Speaker 1: Well, and welcome to another episode of the Odd Lots Podcast.
Speaker 1: I'm Joe Wisenthal and I'm Tracy halliway, so, Tracy. I
Speaker 1: have to say that throughout this whole crisis, there has
Speaker 1: been sort of one genre of article or one genre
Speaker 1: of discussion that I've never really been comfortable with, and
Speaker 1: that is people making really big picture forecasts or statements
Speaker 1: about sort of the future of the world. I guess, yeah,
Speaker 1: I get what you mean. It feels like a little
Speaker 1: bit early to be jumping to discussing the second order effects,
Speaker 1: right like, there's so much to talk about right now
Speaker 1: as these things are actually unfolded. Yeah, exactly. And of course,
Speaker 1: one of the big questions that's out there and that
Speaker 1: everyone wants to have a view on, and I'm guilty
Speaker 1: of it two and I've written about it and I've
Speaker 1: talked about it, is what happened with sort of globalization,
Speaker 1: what happened with the future of the dollar and the
Speaker 1: US is a pre eminent role in the global financial system.
Speaker 1: We sort of talked about it a little bit with
Speaker 1: Adam too, talked about it with other um with other
Speaker 1: people as well, and it's of course incredibly intriguing to discuss,
Speaker 1: but we still we just don't know anything. Uh. Yeah,
Speaker 1: I think that's true, And it definitely falls into one
Speaker 1: of those sort of big picture things um that people
Speaker 1: are are talking about at the moment um, and it's
Speaker 1: something that we've sort of discussed on various episodes before, right. Uh.
Speaker 1: Dollar dominance has definitely been a theme for the past
Speaker 1: year or so on our show. Exactly, you sound a
Speaker 1: little skeptical, like when I was like, Oh, I don't
Speaker 1: think we should have, you know, the big picture future conversations.
Speaker 1: You seem a little skeptical of mine. I get it.
Speaker 1: I mean I don't think anyone really knows at the moment,
Speaker 1: so it's a lot of it is speculation. But also
Speaker 1: markets are always board looking, so I kind of get
Speaker 1: why people are naturally tempted to be looking at those
Speaker 1: big picture topics. Yeah. I guess you have to do that.
Speaker 1: So anyway, we're not going to make it big. We're
Speaker 1: not trying to make a big forecast here today, but
Speaker 1: as we talk about globalization, as we talk about the dollar,
Speaker 1: I do think it is useful to at least kind
Speaker 1: of understand how we got to the current system, what
Speaker 1: the current setup is, and what's actually, yeah, basically understand
Speaker 1: the current world order and how we got here. Yeah,
Speaker 1: I think that that's a great idea. And the dollar
Speaker 1: is so much a part of the global financial system
Speaker 1: that we sort of take it for granted. But it's
Speaker 1: definitely worthwhile to step back for a second and think, like, well,
Speaker 1: how did we get into a position where emerging markets
Speaker 1: are all like rushing to issue billions of dollars worth
Speaker 1: of dollars denominated debt? How did we get to a
Speaker 1: position where all of trade finances basically denominated in dollars?
Speaker 1: Why has that happened? Right? Exactly right? And you know,
Speaker 1: there's a lot of misconceptions about all of this, how
Speaker 1: trade works, who benefits from the strong dollar or who
Speaker 1: benefits from the dollars per eminent role. We often hear
Speaker 1: of the U s is ability to issue dollars as
Speaker 1: quote a privilege. Um, but it's not. It's not really
Speaker 1: that clear. We talked about this a little bit recently
Speaker 1: on an episode with Matt Klein, But the sort of
Speaker 1: the preference of different actors within the global economy regarding
Speaker 1: the current arrangement is not as as clean as one
Speaker 1: might was. One might right, and there is an argument
Speaker 1: that pops up every once in a while that having
Speaker 1: the dollars so enmeshed in the financial system can actually
Speaker 1: be a negative for the US, and we've seen that
Speaker 1: crop up, I guess most recently with you know, people
Speaker 1: talk about the FED being the world central banker. Does
Speaker 1: that sort of constrain um what it can do at
Speaker 1: times like this and even before then? So yeah, definitely
Speaker 1: worth talking about. Okay, So today we are going to
Speaker 1: talk about that, and we have a recent guest we
Speaker 1: actually talked about talked with him several weeks ago about
Speaker 1: municipal debt. But he is the co author of a
Speaker 1: recent essay titled the Class Politics of the Dollar System
Speaker 1: for the website Phenomenal World. He is a Yakov Fagan.
Speaker 1: He's the associate director of the Future of Capitalism Program
Speaker 1: at the Burgrowing Institute. And we're going to talk about
Speaker 1: how we got to this, uh the state, how the
Speaker 1: dollar got to the state, and who really benefits from it,
Speaker 1: who gets hurt from it, and what it really means
Speaker 1: to preserve it. So, uh, Yakov, thank you very much,
Speaker 1: uh for joining us. I should know that your co author,
Speaker 1: Dominic couldn't make it unfortunately. Today but I'm glad we
Speaker 1: have you. Why don't you start by telling us what
Speaker 1: you are the big picture of what your goal was
Speaker 1: with this essay, the class politics of the dollar system
Speaker 1: and sort of what that means to you. Yeah, well,
Speaker 1: this say, it was kind of a really long time coming. Um,
Speaker 1: and I really the person, the two people, the three
Speaker 1: people I should probably thank the most for kind of
Speaker 1: making this as a happen. Our Dominic who kind of
Speaker 1: got us to write it, uh, and the James Family
Speaker 1: Institute obviously for publishing yet. But there's also someone else
Speaker 1: in the background of this essay who is Nils Gilman,
Speaker 1: who is my boss at the Burgruin Institute. And over
Speaker 1: the year i've worked with him, we've had this, you know,
Speaker 1: very long conversation about, you know, why does the world
Speaker 1: use the dollar and why is it a problem? And he,
Speaker 1: you know, he's not a specialist in international finance and
Speaker 1: this stuff is really technical, and I've spent like quite
Speaker 1: a long time kind of in a conversation with him,
Speaker 1: like kind of pouring this stuff out right. Eventually told
Speaker 1: me you need to write this essay up right, You
Speaker 1: need to write an essay that just gives a literature
Speaker 1: review essentially of this kind of point of view of
Speaker 1: what the dollar system is politically and why it's not
Speaker 1: necessarily you know, a very clear cut America versus the
Speaker 1: world story, and so eventually this got written up, right,
Speaker 1: And that's the kind of story we're trying to tell.
Speaker 1: Is it's very hard to pin down a national interest
Speaker 1: in the world that's hybrid, as Perimery Lang would say, right,
Speaker 1: it's a world in which there is a private system
Speaker 1: that's really intermediating on an international level and a national
Speaker 1: uh and the system in which nations are essentially creating
Speaker 1: public goods called units of account, right, And that this
Speaker 1: international system mediates this the hierarchy of these units of
Speaker 1: account just as much as national power or dynamics do.
Speaker 1: So walk us through that thesis, then you talk about
Speaker 1: the political system or around the dollar, what is that exactly?
Speaker 1: So our argument is that it's actually class right as
Speaker 1: almost a or at least like social stratification, as a
Speaker 1: kind of meta politics. Right, that the dollar is actually
Speaker 1: pretty good for a large cross section of people, no
Speaker 1: matter what their position in the global value chain or
Speaker 1: in where they're located, and it's pretty bad for another
Speaker 1: other cross sections. Again without considering international boundaries that they are,
Speaker 1: it's pretty bad for a lot of people, no matter
Speaker 1: where they're located or what part of the global value
Speaker 1: chain there are. So this is similar. Again I mentioned
Speaker 1: in the intro, we recently talked to Matt Klein, whose
Speaker 1: new book also sort of explore some of these tensions.
Speaker 1: That it doesn't really it's not really so much about
Speaker 1: saying US verst China, or the dollar versus another currency,
Speaker 1: but that there are people all different positions around the world,
Speaker 1: in any country who benefit from the existing system, and
Speaker 1: there are people all around the world who lose out
Speaker 1: from the existing system. So let's start by talking about
Speaker 1: in your you who benefits the most, what kind of
Speaker 1: actors in the global economy benefit the most from the
Speaker 1: dollar dominance? The role of the dollar. Well, you know,
Speaker 1: the way we we put it is it's kind of elites,
Speaker 1: especially rent taking elites within the United States, and it's
Speaker 1: also elites, especially capital owning elites in the in other
Speaker 1: countries are especially developing countries, where they are also rent
Speaker 1: taking elites. I think that's a kind of running theme
Speaker 1: through this is that this kind of the way this
Speaker 1: system is evolved is really really encouraged rent taking. And
Speaker 1: the people who don't benefit are obviously people who are
Speaker 1: working people right, who have to do the work and
Speaker 1: are either getting worse jobs or not picking up most
Speaker 1: of the kind of surplus they're producing. Can you walk
Speaker 1: us through the mechanics of how this benefits that sort
Speaker 1: of global elite and hurts a lot of workers. I'm
Speaker 1: iagine a lot of it has to do with the
Speaker 1: sort of long run appreciation in the dollar. But just
Speaker 1: walk us through exactly how you see that working? Well? Sure, Right,
Speaker 1: So our story isn't as much based on appreciation or
Speaker 1: at least in or at least day to day exchange rates.
Speaker 1: That's a whole other conversation about how that's measured, but
Speaker 1: more about structures and institutions. Right, what the global dollar
Speaker 1: system does is give a privileged set of access to
Speaker 1: the international right, And what I mean by that is
Speaker 1: the ability to choose where your wealth is stored and
Speaker 1: how you store it and what kind of returns. So yeah,
Speaker 1: and that has long run consequences, right, So you have
Speaker 1: these an argument, for example, Salton Posner has made that
Speaker 1: a lot of offshore plumbing is that black hole he
Speaker 1: refers to is actually because of the accumulation of really
Speaker 1: wealthy entities, right looking for somewhere to go, and that's
Speaker 1: not a privilege that most people can have access to, right,
Speaker 1: I mean. And the other thing is, obviously, you know,
Speaker 1: the exploitation of rents of corruption. There's a really great
Speaker 1: book called Dictators Without Borders right by Alexander Cooley and
Speaker 1: John Heathershaw, which really outlines how the internationalizization of the
Speaker 1: dollar and the creation of international money centers actually enables
Speaker 1: corruption in Central Asia and enables the suppression of democracy
Speaker 1: in Central Asia because what these dictators are like strong men,
Speaker 1: are able to do is partly out access to this
Speaker 1: international system. So if you're within, if you're in say
Speaker 1: an elite within the ruling base, you get to take
Speaker 1: the your proceeds offshore. If you're not, you don't get
Speaker 1: to do that, or you get prosecuted suddenly out of nowhere.
Speaker 1: And that's a dynamic that's a possible with globalization. So
Speaker 1: we hear during the boom or during the expansion, there
Speaker 1: were all these stories about you know, Russian money or
Speaker 1: Chinese money or whatever it was, flooding into dollar assets
Speaker 1: or real estate um in the United States and California,
Speaker 1: New York City, London, other sort of tier so called
Speaker 1: Tier one cities. Essentially, this internationalized financial system again or
Speaker 1: as you put it, available to some available to the
Speaker 1: elites um and theoretically available for elites to dole out
Speaker 1: access to. But that's clearly not something that say, a
Speaker 1: typical Chinese person or a typical Russian could do with
Speaker 1: their money. So it it creates on a large scale, right,
Speaker 1: So it creates a domestic domestic bifurcation in all different
Speaker 1: kinds of places. Not just yes, but what about the
Speaker 1: impact act on UM I guess employment and the sort
Speaker 1: of trade landscape. This is the overlap with Matt Klein's
Speaker 1: argumentum from a couple episodes ago. But like, what does
Speaker 1: the primacy of the dollar actually mean for the US
Speaker 1: trade deficit and the structure of the labor market? Well,
Speaker 1: I mean that's actually like straightforward Matt Klein's and Mike
Speaker 1: Pettis's argument which this is really like almost a tribute
Speaker 1: to right um. And it's like the simple accounting identity
Speaker 1: right capital account surplus, current account deficit. So you're always
Speaker 1: going to have a situation in which you know, the
Speaker 1: US trade deficit is negative as long as there's this
Speaker 1: giant desire for US dollar based assets, and not only
Speaker 1: US dollar based assets, you know, created in the US,
Speaker 1: but offshore, that eventually we'll have to come at some
Speaker 1: point onto the into the continental US. So the current
Speaker 1: account will become a positive, but it's not even a
Speaker 1: full reflection of the demand of for US dollars to
Speaker 1: some extent, right, and that will create a trade deficit,
Speaker 1: and that will create We think that probably has something
Speaker 1: to do with the fact that non tradeable goods, in
Speaker 1: particular services, right have appreciated so much more in the
Speaker 1: United States. And this is a kind of global phenomenon,
Speaker 1: but it's much more extreme in the United States. They
Speaker 1: have appreciated much more than tradeable goods, and that is
Speaker 1: incredibly difficult for the average household, right. And you know,
Speaker 1: I don't think there's any particular magic to manufacturing jobs,
Speaker 1: but it has made it has had, you know, especially
Speaker 1: regional consequences for manufacturing industries. Though to me, it's not
Speaker 1: as important what people do. It's that they're compensated fairly
Speaker 1: for what they do. And so it's not just manufacturing,
Speaker 1: it's the higher dynamic of the economy changes and you know,
Speaker 1: I use the term Dutch disease kind of as a joke,
Speaker 1: but there is a kind of political story to Dutch
Speaker 1: disease about elites who gain their incomes more and more
Speaker 1: of from rents, and then a kind of service economy
Speaker 1: that lives off of the needs to the need to
Speaker 1: service those elites in whatever way they need to be
Speaker 1: serviced as creating extreme inequality and bifurcation and economy. And
Speaker 1: I think that's pretty obvious for the US, let alone,
Speaker 1: the fact that the same studies say that really lowers
Speaker 1: the quality of governance. Can you remind people what Dutch
Speaker 1: disease traditionally is within usually an E M commodities contexts,
Speaker 1: Like you hear it within say a country that has
Speaker 1: a huge oil or copper export. What the traditional use
Speaker 1: of that term is, and sort of expelicate a little
Speaker 1: bit what you mean by how it applies in the
Speaker 1: U S contact. Yeah, Well, like the term Dutch disease,
Speaker 1: and you know, usually m term is if you have
Speaker 1: a country that suddenly finds, let's say, a bunch of
Speaker 1: oil or any other valuable resource, and that really makes
Speaker 1: the economy's exports dominated by that resource. That really pushes
Speaker 1: up the value of their currency, and because of that
Speaker 1: currency value, that increasing currency value, it crowds out all
Speaker 1: other industries and eventually that has you know, all kinds
Speaker 1: of problems for development, but it also creates political problems
Speaker 1: in which you do have an increasingly small rents seeking
Speaker 1: elite or right that controls that resource that's making most
Speaker 1: of the income. So because and all the other industries
Speaker 1: are crowded out, so you get an economy that's really
Speaker 1: focused on one industry with a lot of the capital
Speaker 1: flowing to one set of people, and everyone else working towards,
Speaker 1: you know, working for those people are not working very well.
Speaker 1: There was a second part to that question, right what
Speaker 1: what it means for the United States? And that's you know,
Speaker 1: the joke we had and it's almost like a joke
Speaker 1: actually came from ft Alphaville post by Brandon Greely. We
Speaker 1: both liked its, like we should kind of think about
Speaker 1: this further. Is the United States exports its debt and
Speaker 1: its currency, which is somewhat a form of credit. You're
Speaker 1: painting a sort of maybe negative isn't the right word,
Speaker 1: but clearly we're focused on the drawbacks of having a
Speaker 1: dollar dominant dominant system. Are there any benefits to the
Speaker 1: US um from having the green back so en meshed
Speaker 1: in the financial system. They're obviously tons of benefits to this,
Speaker 1: right for the United States. One is, you know, the
Speaker 1: political power what people call infrastructural power around kind of
Speaker 1: the keynodes of this global financial system that's sit in
Speaker 1: the US. We don't think that's necessarily the primary motivation
Speaker 1: for how this system comes about or why it continues
Speaker 1: to operate, but there's obvious advantages in terms of what
Speaker 1: sanctions regimes can do in terms and in terms of
Speaker 1: what you know, other political benefits to that or geostrategic ones.
Speaker 1: There's also you know the big economic benefit right and
Speaker 1: consequences that you know, you can run a massive of
Speaker 1: deficit and it won't really matter, right. There's this question
Speaker 1: of you know, deficit finance or serviles finance. Whether that's
Speaker 1: a universal feature of the like deficits not mattering or not,
Speaker 1: that's an open question. But I think they certainly don't
Speaker 1: matter that much for the United States. And because of that, like,
Speaker 1: we kind of argue that the deficits should be seen
Speaker 1: as a public resource, right because that is to be redistributed.
Speaker 1: So in some ways our deficits, like the redistribution of
Speaker 1: our deficits should be thought of as our Norwegian oil fund.
Speaker 1: M Yeah, that's a really interesting point. I mean, I know,
Speaker 1: I I'm seeing people um argue that the US should
Speaker 1: have like our equivalent of a sovereign wealth fund or
Speaker 1: or the Alaskan Oil Fund or something like that, but
Speaker 1: this isn't I'm at one of those people apparently, Like
Speaker 1: especially we I think at burg Ruin we actually kind
Speaker 1: of do advocate that, and especially on a state level,
Speaker 1: but we think it's really appropriate for states, for example,
Speaker 1: and should be done on both the state and national level.
Speaker 1: Well explained further, like what is the model like if
Speaker 1: if the deficit is sort of our asset, if it's
Speaker 1: our equivalent of the Norwegian oil fund, what do we
Speaker 1: what would also be the benefit from a more explicit
Speaker 1: uh state level or national sort of sovereign wealth. Well,
Speaker 1: I think those are some what different questions. I mean,
Speaker 1: for the United States, it's obviously not going to be
Speaker 1: a natural resource. Is going to be the ownership of
Speaker 1: financial assets, right, and because of those inflows, those financial
Speaker 1: assets will be very valuable on some level. And you know,
Speaker 1: there's I think a very good argument for the state
Speaker 1: owning some of them, especially given the fact that in
Speaker 1: some like the big assets in the United States, for example,
Speaker 1: the tech companies, you know, they were developed largely with
Speaker 1: taxpayer money and and because and with like public investment.
Speaker 1: So I think the state should re recouping some of
Speaker 1: that some of that value that is actually quite related
Speaker 1: to that. But I don't necessarily think that's the same
Speaker 1: motivation as something like a Norwegian oil fund or a
Speaker 1: you know, the Singapore sovereign wealth funds, or any of
Speaker 1: the sovereign wealth funds you see, which are really investing
Speaker 1: into some kind of resource, right in an export driven economy.
Speaker 1: So in Singapore it's really like the manipulation of the
Speaker 1: their own currency, right and right, so that's a resource
Speaker 1: they're invent sting in by sending the money outside. Same
Speaker 1: thing with Norway, right, Norway is actually you know, mostly invested,
Speaker 1: is largely investing outside as well as inside with the
Speaker 1: influence they get it from oil. So I think the
Speaker 1: United States should be doing the same in a variety
Speaker 1: of ways. Right, State governments should be considering using them
Speaker 1: because they are you know, not you know, as we
Speaker 1: talked about before, they aren't financially, they aren't financially sovereign
Speaker 1: in the same way the national government is. But even
Speaker 1: on a national level, there's been so much investment into
Speaker 1: valuable companies right by the public, by the state, and
Speaker 1: even you know, there is a story that some of
Speaker 1: these assets are actually you know, not I wouldn't say overvalue,
Speaker 1: but the value of those assets are kind of larger
Speaker 1: because of the you know, big capital inflows the US gets,
Speaker 1: so the state should get us cut of that in
Speaker 1: that way. But I think in order to control this
Speaker 1: particular phenomenon, I think borrowing is actually much more you know,
Speaker 1: borrowing or printing money, or however you put it. Using
Speaker 1: the deficit as a sovereign wealth fun equivalent is much
Speaker 1: more effective then a sovereign wealth fund would be for
Speaker 1: the same purpose, precisely because we wouldn't be using a
Speaker 1: sovereign wealth fund in the United States the exact same
Speaker 1: way as Sat Norway, your Singapore does. It's not the equivalent. Um.
Speaker 1: I want to get back to the deficit idea because
Speaker 1: I guess in talking about the drawbacks of dollar dominance
Speaker 1: for the US, the subtext here is that, well, maybe
Speaker 1: there would be benefits if we had system that was
Speaker 1: less reliant on the dollar. But how do you stack
Speaker 1: up those benefits versus having the privilege of being able
Speaker 1: to not really you know, pay that much attention to
Speaker 1: your deficit, or at least not worry that much about
Speaker 1: it in the same way that say, an emerging market
Speaker 1: would you know, That's the thing. I am not sure
Speaker 1: I think the dollar system has to be bad. I
Speaker 1: think there are a variety of ways of structuring the
Speaker 1: dollar system. And really, when we get to our alternatives
Speaker 1: at the bottom of the paper, you know, we're not
Speaker 1: talking about Bancorp. We think it's you know, bancor is
Speaker 1: a great idea that King's plan probably would have created
Speaker 1: a better world, But we're not getting there anytime soon,
Speaker 1: and we don't think the dollar is going to be
Speaker 1: necessarily you know, replaced any time soon. So I think
Speaker 1: the question is more important. The more important question is
Speaker 1: how do we live with this system that has been
Speaker 1: created by a privatized international you know space, right, And
Speaker 1: this is where I put my historian hat on and
Speaker 1: tell you that, you know, for in global history, or
Speaker 1: at least the study of like global society and global politics,
Speaker 1: there's a very strong and I think correct argument that
Speaker 1: empire and international space comes before the nation state, and
Speaker 1: we don't really have a tool of governing the international space,
Speaker 1: right so where we might be stuck with this thing.
Speaker 1: The point is how to fix it? So I mean domestically,
Speaker 1: it does mean using the deficit as an explicit redistributive
Speaker 1: tool and also an explicit development tool, which is why
Speaker 1: we are such big fans of, you know, the creation
Speaker 1: of these like systems of development banks or neo are
Speaker 1: reconstruction Finance Corporation which would be able to leverage some
Speaker 1: of this stuff right in into productive investment, right because
Speaker 1: we have very low infrastructure capacity right now, so that's
Speaker 1: an easy thing to do for example, right and it
Speaker 1: would improve equity by create and by creating well paying jobs.
Speaker 1: And we probably will have to run a permanent fiscal
Speaker 1: policy I think, in order to create that. That's domestically,
Speaker 1: I think internationally, there a variety of ways of fixing it.
Speaker 1: There's this, you know, there's been some suggestions by you know,
Speaker 1: Nathan Tankers, another popular guest on your show, and also
Speaker 1: that has been taken up either directly or just in
Speaker 1: parallel by Gordon Brown and a large in a letter.
Speaker 1: Actually our Institute helped you know, put together, which would
Speaker 1: be to give the I m F swap lines to
Speaker 1: give the SDRs dollar like you know dollar like backing.
Speaker 1: Our big one is that we think this can also
Speaker 1: be done somewhat you know laterally by the United States
Speaker 1: by integrating swap agreements right into trade agreements. Right, that
Speaker 1: would argue that in exchange for maintaining a reasonable traits
Speaker 1: UH current account surplus UH surplus or deficit across this
Speaker 1: like free trade zone, you would have a guarantee that
Speaker 1: your currency will be backed by a FED swap line
Speaker 1: in the event of a currency crisis, And that's a
Speaker 1: win win for everyone, right. And it's actually pretty interesting,
Speaker 1: right because it's I mean, there can be other conditions
Speaker 1: attached to that, involving good governance, like good macroeconomic macroprudential policy.
Speaker 1: That's a good way to sequence that because there most
Speaker 1: of the time their currency crisis is you're trying, like
Speaker 1: the I m F comes in and it does, it's
Speaker 1: trying to do all these austerity based reforms that don't
Speaker 1: really work and they actually make things worse. So if
Speaker 1: you could incentivize some good macro prudential policy at the
Speaker 1: start of an agreement, right, is much more effective than
Speaker 1: doing it at the worst time possible when you need
Speaker 1: to rebuild a country's demand. Right. So I think that's
Speaker 1: a really great way of doing it. And I think
Speaker 1: because the system has evolved to give the US this
Speaker 1: ridiculous infrastructural power, it should be an onus of the U. S.
Speaker 1: Government to think this way. So just to roll it
Speaker 1: all together, I guess the idea is that rather than
Speaker 1: dismantle dollar dominance, which is something that people have been
Speaker 1: talking about and to some extent, trying to do for
Speaker 1: decades now. Um also to Joe's point in the intro,
Speaker 1: people are talking about it again now and it's entirely
Speaker 1: unclear whether or not the current crisis is actually going
Speaker 1: to lead to that outcome. But rather than try to
Speaker 1: get rid of dollar dominance, the idea here is to
Speaker 1: try to use it differently in order to sort of
Speaker 1: compensate for the downsides of that dollar dominance. So try
Speaker 1: to redistribute the deficit for your idea and sort of
Speaker 1: offset um or increase economic productivity of the US. Is
Speaker 1: that right, Yes, yes, absolutely, and increase the you know,
Speaker 1: equity of the world that as a whole right, I
Speaker 1: think instead of dismantling a system, which is very difficult,
Speaker 1: and I don't think we necessarily I think the whole
Speaker 1: point of the essay, right is that it's not a
Speaker 1: political decision, it's a politically economic decision. It's very hard
Speaker 1: to dismiss dismantle a system, right that's not been necessarily
Speaker 1: created with a purpose, but has emerged out of you know,
Speaker 1: underlying class and economic phenomena. So a better way to
Speaker 1: do this right would be to manage the system. It's
Speaker 1: hard to get there without an intermediate step of managing
Speaker 1: the system that exists, rather than tearing it down. So,
Speaker 1: like I said at the intro, I think it's always
Speaker 1: very dicey two. Look at what we've experienced just over
Speaker 1: the last two months were recording this on me Earth
Speaker 1: or maybe the last three months, and try to make
Speaker 1: some broad proclamations about what the future will look like.
Speaker 1: So we want to do that. But in your view,
Speaker 1: the stresses that we've seen on the system so far,
Speaker 1: do you see tensions building that could materially change that?
Speaker 1: At least are are pressuring the system in such a
Speaker 1: way that we could get some sort of meaningful change.
Speaker 1: Either of it's sort of the end of this current
Speaker 1: dollar system or some sort of rearrangement of it so
Speaker 1: that the benefits of it can be spread more equitably.
Speaker 1: Do the do the stresses and political pressures and the
Speaker 1: economic pressures that we're seeing all around the world potentially
Speaker 1: move the ball in one direction or another in your view?
Speaker 1: So this is the interesting part is I'm actually not
Speaker 1: sure from the point of view of the people who
Speaker 1: can make a difference right now, that there is that
Speaker 1: much stress on the system. Right, the system is operating
Speaker 1: in many ways the way it should operate, given how
Speaker 1: it's evolved. Right, who is loup, who is winning and
Speaker 1: who is losing from it? Right? And the people who
Speaker 1: can make a change for the most part, are winning
Speaker 1: from it now. I think in the long run, maybe
Speaker 1: that's not sustainable for those them, and that in the
Speaker 1: long run they should be thinking of like, can we
Speaker 1: really go on with such a bifurcating world that is happening,
Speaker 1: you know, both within and without our borders, and that
Speaker 1: maybe maybe there would be someone out there with the
Speaker 1: political will, especially you know, in the United States, to
Speaker 1: put this at the forefront and really do something about it.
Speaker 1: Right for the good of the many. But until you
Speaker 1: have such a change, until you really have a you know,
Speaker 1: a set of governments that are interested in the common good,
Speaker 1: I'm not sure the system will change because for the
Speaker 1: long term, it's operating exactly as it's designed to operate.
Speaker 1: It's well, I wouldn't say designed, but it's reflecting the
Speaker 1: underlying distributions of surplus let's say, that have allowed it
Speaker 1: to operate before. So on that note, if we all
Speaker 1: agree that it's difficult to change that system because you
Speaker 1: sort of have um invested or interests who are invested
Speaker 1: in it, how do you go about actually building grassroots support,
Speaker 1: I guess for for modifying it, Like, how would you
Speaker 1: do that? You've written an essay, but what would be
Speaker 1: the next steps? You know, I kind of wish I knew. Um.
Speaker 1: If I did know, I'd be doing it much more.
Speaker 1: I mean, I think this essay and whatever else I'm writing,
Speaker 1: because at least step one of it, right, because you know,
Speaker 1: you talk to you know, anyone, you talk to your
Speaker 1: family members, you talk to your ends about this, You
Speaker 1: talk to even colleagues right that are senior from you,
Speaker 1: who don't specialize or think about these particular issues, and
Speaker 1: it's an absolute mystery to people. Right, and then when
Speaker 1: you start talking about it in kind of more approachable terms,
Speaker 1: and I'm not sure if I did that or not,
Speaker 1: but I tried, you know, then people go, you know,
Speaker 1: why do we have this system? So it's gonna take
Speaker 1: political organizing at the end, and it's going to take
Speaker 1: a very difficult kind of political organizing that might not
Speaker 1: just be national but transnational. And you know, it would
Speaker 1: be great if that worked. I'm not sure I'm the
Speaker 1: right person or anyone is the right person. We know
Speaker 1: is the right person to do that, but I don't
Speaker 1: or even if it will depend it's definitely not dependent
Speaker 1: on a single person. It will depend on a movement, right,
Speaker 1: But that's the you know, the only way to do
Speaker 1: this is to think about this with some intent, you know,
Speaker 1: well just to I mean just to this was kind
Speaker 1: of what I was going to get out with My
Speaker 1: question is like and we again talked about this on
Speaker 1: mad Klient. With mad Klient, there is some sort of
Speaker 1: like theory that the election of Donald Trump was an
Speaker 1: implicit or it had the potential to be sort of
Speaker 1: an implicit rejection of this system. He did well among
Speaker 1: the sense the populations that haven't benefited. You mentioned sort
Speaker 1: of regional manufacturing, the people who have not thrived in globalization.
Speaker 1: It was not a political movement that was a rejection
Speaker 1: of the dollar system. It was just maybe, uh, some
Speaker 1: consequences of trajectories of you as economics and and of
Speaker 1: course we haven't really seen any meaningful changes. He's done
Speaker 1: some things on trade with China, but nothing like that
Speaker 1: substantive and a lot of leaps. Like Donald Trump very much.
Speaker 1: But could it be that the rejection of this system
Speaker 1: or the change just comes through lots of domestic changes
Speaker 1: such as what we're seeing at US, but all around
Speaker 1: the world. Yes, someone level you can like you can
Speaker 1: argue that Donald Trump, and to an extent, I don't
Speaker 1: think that's the reason Trump was elected. I think the
Speaker 1: reason Trump was elected is overdetermined. There were so many
Speaker 1: factors behind it. But yeah, obviously that's one reason was,
Speaker 1: you know, the rejection of the harms of this system.
Speaker 1: But the problem is we're talking about trade, right, Like
Speaker 1: one thing I always try to get across in these discussions.
Speaker 1: This trade is only one element of this and it's
Speaker 1: like a balloon, right if you shut it down in
Speaker 1: one place, it will come out of another place. I
Speaker 1: don't know exactly how you politicize it, but you need
Speaker 1: to politicize it systemically, and you know, there have been
Speaker 1: there has been some attempt. There's the Baldwin Holly Act
Speaker 1: that Mike Pettis is behind, and I think it will
Speaker 1: work to a certain extent, but I think it has,
Speaker 1: you know, big downsides. It just my actually might reintroduce
Speaker 1: a lot of very risky financial practices as we've seen
Speaker 1: during the Alae crisis. Right, Um, so I think there
Speaker 1: are that's one way of getting at it. I think
Speaker 1: we've introduced a more internationalist way to try to get
Speaker 1: at it. And I think hopefully some people who want
Speaker 1: to do politics and start thinking in this way and
Speaker 1: you know, start to actually you know, inform and build
Speaker 1: up systems like this. And maybe that's not for us
Speaker 1: to do. You know, we're we we writ we're writers,
Speaker 1: were intellectuals, you know, we're analysts. Our job is to
Speaker 1: try to speak to those in power and tell them, hey,
Speaker 1: it's not working, thinking to think about it in a
Speaker 1: different way. Well, Yaka Fagin, really great having you on
Speaker 1: a phenomenal essay. I strongly would encourage people to uh
Speaker 1: go check it out. It's at the website phenomenal world
Speaker 1: dot org. The Class Politics of the Dollar System. Um,
Speaker 1: thanks for joining us, Thank you for having me. I
Speaker 1: think chacough, that was great, Tracy. I love talking with
Speaker 1: Yakov again. I think this there is so much talk
Speaker 1: about the dollar and who had benefits, and so much
Speaker 1: of it is so like simplistic, and it's it's extremely complicated,
Speaker 1: like what the dollar system means and really who benefits
Speaker 1: from Yeah, it's definitely it's sort of like a middle
Speaker 1: path in thinking about dollar dominance. But I have to say,
Speaker 1: for someone who started this episode talking about how they
Speaker 1: don't like big picture ideas, this seems like a pretty
Speaker 1: big picture idea, does it not. No, I love big
Speaker 1: don't get me wrong, I love big picture ideas. I
Speaker 1: think maybe what I was saying it was like I
Speaker 1: don't like big picture like prediction, right, Maybe that's that's
Speaker 1: what I meant. Okay, I don't know big picture like
Speaker 1: we're all about that here, but I just mean, like, oh,
Speaker 1: the world that we're never going to go back to
Speaker 1: X or we're never going to trade with China the
Speaker 1: same again, or whatever it is, we're gonna on shore
Speaker 1: all of our manufacturing because we had a shortage mask.
Speaker 1: That's the kind of stuff Like it's like, let's just
Speaker 1: wait a few months. Yeah, okay, well, this definitely isn't
Speaker 1: a prediction. In fact, I mean, Yakof was pretty upfront
Speaker 1: and talking about how this is all a very conceptual idea, um,
Speaker 1: and he isn't really sure how to get it done politically.
Speaker 1: But I think I think also when we talk about
Speaker 1: this kind of stuff, and you know, I sometimes think
Speaker 1: about this in connection with modern monetary theory as well.
Speaker 1: But if we say that, you know, the thing that
Speaker 1: we thought was a problem isn't actually the problem. The
Speaker 1: problem is politics. I'm not sure that gets us very far.
Speaker 1: Like that's the sticking point, and that seems to be
Speaker 1: the most difficult thing of all. Yeah. I had to
Speaker 1: have fun too, which is that if you have a
Speaker 1: set of people who broadly benefit from the existing system,
Speaker 1: and those existing people are the ones who are in
Speaker 1: position to rewrite laws or change how society operates, you
Speaker 1: do run into this situation and it's like, okay, well, like,
Speaker 1: so who where does the political catalyst come from? And
Speaker 1: I thought that your question to that is really important,
Speaker 1: And you know, there's there's really no obvious, uh answer
Speaker 1: to that at all. And it's again, as you say,
Speaker 1: with modern monetary theory, it's like, okay, so we can
Speaker 1: spend more and do a lot more with a fiscal
Speaker 1: policy than maybe a lot of mainstream views would suggest,
Speaker 1: but that doesn't give us any answers to how we
Speaker 1: actually get people to vote for That's exactly it. But
Speaker 1: like someone has to actually vote to spend the money,
Speaker 1: even if in theory fiscal governments or have much more
Speaker 1: flexibility on fiscal policy than people really. But I do
Speaker 1: like the idea of UM sort of using the deficit
Speaker 1: to redistribute to UM to America. I guess like that's
Speaker 1: an intriguing thing, and if it sort of offset some
Speaker 1: of the negative side effects that we've seen from dollar dominance,
Speaker 1: you know, UM, the expansion of the trade deficit, and
Speaker 1: the idea that the US is biggest export is dollar
Speaker 1: denominated financial assets versus something more tangible, like I don't know,
Speaker 1: widgets or something. That's an intriguing idea, I think definitely.
Speaker 1: And again, like the Alaska State Oil Fund and everyone
Speaker 1: who's a citizen of Alaska gets a check to benefit
Speaker 1: from that, and so you could theoretically apply that model
Speaker 1: to the US as a as a whole, in which
Speaker 1: the idea is like, Okay, well, the US is a
Speaker 1: major exporter of dollar and dollar assets, so let's use that.
Speaker 1: Let's use that national asset to distribute money more aggressively domestic. Yeah,
Speaker 1: should we leave it there? Let's see it there. Okay.
Speaker 1: This has been another episode of the All Thoughts podcast.
Speaker 1: I'm Tracy Alloway. You can follow me on Twitter at
Speaker 1: Tracy Alloway and I'm Jolly Isn't Though. You can follow
Speaker 1: me on Twitter at the Stalwart. And you should follow
Speaker 1: our guests on Twitter. Yeah, go Fagan. He's on Twitter
Speaker 1: at Buddy Yakov and follow his co author. We couldn't
Speaker 1: have him today, but he's also great. Uh. Dominic Loisder
Speaker 1: He's at Dominic Lois And you should also follow the
Speaker 1: Jane Family Institute, which published the essay. Everyone should really
Speaker 1: go check it out. They are at Jane Family and
Speaker 1: followed the Burgruin Institute. Yakov's employer at Burgruin Instant. And
Speaker 1: follow our producer on Twitter, Laura Carlson. She's at Laura
Speaker 1: and Carlson. The Bloomberg had a podcast Francesco Leaning at
Speaker 1: Francesco Today as well as all of the Bloomberg podcast
Speaker 1: Check him out under the handle at podcasts. Thanks for listening.
Speaker 1: The yet E