this massive current account surpluses, savings is quite high, personal corporate and even public in recent years, while investments been restrained and um, I also noted in the piece that Germany's automotive industry has played a huge role in the economy's growth and it may face difficult transition periods with the electrification of cars and whatnot.
Um, and then, as you said to help stimulate domestic demand growth reduce its external dependence at the time of a slowing global economy, which we just discussed, um, I observed that the new government could help modernize growth model and support the economy through investment in climate digitalization and infrastructure. And let's give the Germans credit. The Schultz team understands this and they have even articulated this vision. Uh, one should never underestimate the ability of the german
economy to adjust. You know what it did after reunification was quite impressive. Um, you know, the greens are in power now and definitely have a climate agenda and the like now you asked, I mean, is this going to, will they carry through on it? And I think it could be quite challenging for them to do so. Um, german fiscal behavior is conservative perhaps from the standpoint of many americans, excessively conservative.
Of course, one could always ask who are we americans given the way we run our fiscal policy to comment on anybody else's.
Um, but and they deserve good credit um for their commitment to financial stability, but with negative real interest rates and huge investment needs, it would be a good time to step up investments in these areas, but I think that there are constrained by their conservativism and then the debt break laws and well I think they can find some ways to work around the debt break, they're going to face political and other constraints in doing so. So I expect them to do more.
Um but I'm doubtful about a significant ramp up. Um You know, let's just say the current-account surpluses 7% now. So that means the savings investment imbalance is 7%. So let's say um they step up public uh deceiving, let's say the current account goes from 7 to 5%. Um You know, is is that is that such an epic change? Um and in those circumstances will still be relying excessively on demand from elsewhere to support the german economy.
Um So I think they're going to be politically hand strung Now you then just ask me, well why can't this be china's playbook? And and I think implicitly you're asking me why why do I think it could work for Germany but not for china. Um So this can indeed be china's playbook. Um And you know, if you haven't read the china article for, it's worth reading it, but it describes some of the playbooks that china has in these areas.
Um And uh you know, it's kind of hard one might imagine why why are you talking about infrastructure in china because if you've gone to chinese airports or written train from Beijing to shanghai, you think well pretty darn good infrastructure certainly relative to the United States. Um I guess at the end of the day um I mentioned g cracking down in the private sector, she being more controlling, more authoritarian, the party playing a greater role in the economy.
And as an american, I have an innate, greater faith in the private sector to deliver innovation than government, even if the government, even if governments have a role to play in helping catalyze um processes of R and D etcetera. And um and again I I think china is changing and um I think that in the end this direction is going to weaken China's growth potential and productivity. So it comes down to the role of the state I guess in my mind,
Mark, I'll share with you two anecdotes. So I spoke with David Victor who's a professor at UcsD used to be the climate adviser for Pete bulleted during his campaign run. And David's argument was that, you know, basic mainstream economics sort of, you know, falls short in terms of you know,
how to deal with climate change. And the general observation that economists are making on the climate change side, it has to be top down coming from the government whether it is carbon pricing or upgrading the infrastructure to deal with climate change and renewables.
And the second anecdote that I want to share with you is that, you know, when I spoke with joon ma who's used to be PBOC chief economist and now represents china in the G 20 climate change roundtable and june sort of, you know, models that Over 5% of GDP and will expenditure is needed by china to reach 2060 0 goals. So that's you know, trillions of dollars, literally that china's public and private sector would have to put aside for
again the green transition. So it seems to me that the zeitgeist of climate change seem to suggest that it should be a top down uh project and china seems to be following along that which most Western climate economists would argue that is the
right way to go about it. Not necessarily allow the private sector to figure out how to internalize all these negative externalities from climate change, but let the government sort of dictate what the price of carbon should be and how the transition timetable should be. Um So that was, you know, just my two cents that, you know,
that's fair, it's fair to say that the government has to create the kind of the the incentive framework. So carbon pricing and regulation and the like, but at that point, you know, I think the private sector is going to have to take over and we'll see, we'll see how china does. I wish them the best and I wish my country would be much more proactive in this area as well.
Right. Um Mark both you and I have spent some years of our lives in the I? M f so I want to end this discussion asking you a question on the I. M. F. Recently I had martin mull highs and on my podcast, martin used to be the director of the Strategic Policy Review Department in the I. M. F. Recently retired and he seemed to be a bit uneasy about a middle of the road conservative multilateral organization like the IMF being increasingly tasked with dealing with climate change issues or
gender or inequality and so on. So martin of course thinks these are important issues. It just feels that the I. M. F. Has been successful, being narrow and focused on balance of payments on fiscal and that's where most of the energy of the organization should be your thoughts.
So this is complicated terrain, martin mull horizon is a wonderful thoughtful individual and uh I commend you for having him, I'm sure he was a great guest. Um So um let me just make one general observation which martin wouldn't make, but it would be kind of observation somebody like me would make because um I wasn't an I. M. F. Staff, I was, I have representing a shareholder and you know, ultimately the IMF is a shareholder organization.
Um It's remained relevant and been successful because it has adapted to what shareholders wanted over time. You know, we the soviet union collapses, we throw the I? M f in there to do all the economic research and that's what the shareholders wanted. We wanted the I. M. F. To get involved in um you know, dealing with debt issues solving emerging market debt crisis, we wanted the IMF to go into low income countries, so so it doesn't, so it is responsive to shareholders and um
the whole world disease
with climate issues, for example, um these days, so, you know, I think it's appropriate for the IMF to be head in this direction, so long as it's consistent with its mandate and done in a reasonable way. Um So, you know, what is, what is reasonable? Well, research is one thing, I'm research by the I. M. F. On carbon pricing, I think it's been very good and useful.
Um Climate can be a macro critical issue, you can imagine small island economy, this is something they've got to factor into their um budget. Um And you know, everybody jokes that the IMF stands for, it's mostly fiscal. Um So I I think that if it's defined in this macro critical way to use a somewhat nebulous but semi meaningful term in the context of the IMF there is a role for climate, there may be a role for equity, I less convinced of that, but but there are no doubt important issues there.
Um So again, it should be consistent with the mandate. Um You know, the fund should not be doing what the World Bank does. The IMF should be focused on stabilization, it should be focused on the relevant structural reforms that go along with areas like fiscal um yeah et cetera. But I but I think that it can play a role. Um it's not black or white, it's a shade of gray and uh you know whether it's uh charcoal or light, I think that's an issue that still needs to be sorted out. Mm hmm.
Very, very nuanced. That's great. Thank you so much mark for your time and insights.
It's been fun. Always a pleasure to see you. And uh hopefully the next time I see you we will not have a 12 or 13 our bridge between us.
It will be wonderful and I look forward to that. Hopefully in april let me also thank our listeners. On a concluding note, Kobe time was produced by martin Tuckey daisy Sharma and violently provided additional assistance. It is for information only and does not represent any trade ideas or recommendations. All 69 episodes of copy time are available on youtube and on all major podcast platforms including apple google and Spotify.
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