Interview With Stephen Roach: Masters in Business (Audio)

Stanley Asia. This was just an tour to force discussion on everything from the role of Federal Reserve to the way we measure productivity, to how markets should impact you're thinking about everything from economics to valuation and investing. Uh. Absolutely, Uh, I can't say enough. I'm gushing. I expect you're going to find this to be just uh ninety minutes that are gonna fly by. So rather than have me continue to babble, let me just jump right into it without

any further ado. Our conversation with Yale and Morgan Stanley's Steven Roach. This is Masters in Business with Barry Ridholts on Bloomberg Radio. My special guest today is Stephen Roach. You probably know him from his years as the chief economist for Morgan Stanley. A quick background on on Mr Roach, Professor Roach, Dr Roach, Can I call you Dr Roach?

Calling anything you want? Barry? Alrighty and um. He began his career as a research fellow at the Brookings Institute before becoming a researcher for the Federal Reserve, where he worked for seven years. Uh. Not only was he chief economist at Morgan Stanley, he eventually rose to the title of Chairman Morgan Stanley Asia, where he was for five years. He's written a number of books, Unbalanced, Codependency of America and China, as well as The Next Asia, Opportunities and

Challenges for a New Globalization. He is presently a senior lecturer at the Yale School of Management and a Senior fellow at Yale's Jackson Institute for Global Affairs. Stephen Roach, Welcome to Bloomberg. Pleasure to be so. I was excited to talk to you for so many reasons. Your your background is tremendous, and you were at Morgan Stanley for thirty years, including a huge swath of that as the chief economist, and you worked with a number of legendary

people before becoming a legend yourself. You worked with Byron Ween as well as Barton Biggs. What was it like during that era, Actually, Barry, you know, those are the as far as I'm concerned, that was the golden age of Wall Street macro research. Uh. We really had an extraordinary period, not just in the economy and in the markets,

but in building UM. Morgan Stanley I think into the pre eminent leader in um sort of macro analysis of markets and economies, and Byron Barton and I sort of spearheaded that they did it from the market strategy point of view, um, I did it from the economics point of view. Barton of course, straddled both the market and the economic realm because he always had some really uh uh you know, quite penetrating and deep insights into the

macro underpinnings of the markets that he was following. And um, you know, and Byron had his own knack of looking at the market through the lens of his out of consensus ten surprises, and and and we we all worked very very closely together. We traveled the world together. We provoked each other, we debated each other. Um. Every once in a while, we even agreed with each other. Uh, but most of all we had fun. Uh. It was an extraordinary period. The bulk of this period was the

nineteen eighties and nineteen nineties. It was a huge boom going on both in the bond market and the stock market. How does that era of prosperity impact the growth of

a firm, a little unknown firm like Morgan Stanley. Well, you know, Morgan Stanley was historically, you know, mainly an investment banking firm that you know, in the nineteen seventies made a commitment to really uh go into a broad based institutional origination and distribution business, adding equities, um, then when I came in the early eighties, adding government securities, becoming a primary dealer, and then really starting to build out a uh a full blown a fixed income uh business.

And so Morgan Stanley wanted to ride the wave of the institutionalization and the internationalization of the global securities business. And really, I think was one of the first firms to successfully transition transform itself from a narrow, pre eminent

investment bank into a broad based international securities firm. So, given how everything has become so balkanized, you have boutiques rising, you have hedge funds and private equity and venture capital, would it be possible in the modern era for that same story to take place. Could another Morgan Stanley rise or is that just a bygone era and we're not going to see that sort of huge conglomerate coming to the fore again. It's hard to say. I mean, you know,

the environment has changed from a macroeconomic perspective. I mean, back in the late seventies early eighties, when this whole magic began, you know, we had double digit inflation, double digit interest rates, and and once we put policies in place to address that, then you know, we we began a you know, extraordinary twenty five year ballmarket with interest rates going one way. That journey is complete, and now you know, there's a big debate as to whether or not,

you know, it's gonna go the other way. I'm suspicious of that. But to to get that kind of break from the markets, and then to get the same type of break from the globalization of of of cross border capital flows and the development of a whole new complex of of products that are addressed to uh uh, to deal with these twin forces of disinflation and globalization, I don't think you can recapture that. But that doesn't mean

some other combination. Couldn't UH, you know, come up and and and offer a different business model that UM is potentially just as attractive as the one that Morgan Stanley presented in our early nine You're listening to Masters in

Business on Bloomberg Radio. My special guest today Yale lecturer and former Morgan Stanley chief economist Stephen Roach, and we were just talking about UH, the f O m C and the most recent UH end of zero interest rate policy in the beginning of what some people have been calling lift off. Let me let me ask a very broad question. So unemployment since the crisis has been cut in half. We were ten percent, were now more or less at five percent. C p I is barely two.

So the question is what have the FED been waiting for? Well, the Fed, I think harbor is the mistaken belief that UM UH monetary policy, whether it's traditional using UM their federal funds rate or non traditional using quantitative easing, holds the key to economic recovery whole is the key to controlling inflation, holds the key to controlling UH risk taking

and and and driving global economic activity. I think UM, you know, a lot of those assumptions probably are close to being right, but just as many, if not more, of them are are really wrong. So let me push back on you on that a little bit, because between Ben Bernanke's The Courage to Act is his recent book

and the circuit he's been doing talking about it. One of the things he has said is we didn't want to be as aggressive as we were, but we had no choice since Congress was paralyzed, there was an austerity movement, and the traditional post recession Kinzie stimulus was not available. Do you buy that or what do he's You know, he's talking his book literally and figured figuratively. Yes, um.

And you know he has an uncanny knack for starting history when it's most convenient for him to explain, um uh, the efficacy of the Federal Reserves Rescue Act during the crisis. What he fails to really own up to in Greenspan is the same way is the critical role of FED

played in getting us into this mess. Um. I commend Ben Bernanky for his heroic actions in the depth of a crisis, but by advocating a monetary policy that was extraordinarily easy um and the pre crisis years, by steadfastly maintaining as an academic and then as a central banker that monetary policy should play no role whatsoever in containing or controlling asset or credit bubbles. I think he let us down a path that almost blew up the system.

And so what I want from a central banker is a much more disciplined approach to focusing on financial stability rather than just targeting an inflation rate which never seems to budget, which it's consistently below the FEDS expectations and has been so for close to eight years now. So you mentioned green Span. Let's let's talk about the central banker formerly known as the Maestro. His reputation took a giant hit following the crisis, deservedly so or not? Yeah,

absolutely so? I think, um again, he he was sort of a uh, you know, had a one way view of market disruptions. The so called green Span put whenever the market's got into trouble, just you know, um, turn on the fire hose and and inject more liquidity and let it slash around and the system will take care of itself. And that works brilliantly until one day it doesn't. Uh, And that doesn't was when um, you know, there was this catastrophic near collapse of the system in the fall

of sparked by Lehman Brothers. Green Span never believed that we could have uh systemic risk coming from any bubble, while it was a dot com bubble, whether it was

the housing bubble, whether it was a credit bubble. He all believed that these were testaments to the oh, you know, the brilliance of you know, the market based system, consistent with his uh you know uh and rand libertarian view of the world that markets always no best in central banks should never interfere with the wisdom and brilliance of markets, Which is sort of bizarre because I just want to clarify something. So two thousand eight Lehman brother Long Term

Capital Management. Um. The fascinating thing about Greenspan is here's a guy who who is proselytizing, let the market sorted out hands for off limit the amount of regulation we had. Yet every time there was a twitch, he was there too intervene in the markets. It seems somewhat um hypocritical. Well that I think hypocriticals putting it too kindly. I think I think I was afraid you're gonna say that's

too strong in the world. No, I think I think that, um what what the FED didn't And I don't want to single out Alan Greenspan, because we had a system Barry that would have created another Alan Greenspan, if if if, if he wasn't around. We were struggling with economic growth as a nation. Uh really beginning in the nineteen seventies. Uh and um then we had you know, devastating high inflation. Paul Provoker came in and and really broke the back

of that inflation. But you know, the economy was still laboring under a lot of pressures, especially in its ability to generate income for average American or middle class workers.

And so the Central Bank, under the guidance of Alan Greenspan for eighteen and a half years, relied much more on financial engineering to create asset bubbles to generate so called extra purchasing power to grow the economy beyond the fundamentals of the earnings that we were able to squeeze out of hard work UM and productivity related pay increases.

And this disconnect between the UM, the underlying income generation that comes from employment, and the income that could be extracted from asset and credit bubbles let us down, I think a very treacherous path and you know, I think that's the the dilima that Janet Yelling faces today is how to uh put the economy back on a sounder basis, more supported by the fundamentals of wage on labor income

generation than by the excesses of asset appreciation. So so, we had the dot com bubble in two thousand, we had the housing and credit bubble in oh five, oh six, we had a subsequent commodities boom and bust. Are we in uh we at risk at another bubble now? Or things on the right track? And part of that comes from the slope to to and a half percent growth now? I like, I think that um uh, there's there there's risks that we're gonna end up with another type of

financial accident. Uh. We you know, we're still at a period, historically unprecedented period of rock bottom interest rates. I mean, you know, big deal. You know, the federal funds rights now at basis points. But not only have we taken interest rates to the so called zero bound, uh, and not just in the US, but in you know, Europe,

uh and in Japan. But the balance sheets of central banks are so swollen that there continues to be a lot of excess liquidity slashing around the world, and that's where the risk lies in terms of the next potential crisis. You're listening to Masters in Business on Bloomberg Radio. My special guest today is Stephen Roach. He was the chief economist at Morgan Stanley, where he toiled for more than thirty years before becoming Amen of Morgan Stanley Asia. He

is currently a lecturer at Yale University. And earlier we were talking about the impact of the FED and some of the bigger mistakes that Alan Greenspan and other FED members had made. Why is it, I'll start you out with a big one. Why is it that the FED specifically and most of the world's economists missed that big crisis in O eight oh nine? How come no one

really saw it coming in advance? Well, I think, uh, it's it's it's like an how come investors, you know, don't see bear markets when when a trend is spectacularly in favor of your position, whether it's an investor or a policymaker, you know, you don't want to ever shall be the one who shouts there's a fire in the room. You overstay, You're welcome. The Federal Reserve uh, was was steeped in the hubris of what it loudly proclaimed as the Great Moderation. They had cracked the back of inflation.

They had gotten the economy to perform very well. Unemployment was low, and sure, you know, asset markets were frothy in their view, but this wasn't a big, big risk after all of green Spain argued, we can't have a nationwide housing bubble. We could have problems in Las Vegas or Florida, but not for the country as a whole. We can't have a dot com bubble, he argued earlier. I mean, after all, these are new companies that are

gonna drive us to a new frontier on productivity. And let's not be critical of some prime mortgages, he argued, because that's providing housing finance to a swath of the population that needed shelter. And so, you know, it went on and on on. The music just kept playing. Uh and um. Nobody wanted to be left holding the bag until they realized suddenly that maybe it wasn't quite as pretty as they thought, and it was too late by then. Bury.

Let me push back a little bit, because we know that investors from a psychological standpoint, they have a vested interest in bull markets continuing, and they always overstay their welcome and they never want to believe that markets go

up and down. But the FED are supposed to be the professional watchmen who are there for, amongst other things, to look for these aberrations and to identify when policy is too loose or too tighten is going to cause a problem for the FED to behave Like any mom and pop investor who makes bad decisions based on a variety of behavioral eras, seems like they really weren't doing what they were supposed to do. Well, you know, I hate to uh uh disagree with you on that, but

but I think I think we ended up. Despite the fact that we extol the virtues of the FED as being politically independent, they're not politically independent. They're part of the body polyp that wants to squeeze more growth out of the system than the system can deliver on the basis of fundamentals. And so you know, if you read that alone, seems very reckless. Well, basically, it's like driving a car that shouldn't go more than a hundred miles

an hour. At a hundred and fifty you're gonna run into drug They were part of the Washington consensus that really was disturbed by the lack of fundamentally supported economic growth. So if a central bank could deliver growth beyond the fundamentals by excess liquidity, low interest rates, asset and credit bubbles, who who who was the Congress to be critical of that?

And Greenspan ultimately ended up, you know, in his UH memoirs, writing towards the very end buried in the back UH that he says, I regret to say that the political independence of the FIT is not carved in stone, admitting that, you know, he was very much a part of the political process that guided and shaped UH Congress, the President event UH and the so called tough minded independent central bank.

Because I look back on America's Central Bank, UM, and I started my career there, as you indicated in the intro, UM, I regret to say I only see one independent chairman, and that was politically independent sharing that was Paul Vulkan. None better. So the first rule of economics I learned is there's no free lunch. Are you suggesting the FETE policy for the better part of three or four decades has been a free lunch policy. Well, yeah, I think

that's not a bad image. I mean, again, if you have a central bank that at the first sign of trouble in the market is going to uh flush the system with liquidity, as the so called Greenspan put repeatedly did, maybe it's not a free lunch, but it's certainly a highly subsidized uh longstanding banquet meal. All right, So, in our last minute of this segment, rather than me being critical about the feed and economists, tell me what is

it that economists do right but don't get enough credit for? Well, I I think economists are good uh at UM having a disciplined analytical thought process to identify the tensions that build in a system. That want to take a system that moves away from UH stability or equilibrium into a UM a place that needs a correction. And so when I was doing it on Wall Street, I always focused on these disequilibrium UH tensions and how they might be

resolved through a correction in the economy or policy. And every once in a while I'd even wander, usually mistakenly, into the realm of how they'd be corrected by markets. You're listening to Masters in Business on Bloomberg Radio My special guest today is Stephen Roach. He is a professor at Yale UH former chief strategist, chief economist actually at Morgan Stanley, where he worked for thirty years, former chairman

of Morgan Stanley a Asia. Let's talk a little bit about Asia, because long ahead of the curve, you decided that Asia was a place where global growth was going to come from, and then essentially set up Morgan Stanley's shop up there. How did that whole thing come about, Well, Barry, I was running Morgan Stanley's Global economics team UM beginning in the early nineteen nineties, and UM we had a great team. Actually, we were ranked the number one global

team by II Institutional Investor. And then along came the Asian Financial crisis, and our forecast was in shambles, the number one when it ranked team. We had the worst forecast of anybody on Wall Street. So this was a great source of personal humiliation to me. So I had been to China, you know, a few times. I had a hunch that China might hold the key to the

endgame of this crisis. And right around the middle of ninety seven, when the Taibot was devalued, I started going to China once every other month to figure out if China would be the next shoe to fall as many believe, and UM it quickly became evident to me that China was cut from a very different cloth, and I started doing a lot of research on China. Then I hired a brilliant young economist, Andy Say, to analyze UM China.

But Andy was UH pretty green at that point and and and really had a hard time UM coming up with the types of answers that I thought would be helpful to our team. So I I went off on my own, got hooked on China uh and never turned back and wrote I remember UM my first public article in the Financial Times UM and UM uh probably the

spring of that. Not only would China put a floor on the crisis, but it would emerge from the the Asian financial crisis as the new leader of the region, quickly supplanting Japan and you know more not a very controversial old statement today now, but back that was a radical shift, wasn't it. Well? It it got me sort of excommunicated from Morgan Stanley's uh Japanese centric institutional client based in Asia, and you know, my Chinese relationships that

I was developing. Were actually embarrassed by they they thought that that I was going a little bit too far. But you know, it always helps, you know, and whether it's Wall Street or Hollywood, to be in the right place at the right time. And China took off, uh, right after the Asian financial crisis, hasn't looked back since then until right about now when the growth rate is slowing.

This is causing a big debate. Japan has struggled. Uh. Two and a half lost decades later, is is is still going nowhere despite the hype and promise of the so called abeomics, UH policy proposals and UH. You know, I I've been deeply involved and written books and now teach classes at Yale on on Asia on China on the lessons of Japan ever since. And it's really been a very rewarding part of my own personal journey. And you lived in China for three plus years. What was

that experience like? Well, I was a chairman of Morgan Stanley Asia. The office was in Hong Kong, UH, where I had an apartment that I spent about one day a week at I was on the road constantly. I spent about half my time uh in the mainland, and it enabled me to deepen my connections to officials, um, business leaders, academics in China. I traveled all over the country. On what cities did you go to in China? Well, you know, what are the standouts? I mean, I know

you're gonna say Beijing, Well, yeah, idea. I did the usuals Beijing, Shanghai, shen Jin, Dalian, uh, Nanjing. UM spent a lot of time in Chongqing. Uh. You know the biggest urban city in in in the world, Shian Uh you name it, uh, changshaw uh Cheng. Do see the pandas there? Uh and uh you know China is um uh more than just Beijing uh and uh Shanghai. You know, There's there's a lot that's going on outside of this thriving coastal region of the country that you really have

to know. And and I was privileged to be able to see a lot of that. Did you pick up any Mandarin or can you get by on English? Everywhere I I studied Mandarin. I had tutors um and um. You know, a couple of things along the way told me that UM, I had no reason to do that. I tried out my Mandarin a few times and meetings with senior officials that I was very uh close to, and they would usually stop me and say, you know, do us a favor. Uh, we understand you a lot

better stick. And then the final um uh uh embarrassment came when I was invited actually to give a commencement a speech at Nanjing University, one of China's leading universities, and I knew enough not to try to do the speech in Mandarin, but I wanted to close with a brilliant, astute Chinese proverb and delivered in Mandarin. Uh. And I'm pretty comfortable at public speaking uh. And I'd rehearsed this line maybe seventy five times, and I'd had a tutor to help me with the tones, and so it came

time to just read it. All I was gonna do is read it. And I look up and I see thousands of students in caps and gowns, and I forgot everything I had learned, and so I did it, you know, fanatically, and no one blinked. Into this day, I'm convinced that no one knew I was even speaking in Chinese at the time. So that's when I said, Okay, I'm done. I don't. I don't no more Mandarin, and pretty much you could get get by with English just about anywhere,

get by with it. But you know, um quite to see if I have a regret, you know that that is a regret of not learning mens and not being able from time to time to you know, to to speak comfortably in the language of my host country. I think that's that. That's something I always tell young people when they're thinking about their own career choices. So a question that I've always been fascinated by any time I

speak with someone who's lived overseas for a while. Uh, what is it that we in the US misunderstand most about China? And then vice versa? What are what misconceptions of the Chinese have about Americans that seem to be

long lasting. Well, that's a great question, and um uh you know, the first part of it, um is is something that really hit me over the head when I read a book actually in nineth publish by now retired Yale professor and Jonathan Spence called The Chance Great Continent, where he examined forensically, uh, Western views of China going back to Marco Polos thirteenth century journals right through Nixon and Kissinger, and the bottom line of of Spence's um

you know extraordinary work, was that the West, especially those of us in the US, would always see China through the same lens that we saw ourselves, rather than through the experiences UH through from the Chinese perspective, example being Marco Polo's journals UH in the thirteenth century. UH never once mentioned that the Chinese women bound their feet and referred constantly to the canals that we went through ancient pay King, when in fact there were no canals in

ancient painting. The canals were in his native Venice, and on and on through um more current historical figures. You know, Nixon Uh sitting down with mout s tongue and saying, oh, we're both from small towns. You know, You're from Changshaw and from York Blinda. We have a lot in common and maybe not, you know. And so when we look today at China through the lens of some of our dead issues are housing bubbles. You know, we're looking into the thing that China has got the same types of

problems that we have, and they don't. They're there. It's a very different um UH framework and set of issues that they're grappling with in their system at a very different stage of economic development. So let's talk about that for a second. They have a billion seven people, many of whom have a billion four billion, four many of whom are coming from a very a grarian lifestyle, small towns, farming villages, moving all these people to a industrialized um economy,

moving them into these cities. You know, sixty minutes did that big piece on the ghost cities, But are those that's an example preparation for changes coming forward. That's a complete example of of what I just said. We look at unoccupied housing a a bubble waiting to burst. The first ghost city that I saw in China was in the second half of the nineteen nineties at place called Shanghai Pudong, was the largest urban development in the history of the world at the time. It's now fully occupied

by five and a half million people China. That's like a Manhattan, practically almost built. China moves between fifteen and twenty million people a year from the countryside to the city. That's two New York cities a year. Uh. And so they don't wait uh to to build shelter and infrastructure for these people after they've arrived, which is the sort of the model of the urbanization model of India, which leads to urban squalor. But they build in anticipation of

and ensure they will make mistakes. They will build in areas that ultimately will um uh not be as fully occupied as they would like. But in large part their high investment economy is built to anticipate the future sub squent flow of rural urban migration, which is gonna be you know, enormous. Continuing through, we've been speaking with Stephen Roach. He is the former chief economist for Morgan Stanley, currently a lecturer at Yale. If you would like to hear

or see more writings of of Professor Roach. Where can people find uh your work other than Barnes and Noble and Amazon. Well, I do write a regular um column that's available on the Project Syndicate website monthly that has distributed to um UH newspapers all over the world in multiple languages. So you can check me out on the Project Syndicate website as well as your your local book deal.

If you enjoyed this conversation, be sure and hang out and check out our podcast extras, where the tape keeps rolling and we continue discussing all these weighty matters. You can check out my daily column on Bloomberg View dot com. Follow me on Twitter at rid Haltz. I'm Barry rit Else you've been listening to Masters in Business on Bloomberg Radio, Welcome back to the podcast. Or for those of you who haven't left or on treadmills and cars, thanks for

hanging around. Before I forget Stephen, let me thank you for doing this. I really appreciate your time so far. This has been absolutely fascinating and I know it's gonna continue to be fast. Um a little bit. Hey, there's nothing wrong wrong with a little hedge every now and then. Um, but I'm pretty confident it's going to continue to be outstanding. It's really depending on me not messing up you. I'm confident in So we missed. There's so many questions I wanted to get to and I didn't have a a

chance to. Let's talk a little bit about the economy in general. What is the state of the labor market in the United States? And I'm gonna tea that up by saying unemployment at five point one percent depending on whose numbers where you date, the data we've created some way be me nine and eleven million new jobs since the end of the Great Recession GDP at two two and a half percent housing off it's lows. What's wrong

with the US economy? Well, yeah, I don't believe the the official labor market statistics UM if well, if the unemployment rate is actually as low as UM the the

official sort of five percent rating indications. Yeah, I believe in supply demand there there should be some wage inflation by now, um, and we've seen none zero And so there's there's a lot of UM, suspicious trends in things like, uh, the employment to population ratio, which is barely up off the bottom, the labor force participation rate which is still near that's been falling for all that's been falling um uh dramatically uh since the crisis. And I don't think

that's an accident. A lot of serious academic work says that, oh, this is just a coincidence that's occurred, UM, reflecting you know, the demography of of aging workers who are now reaching the point in their lives where they are just opting out of labor force. I don't think these things happen by coincidence sparked by a crisis. So I think the long term job issues UM very structural in nature, meaning when you say structural automation, globalization and things like that.

And and reflecting the fact that the demand, the demand side of the system, especially consumer demand UM is on a extraordinarily uh weak trajectory. So without demand UM and and and the numbers are pretty clear. We've had UM now uh seven and a half years of growth in real consumer spending, which is seven to present the economy UM. The the the annualized average adjusted for inflation is one point four uh. And you know the pre crisis trend is a number slightly north of three. And if you

back out automobiles, which are booming, it's significantly worse than that. Well, this is a seven and a half year average, So you know, I think I don't want to back anything out of I just want to take the numbers. It stands consumer demand is weak and so when people forecast the future with an aim toward hiring or investing in planted equipment, they look at the past as a guide to where we're headed. Uh. And they're going, wait a second, in a slow demand environment, why am I going to hire.

Why am I going to expand my productive facilities? And uh so this, you know, this sluggish labor market is very much a byproduct of the demand destruction that occurred, and it is still with us in the aftermath of this horrific crisis. So that goes back to something we just barely touched upon during the broadcast portion, which is the usual Keynesian stimulus that typically follows the recession was

pretty much absent. And I know I'm going to get emails about the American Recovery Act, and it was eight hundred million dollars, but really two thirds of that was temporary tax cuts and temporary extension of unemployment policies. We didn't really get the trillion dollar stimulus that that we've seen in prior recessions. Is that a culprit in this soft recovery. Well, it's a big debate, as you say, and I think, um, it's it's appropriate to raise that question.

I think though that um it's it's it's really an oversimplification to say that, you know, we had just done you know what Sat Paul Krugman said, everything would be fine. Um, we went through a Japanese style balance sheet, recession where UM, American homeowners, whether they were subprime or prime or not, levered their biggest asset and used the proceeds of that bet to fund both current consumption and saving. And they made,

in general, a huge mistake. And so when that asset went underwater relative to the liabilities, they were stuck with a huge hole in their balance sheet and they needed to pay down debt and rebuild their saving and all the infrastructure spending in the world would not have repaired. UH, these bruised and battered balance sheets. We needed policies aimed at taking the excess debt off the system, UH and providing some long term incentives for individuals to save, and

instead we got the opposite, zero interest rates. There's no incentive to save, and debt forgiveness is politically you know, incorrect. Um. Uh argument. So so right now we have still seven years later, we have a lot of homeowners still in the process of deleveraging. That accounts for a big chunk of the lack of consumer spending that you referred to. I have two questions for you. The first is, and you you alluded to, debt forgiveness isn't likely to work.

What could the government have done or or the Federal Reserve had done to address that. And and the second part of that is really about the new normal. So so let's start with the first half. What could have been done about all this massive debt held on the books of of individuals and homeowners in particular, in order to get them back on a normal footing. Well, two things I would say, um uh that that are to

that point. Number one, UH, what we learned from Japan is really relevant to um the US and summer um. Japanese corporates were kept on artificial life support uh when they should have been allowed to go under, and that clogged the system. And so the zombies, the walking dead ended up creating a massive congestion throughout the entire system

of viable companies as well as failed companies. We've had a similar zombie congestion in the United States where the homeowners were under water that access um uh, supply of of homes and overhang of debt created a price instruction for all the homeowners in general. So we had a nationwide collapse in our housing markets sparked by one small piece of it, the subprime piece. Secondly, I reject the notion that we could not have dealt with with debt forgiveness.

We just needed a more reasonable approach where everybody's skin was in the game. That the government provided some subsidy to over extended Americans. The banks took right as they didn't want to do that because we hurt their earnings. Uh. And um that that individuals would accept some responsibility for their own reckless borrowing by moving from non recourse to

recourse learning. So if you reset their mortgage at a market clearing rate and they and they failed to make good on that payment, they wouldn't just lose the house, they'd lose all their other assets. So we needed a you know, a political consensus to go about addressing this excess dead problem. Of course, political consensus is an oxymoron in a in a system that is so dysfunctional as the great American democracy is. So so let me ask

an even broader question. Uh, We're a number of people have described the new normal, but the counter to that has been the Reinhardt and Role gelf book Eight Centuries of Financial Folly. Were ran Heart and Rogelf right that following a huge financial crisis, you have a decade of subpar growth and subpar job creation and poor consumer spending. This isn't a new normal. This is the old post crisis environment. Yeah, I think I couldn't have said it better.

Very Um, there's nothing normal about what we're going through right now. Normal means you know, relax, you know, this is the way it's gonna be. And and it sort of has a connotation of of of tranquility acceptance that, um, this is the way things are supposed to go when you nearly blow up the system and you then spend seemingly an ordinate amount of time in repairing the damage that was done when the system was being blown up.

That is much more consistent with the post crisis payback of the work of Ryan Hart and Rogua Golf and others. And you know, I give a Carmen, Ryan Arton, Knrogue of a huge amount of credit for assembling it. But by no means is this a unique theory that should just be associated with their own work. There are plenty

of other people that have looked at this. One of my favorites is actually in the mural economist or Richard kop who looked at them the aftermath of the balance sheet recession UH in Japan, and came up with a very similar but you know, also very uh provocative analytical construct of this debt rejection syndrome that falls in the aftermath of this um UH debt induced crisis that Japan went through. And I think it's very appropriate to analyze the US and other debt um UH induced crises with

with that same type of approach. So some of the arguments that I've read about why Japan could not have done a full on, why they had no choices, their concept of of kiritsu where all these companies are vertically integrated,

and the great example was Mitsubishi. So the Bank of Mitsubishi is laden with all this real estate debt, but then there is Mitsubishi realty on top of that, and then Mitsubishi having manufacturing, and Mitsubishi Automobiles and Mitsubishi Air and all these other companies, including the Bank of Mitsubishi stacked the brokerage firm of Mitsubishi stopped on top of that. Could Japan have done a full on um sweden UH type debt reduction and move forward or had did their

structure paint them into a corner? Well, you know, this is a great topic. Actually, I teach a course UH I've been teaching for five years. We'll teach it again next semester called the Lessons of Japan, and you're you're more than welcome to again apply to Yale Barry and we'll see you know, I can get you an accelerated um UH process to examine your credentials and you can take the course and send my nephew to order the class. But but look, um, Japan had this interlocking Caratsu system.

You're entirely right, but they made serious policy mistakes as well by leaving that they could offset the end appreciation that came out of the Plaza cord with extraordinary monetary stimulus, and that created the bubbles um property and UH and equities that, when they burst, then brought this corrective system UH to its knees. And it was not until the late nineteen nineties when they first started to recapitalize the banks and the Japanese corporations that were caught up in

this web, that the system began to stabilize. And they've had a lot of problems since then as well. But the structure that they used, which was very successful in driving economic growth post World War two fifties sixties, seventies and early eighties, UM became you know, serious part of the problem. And and that's UM certainly a lesson they ultimately had to face. So let's talk a little bit

about albonomics and what's going on in Japan today. The the US has officially and that it's policy of zerp qu is winding down. Meanwhile in Japan there a couple of years out of phase with US, and they've ramped up their QUI and they continue to have zero interest rate policy. What what do you think is going to happen uh in Japan with their economy and their monetary policy. Well, just one slight correction. You say, you us KIWI is winding down. I mean we're not. The feed is not

shrinking it's balance sheet. It's moved the federal funds rate above zero by you know a' measily twenty five basis points. But the balance sheet, Uh, the size of the assets are still four and a half trillion and online. But isn't that going to naturally run down? I think it's a seven year maturity duration. App believe it when I see it, all right, So I'm assuming when they say we're just gonna let this run off that that they're

telling the truth you think they're going to contain. I'm suspicious. I'm very suspicious. Let's anyway, your question was about Japan. Japan. Uh anomics has three arrows. Recently he has added a few more arrows because the first three weren't apparently strong enough or sharp enough. And but but the third arrow is the one that is ultimately going to hold the key to Japan, and that's the structural reform required to boost productivity. Japan is an aging population, and it's not

just getting older, it's now shrinking. Uh. And when when your population, you're working age population shrinks, your your output is going to go down. Unless you can compensate um for that with higher productivity. You need the structural reforms

to do that. And you know, there's a whole agenda of structural issues, especially in the labor market, the immigration policies that have not yet been dealt with because it's politically difficult to do in this still LDP one party dominated system, and UM that puts more onus on the fiscal and monetary arrows. The first two arrows UH to offset the inability to really deliver on the structural reform front. So I take it you're not especially bullish on Japan

going forward. I think in until you're unless Japan really addresses this productivity issue. And by the way, productivity is now weak um from most countries in the world, including our own in the United States. UM that you can't offset that through financial engineering sparked by you know, quantitative easing or or zero interest rates. That's such an important lesson and it's one that again we we just don't have the discipline or the political stamina to to to address.

We like to think of that the japan Japanese is being long term strategic thinkers. But by jumping on the Kiwi bandwagon and uh and and really trying to do much more in terms of Kiwi than than than even we did. You know, that tells me that uh, they're they're even betting more on these untested, unconventional policies, uh than um the U S did. So in terms of structural reform, they need to increase their birth rate, perhaps bring in some young migrant workers who can who can

fill their factories. Is that actually gonna happen? Well, you know, uh, longstandings assessment of the cultural um characteristics of a relatively closed Japanese society would argue against that. And so you know that that that is a disconcerting conclusion. But again, when you're when you're working age population is shrinking, you either need more workers I you know, um, more more women, more younger people, or foreign workers, or you need to

squeeze more out of the current workforce through productivity. When you rule those options out, uh, you know, the implications become relatively dire. The game is over before you begin under those second makes it really hard. So let's talk

about productivity a little bit. We One of the things that we noticed in the nineties and and two thousands is that all these fantastic productivity gains that we were all experiencing in our day to day life, thanks primarily to technology and telecommunications and software, weren't really showing up in the data. In fact, the joke was, you know, productivity gains are everywhere except the data. How much of

the productivity issue is a measurement problem? And how much of this is really a function that we're as productive as we're going to be and it's not going to get any better. Look, it's a great issue, and actually I'm proud to say that was one of the issues that I really was involved in as a Wall Street economists. Um, there are there are very few you know in Wall Street,

you know, the economics profession. It was always looking at the next fed move, the next take in the market, so there was very little appreciation for these deeper themes. But I I worked continuously on this theme in the late nineties and early two thousand's, and UM, you know, I think that the productivity mystique, UM, as we shifted more into the services based knowledge economy, became a really

important issue. And eventually, uh, we did move into a period where the gains picked up, but now they seem to have stalled out. Uh. And you have to ask yourself, um, uh was that period from the mid nineties to the mid two thousand's was that just an aberration? Did we just moved from one technology platform to another. We're now at this new platform and we're finding it just as hard to deliver on the productivity front going forward as we did. Um. You know in the two decades before that,

you mentioned measurement problems. I'll tell you a big measurement problem that I continue to worry about, and that is not that we're understating output, but um that we're really um understating labor input courtesy of your all right, well, think you think about it. You know, you have a

cell phone or a BlackBerry or whatever. You have a laptop, and so you know you're you're probably online, maybe not because you're like you're well arrested maybe seven okay, but but your work and you're you're basically available all day long. The U S. Bureau of Labor Statistics when they report your work day, they're telling, um, uh, you know the productivity calculus that you're working probably about forty hours maybe

thirty five hours a week. And that's certainly true of financial services, an industry that I know a lot about, uh, And nothing can be further from the truth. And what that says is my understating work time. You're overstating the amount of output per understated work time, and you're getting credit for being more productive when in fact, all you're doing is working longer. Productivity Berry is not about working longer. It's about generating more output per unit of work time.

And I I've done a lot of work on this, and I've looked at some of the data they go into it and I think that's a big unanswered question in seven technology laden era that we're in. So so are we not as productive as we think? Or are we just working so much more? United States is notorious for having amongst the longest work week, and that's just what's reported. Are we just working more hours and and it looks like an increase in productivity where it's really

just more labor less leisure time. And I think that's that's what we're doing. I think we are definitely working longer, uh, and our productivity as a result is being overstated, not understated. So let's talk a little bit about commodities, which we really haven't discussed um And that naturally leads to a conversation about the dollar. When when we look at the collapse of commodity price as oil is cut in half, iron ore, steel, old, the manufactured copper, to say the

least all seem to be under pressure. How much of this is attributed to the strong dollar and how much of this is attributed to falling global demand? Well, you know, the the dollar obviously is um a part of that. But I think, you know, the dollar maybe a symptom rather than a real cause here, UM. I I look at this commodity cycle, the supercycle on the upside and the collapse on the downside, as something that is largely

made in China. Really, China UH has just ended a thirty year period of the most spectacular UH growth at a large development economy has ever experienced. This was a manufacturing lad commodity intensive growth binge. China's UH. You know, it's it's primary fuel sources coal, but it's demand for oil account for the total growth in global oil demand over the last ten years. It's a share of base metals. China's the most metal intensive economy in in in the world.

And China is moving right now transitioning not just to slower GDP growth, but to commodity lights services growth. So in making the move from commodity intensive manufacturing to commodity lights services and taking the GDP down from ten to pick your number six or seven. UM, it's a double lammy because of the production side. The supply side of commodity markets is in denial over the shortfall of Chinese demand and the shift to UM commodity led services. And

I think that's a huge factor that's really unappreciated. The cliche I've heard repeatedly, and I've never been able to verify the data. Is that in the past three years, or in a three year period that ended not long ago, China consumes more cements than the United States did last century. Yeah, I don't know if that's exactly right, but but but China's share of the global cement market is about that.

That's an extraordinary and and they've got, you know, just years of decades to go in terms of cement intensive infrastructure construction to um provide the shelter and the roads and the bridges and the facilities required of the prospective urbanization that is still out there. So let's talk a little bit about emerging markets in general. But you just said something that I have to follow up on. They seem to make infrastructure building maintenance a huge priority. We

don't really seem to do that anymore. You notice, have you been on the FDR. I have been screaming about this for a decade. I personally believe that anytime someone gets a flat tire or breaks an axle, the bill should go to Grover Norquist. But that's just my personal bias. Are we ever going to get on the same page, as you know, we invented the idea of an interstate

highway system, mobile phones, the Internet. How is it that we've developed these phenomenal economic platforms for growth United States and then kind of let them fall into a period of under investment, shall we say? Look, yeah, I'm I'm an economist. You know, I actually have a PhD in economics UM. And one of the things you're taught, you know, way back even when I studied it, is if you don't say you can't invest our national savings rate, which is the sum total of savings of our businesses, our

households in the government sector, which is always indeficit. If you strip out the depreciation UH that needs to be funded through our growth savings to replace our warnut capital stock, there basically isn't any barrier. Well, now we're about three percent, which is, you know, well below our long term average,

which is closer to eight. And so when you don't save, where do you get the wherewithal to invest in the infrastructure UM and even invest in human capital, let alone the new capacity we will need to compete in this globalized world. And no one focuses on the saving imperatives

of the United States. But I would write about it from my Wall Street days or even in my Yale days, and I get attacked, you know in um, you know by illustrious um uh luminary some of who have Nobel prizes that we even have beards who write for the New York Times, And they said, don't listen to him. We should never save. You know, saving is um what got us into trouble uh in the nineteen thirties. And

I beg to differ. I think if a nation that doesn't save well ultimately squander the seed corner of economic growth, maybe we don't need to boost our savings rate immediately and sharply, but we need to think about a long term strategy of having the wherewithal the fund what we need for our competitive survival. So let's talk a little

bit about emerging markets. And by the way, those of you listening should just rewind this conversation three minutes and listen to that again, because that was an absolutely um brilliant and sightful exposition on on what America is currently doing wrong and why we have found ourselves in a competitive disadvantage. But let's change gears and go to emerging markets. We have a tendency to lump em into one group. Remember, very famously Goldman Sacks came out with the brick acronym.

But really I heard they just closed the bricks, didn't do it. But stop and think about Brazil, Russia, India, China. You couldn't pick four more disparate and different entities that don't have a whole lot in common. Do we make a mistake lumping all of the emerging markets into one basket? Yeah? Absolutely. I mean, you know, with all due respect for Goldman SACS and I have great respect for them as a very powerful financial institution, but bricks was hype. It was marketing.

You know, they came up with a clever acronym at a time when you know, four large emerging economies were uh seemingly on the cusp of a major breakthrough. If you pick apart the bricks, the only real growth that came, of course was in the Sea China. The b the r UH and the I were pathetic in terms of really delivering dynamic economic growth. We we do lump them all together. You know, a couple of the bricks were commodity producers. A couple of them like China and India,

where commodity consumers. Uh, there are different points in their development journey. They have different political systems, they have different needs,

different strategies. UH. And UM. You know, maybe this shakeout in e M that's been going on for several years is about moving away from this single minded uh sort of homogenization of emerging markets and getting back to the fundamentals of really being able to understand individual economies and companies, whether they're in emerging markets or developed markets, uh, and what their opportunities are. So let me let me change stuff up on you. Before I get to my my

favorite questions. I asked all my guests, I have to bring something up that David Rosenberg, who was essentially your counterpart at Morgan Stanley who is now back up in Canada, said something is a political refugee. A lot of respect

for you. David had said one of the most profound insights he developed as an economist was when he moved from the cell side, where you're making forecasts and letting the chips full where they may to the by side, where the questions that come from clients and fund managers are, well, how much conviction do you have in that forecast? And if you're wrong what's your plan be? And that was something that never came up. Uh from the south side. Have you ever had a similar perspective looking at the

different rules economists. Yeah, I say, I think that's a fair point. But but you know, I I was amazed. I mean, I maybe I just David had a more sheltered life when he was toiling in Maryland. But when I first started going out on the road Morgan Stanley in the nine, I would go into these conference rooms of these legendary investors and you know, I'd give him

my baseline case. And one guy, actually um had a sign in the middle of his conference room where we listened to salth side presidents, get to your point within five minutes. If you don't with this meeting is over. So within five minutes I had to lay out my base case. And then then you know, I would stop and he and others would say, Okay, you know, good case. How could you be wrong? And when I first heard that question, I go, like, you gotta be kidding me.

You know, I can't be wrong. You know, I came from the fit, and then I realized, you know, it's because actually what you know, they wanted to test, they want to test your conviction. And so I got that um uh that that pressure repeatedly uh in my cell side years on Wall Street. And I think it's a great question. You've got you've you've got to you know,

own both sides of the debate. In fact, the most successful course that I teach at Yale right now is called the macro Debate, where I co teach it with a you know, a theoretical economist from the Yale Econ department who has never been in the real world. His name Alex Sabinski. He's Russian, he's brilliant, he's a great friend of mine. But he's the theorist. I'm the market practitioner,

and we debate everything. And and when I first hit him with this idea, you know, we had a huge fight in one of the Yale um uh sort of a college dining rooms, because I challenged him on the other side of his one of his theoretical models, and he was, uh, just not used to being challenged and thinking about the other side of the debate, and so

you know, we had this big fight. A lot of students thought that, you know, it was cool to see this, you know, this new guy fighting with one of their theoretical giants, and so we turned it into a course in the university supported UM and we've taught this course UM now for five years and it is it's possibly the highest ranked undergraduate e concourse at Yale because we've taught the students that not you don't want to just UM go out with a stylized, theoretically driven view of macro.

You've got to debate both sides of these burning issues. And we do that in the classroom UH, and we give them a lot of assignments and exams UH to test them and their ability and the tools they developed to understand this. And so I think that um uh IS has got to be an important feature of the

Wall Street debate as well. It's got a flavor of mood court where you have to be able to argue both sides of the case because you really can't understand something unless you know your your counterparty's strengths and your own weaknesses. And and then you have to be you have to have enough hu million now that you know, you may have a brilliant idea or insight, but you know many times you're you're just gonna, you know, fall

in your face and be proven dead wrong. If you don't have the framework and the knowledge of what's on the other side of it, you don't know how to pick yourself back up and and and and go back as a credible analyst, economist or strategist again. So so let's go back to your early days at both the FED and Brookings and Morgan Stanley, who were some of your early mentors. Well, um, you know, that's that's a good question. Is I look back on, uh, you know, mentorship.

I mean, I certainly when I was at the FED, Um, I was was was intimidated and ultimately influenced by by two major figures. UM one Arthur Burns. He was the chairman of the FED UH in the nineties seventies, and um you know, God rest his soul, did a terrible job as a central banker and really failed to appreciate the role that monetary policy could play in fostering high inflation. So I learned a lot from that experience, which I subsequently would refer to as a politicization of of the FED.

And I think there's some of that that is very much present, um uh, you know in the greenspan uh and and bernanke Aris and hopefully will be dealt with effectively by Janet Yellen, who I have enormous respect for. UM. I also learned a lot from from Paul Wolker, who basically came in and said, here's why Arthur Burns is wrong, and here's what it's going to take to ring inflation out of the system. That they were both very formative in my early experience when I went into Wall Street.

If I look back on, you know, all the individuals that influenced me the most, UM, I'd have to say it was it was my my dear and sadly departed friend, Barton Biggs. Barton Um was not only I think a great investor, but he was able to marry his macro insights with his views on markets and and we were

closely together. And he was tough. Um. You know, he was a gentle soul of many respects, but he was also intellectually rigorous and tough and always demanding that when I came out with some crazy theory on productivity or debt or China or whatever it was, that I market to market, try to understand what the market was discounting with respect to my trends, and then to be stronger weak and emphasizing my trend not on the basis of my quote brilliant unquote analysis, but on the basis of

how far the market was willing to go in believing or disbelieving. And so he connected me as a macro thinker to the markets discounting mechanism. And that's not something that you learn uh in PhD program in UH in grad school. Something you learned really by by living and breathing the markets. And and Barton was absolutely superbic. Then you've you've been in the financial industry more or less for thirty almost forty years. What has changed for the

better and for the worst since you began? Well, you know, we started out this conversation by and by saying I was just lucky to be in the right place at the right time. You know, it was the golden age of Wall Street research, especially at Morgan Stanley. We we could be very entrepreneurial in the way we developed research products.

We really had a clean slate. And you know, thirty five forty years later, UH, there's a lot of people out there competing for um uh sort of airspace and time, and you know, you have these Internet enabled distribution systems push research out seven to everybody. I think the marketplace for ideas has become much more commoditized, and um, the perspective has shortened. There's you know, like I look at what happened, um, you know in the markets this week.

I mean, you know, the only issue people cared about was whether the FED was going to finally and the zero interest rate regime and moved by twenty five basis points. UM. I think, um, uh you know, it's a very myopic view of the world. I think there's very little that's done right now in developing these deeper thematic insights. It's really gonna guide shape and reshape the investment climate, the economic climate, uh, and the policy regime over longer periods

of time. So I think, um, you know, we were lucky to be able to focus on some of these long term themes and debate them, sometimes seemingly endlessly. Uh. And I think the the cell side is now drawn into a much more short term um uh time arizon

that moves away from these um broader themes. I imagine Barton Biggs would have looked at this week and said FED fun futures are at probability of of a quarter point INCREASEY would have waved it off and said, this is already in the price, let's talk about what's going to happen in the future. I think that's absolutely right. Um uh. You know. Once Barton's greatest gift I think was this uncanny sense of knowing when the market was

discounting a macro trend. And as soon as that uh he concluded that the trend was in the market, he wanted to move on to something else makes makes a whole lot of sense, and so he and and and Byron, to his credit, understood that through his um contrarian ten surprises approach. He also felt, um, I think have influenced by Barton, although Byron would never want to admit that publicly. Uh, that it was really important to understand what was in the market before you made um uh an out of

consensus bet for the future. So Byron was a guest here a couple of months ago. What I what, I really and he still travels extensively, which is amazing. What I loved. I'm not a big fan of forecast, but I find his tense surprises to be brilliant because instead of forecasting what's going to happen and being wrong. The forecast attempt is, hey, here are some unexpected surprises, and it was just a brilliant twist on the usual. Well, but it's the same I, you know, it's the same concept.

And I agree, you know, I I like I used to. I spent twenty one years with Byron. We traveled the world together, We were you know, I was as close with him as I uh, I was with you know, my own siblings aren't spent more time with him, and he spent more time with me than we did with our own spouses. Um. And so I I would you be shoulder or shoulder with him as he would articulate his ten surprises, and I would you know, lay out some you know, macro views that were either consistent or

inconsistent with that. Sometimes we agreed, sometimes we didn't. Uh. We debated a lot, we challenged each other a lot. But he his focus again was in in maintaining the view that I make big money as an investor when I bet against something that is not in the market, rather than when I bet on something that's in the market.

So this goes back to the Barton bigs insight that you need to really focus most of all on what the market is discounting and to be able to identify those anomalies, those trends, those opportunities, those risks that are not in the price. And when you can do that, uh, you really add value to the thought process that guides in shapes markets prospectively rather than looking back through that rear view mirror. So our last two questions, UM, you work with a lot of millennials, a lot of students.

What sort of advice would you give a student of yours who comes to you and says, I'm thinking about going into finance as a career. I get a lot of those students all the time, and you know, despite the post crisis shake out of Wall Street, UM, I'm still shocked about a large number of students who want to go down, uh that road. And I always tell them, look,

try it out for a few years. You know you're gonna get if you're an undergrad, go to work for a Goldman, Sachs, Morgan, Stanley or whatever for a few years, and then after two to three years take stock. You've you've you've been on a trading desk, you've been an analyst.

Does this give you the satisfaction you want going forward, and then take a pause, take a break, do something else after two to three years, after you've done your first stint, uh, you know in Wall Street, and that's something else, could be going back to grad school or getting a job, you know, in an industry that actually makes things opposed to promote ideas. And then compare those next two to three years or your first two to three years, and you'll have a better judgment as to

what you want to do in the future. But don't just monolithically get your degree from a great school like Yale where I teach UM, and then just assume that you figured out that Wall Street or finance is your future. It still pays very well, there's great opportunity there, but there's more. As millennials will tell you, and I actually study millennials a lot in my coursework. UM. Millennials are

very nonconforming. They want something else out of life than what you and I did when we were first starting out, and so uh, life satisfaction is really important to them, and they need to challenge those aspirations with the actual experiences that they're getting rather than what something looks good on paper. And our final question what is it that you know about investing today that you wish you knew

forty years ago when you were beginning. I think, UM, the most important thing is is going back to this discipline of having an enormous respect for the markets to anticipate uh these seemingly brilliant macro economic insights that I and others can come up with, and UH connecting markets to the discernment uh the understanding of macro trends. That's a big challenge a lot of investors. I remember when I first started out in the business. UM, I met this guy at at Fidelity. I had no idea who

he was. I was so green. His name was Peter Link, and uh, you know, he was very polite. You know. I remember someone gave me a list of people to call, so I called, you know, I called him up and I introduced myself and he asked me, said, you know, what what do I do? And I said, well, you know, I'm recently on Wall Street. I came from the Federal Reserve. I four asked the economy. He says, so you do economics and I said, you know, I said, well do

me A favorite says UM. I really enjoyed talking again, but don't ever call me again because I don't I don't really have any use for economists. He was very polite, uh. And then he wrote about this in one of his books about he didn't unfortunately he didn't mention me by name, but he said, you know, if you're just he has a line with something. You know, if you're spending ten

minutes a year thinking about economics, you've wasted nine of them. Uh. And I took personal exception of that as a young kid, and it's been my goal ever since I'm not no longer a young kid to um make make this connection between markets uh and macro because I think if you get that connection right, and it's rare, the macro thinker they can do it, you can really add value to the process. And I wish I understood that better uh thirty five years ago uh than I did today. It

takes a long time to understand and accept that. Stephen Roach, this has been absolutely fascinating. Thank you so much for being so generous with your time. UH. If you've enjoyed this conversation, look up an inch or down an inch on Apple iTunes and you could see the other seventy plus uh. Interviews we've done. Uh. Feel free to check out my daily column on Bloomberg View dot com or follow me on Twitter at rid Halts. I would be remiss if I did not thank my producer, Charlie Bohmer

and my head of research, um, Michael bat Nick. I'm Barry Ridholts. You've been listening to Masters in Business on Bloomberg Radio.