Kenneth Rogoff on Monetary Moves, Fiscal Gambits, and Classical Chess

Harvard economist Kenneth Rogoff approaches global finance with the same strategic foresight that made him a chess grandmaster. Author of the new book Our Dollar, Your Problem, Rogoff doesn't sugarcoat America's future: he foresees a significant inflation shock within a decade, far more severe than the post-COVID bout. When this second wave hits, he warns, "credibility's really going to be shot." In this conversation, Ken and Tyler tackle international economic dynamics, unresolved macro puzzles, the state of chess, and more, including whether trade deficits are truly unsustainable, why China's investment-heavy growth model has reached its limits, how currency depreciation neutralizes tariff effects, Pakistan's IMF bailouts, whether more Latin American countries should dollarize, Japan's deceptively peaceful economic decline, Europe's coming fiscal reckoning, how the US will eventually confront its ballooning debt, the puzzling absence of a recession during our recent disinflation, the potential of phasing out large denomination currency notes, the future relevance of stablecoins, whether America should start a CBDC, Argentina's chances under Milei, who will be the next dominant player in chess, hanging out with Bobby Fischer, drawing out against Magnus Carlsen, and how to save classical chess from excessive computer preparation. Read a full transcript https://conversationswithtyler.com/episodes/kenneth-rogoff/ enhanced with helpful links, or watch the full video https://youtu.be/u1bqpyqLn0A. Recorded April 2nd, 2025. Help keep the show ad free by donating https://mercatus.donorsupport.co/page/podcastgift?utm_source=cwt+podcast&utm_medium=podcast&utm_campaign=shownotes today! Other ways to connect Follow us on X https://twitter.com/cowenconvos and Instagram https://www.instagram.com/cowenconvos/?hl=en Follow Tyler https://twitter.com/tylercowen on X Follow Kenneth https://x.com/krogoff on X Sign up for our newsletter https://mercatus.tfaforms.net/5060931 Join our Discord https://discord.gg/JAVWP7vTxt Email us: [email protected] mailto:[email protected] Learn more about Conversations with Tyler and other Mercatus Center podcasts here https://www.mercatus.org/podcasts.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:04Tyler Cowen?

  Conversations with Tyler is produced by the Mercatus Center at George Mason University, bridging the gap between academic ideas and real world problems. Learn more at mercatus.org. For a full transcript of every conversation enhanced with helpful links, visit conversationswithtyler.com.

• 0:26Tyler Cowen?

  Hello, everyone, and welcome back to Conversations with Tyler. Today I am chatting with Kenneth Rogoff, who is one of America's best economists. He is a professor at Harvard, and he has a new book out called Our Dollar, Your Problem: An Insider's View of Seven Turbulent Decades of Global Finance and the Road Ahead. Ken also having extensive experience in the IMF and dealing with various global crises. Ken, welcome.

• 0:54Speaker 01

  Thank you. It's a pleasure to be here, Tyler. Good to speak to you.

• 0:58Tyler Cowen?

  Circa early 2025, the big debate is whether there's such a thing as an unsustainable international trade balance. So Orin Kaff says there is, Michael Pettis says there is, traditional theory is more skeptical or agnostic. What's your view?

• 1:14Speaker 01

  No, there's unsustainable debt. There's not particularly an unsustainable trade deficit. I mean, there's good things about having a trade deficit, bad things, but it's a result of many factors. So, no, I wouldn't agree with Pettis on that.

• 1:29Tyler Cowen?

  So what is the mistake he and Orin Kaff are making?

• 1:33Speaker 01

  Well, the trade balance depends a lot on your savings, your investment, these macroeconomic factors. If there's an underlying problem, and to be fair, when your trade deficit's really negative, there often is, you know, it could be something. I think in the case of the United States, when it hit a real peak in the 2005 to 2007,

• 1:59Speaker 01

  I thought there was a problem, I must say. I didn't know till very close to the event what was going on. We weren't regulating well. But yeah, I mean, I didn't even know what their point is, to be honest. I mean, there's this mercantilist view. I want to collect all the gold in the world. You know, we want to be able to buy things. Back in the day, you used to have to hire an army or navy to help fight off, you know, invaders and such. But, you know, today, that's not so true. So I, I, I think the current account deficit, that's a broader measure of the deficit. It's important. And if it's really large, you can probably bet that it might go down. But it's not something to try to wrestle to the ground.

• 2:45Tyler Cowen?

  There's an associated claim I hear, including from Martin Wolf, that China needs to substitute more into consumption to remedy some longer term macroeconomic imbalance. Now, I can see that from a welfare point of view, the Chinese over subsidize investment and might be better off consuming more. But is it going to boost their growth rate to consume more?

• 3:07Speaker 01

  Well, first of all, they subsidize investment like crazy.

• 3:11Tyler Cowen?

  Of course.

• 3:11Speaker 01

  I mean, so investment's been 40% of GDP. Consumption, they're different measures. But, you know, 50% of GDP, maybe, or 70% of GDP by comparison. And it's been very imbalanced. It's for a command and control economy. And China's a hybrid economy. The central government plays a big role. Doing infrastructure investment, subsidizing real estate is easy to do. And they've been doing that for a long time. And their growth has been very imbalanced. So everybody's been telling them for years, why don't you build up your consumption?

• 3:54Speaker 01

  But it's been hard because they don't have medical care in your old age. They don't have social security in their old age. They had this one child policy for a long time. So, you know, there are a lot of reasons everyone's had to say it. And now their house prices are plummeting. And that's for Chinese where a lot of their wealth is. So I would say it's not a bad idea to try a little bit of that. But they've dug a very deep hole. It's not easy to dig their way out.

• 4:23Tyler Cowen?

  So putting aside the microeconomic distortions, which macro model do you use to think through the question of whether or not China should consume more? Like, do you use the solo model or Romer, something else? What's your go?

• 4:37Speaker 01

  Those are, those are nice models, but I mean, let's be honest. I mean, they're just a piece of things. They do tell us that at the end of the day, you need to have innovation. If you're just growing by building more machines, by building more roads, you run into diminishing returns and you get less and less with the output. That's what happened to Russia. That's what happened to Japan. That's what happened to a lot of Asia. And for some reason, people thought that wouldn't happen to China. But their rate of innovation over the whole economy, I'm not talking about the highest level, has collapsed by many different measures. And the private sector is, of course, the root of all the innovation.

• 5:21Speaker 01

  They have oppressed the private sector, particularly in the last 10 years. And so, you know, for them to grow again, they need to restore some agency to the private sector.

• 5:34Tyler Cowen?

  We're in the midst of some tariff debates right now, as you know. And one argument I hear, sometimes even from the anti-tariff people, is that if the US puts higher tariffs on China, well, the Chinese currency just depreciates. The dollar strengthens. There isn't that much of a net effect. Because arguably, they're propping up their currency some amount now. Do you agree with that?

• 5:56Speaker 01

  Well, what you said is exactly right. I mean, so to a first approximation, if we put on a, I don't know, whatever it is, a 20% tariff, it has an effect on our exchange rate of making it go up, which makes our exports more expensive and makes their goods less expensive. And I mean, I don't want to get wonky, but if you did it on the whole world.

• 6:17Tyler Cowen?

  You can get wonky.

• 6:18Speaker 01

  I can get wonky with you?

• 6:20Tyler Cowen?

  Absolutely.

• 6:20Speaker 01

  Well, if you did a 20% tariff on the whole world, to a first approximation, your exchange rate goes up 10% the dollar. And so, you know, that rebalances everything. That brings the cost of their goods back to just a 10% rise. And it makes your exports 10% more expensive because the currency appreciated. So that's definitely an effect. Of course, they're probably going to retaliate. And then, you know, that cancels it out.

• 6:48Tyler Cowen?

  But do they want to retaliate? Don't they prefer the outcome where the tariff approach is some kind of neutrality? Given that they have an overvalued currency right now, they could have a decline, basically be insulated from the tariff, not have to worry about Trump so much anymore. Why should they retaliate?

• 7:06Speaker 01

  I mean, they have a lot of distortions in their economy, but the days when it was very clear cut that they had an overvalued currency, I mean, are far gone. I mean.

• 7:16Tyler Cowen?

  But it used to be undervalued, right? Those days are very far gone.

• 7:19Speaker 01

  So you're saying that their currency now is overvalued?

• 7:23Tyler Cowen?

  I think so.

• 7:24Speaker 01

  And they want to bring it down?

• 7:25Tyler Cowen?

  They have all this producer price. They have all this producer price deflation, right? So they should be expansionary on the monetary side to have a more predictable path of nominal GDP growth. But they're not doing it, so probably their currency is a bit too high relative to an optimum?

• 7:40Speaker 01

  Well, I mean, a logical way to do it would be to do more expansionary fiscal policy, more expansionary monetary policy. We don't usually try to deal with producer price inflation through the exchange rate. I mean, exports and imports are important to China, but it's also a very big economy. There's a lot of stuff, you know, like the infrastructure investment and other investment that's internal and.

• 8:04Tyler Cowen?

  Sure, but if they had higher price inflation, the value of the renminbi in real terms would fall somewhat, at least for a while. Right? And that would be better, which means the current rate is somewhat higher than it ought to be.

• 8:16Speaker 01

  I mean, they're running a massive surplus to the rest of the world. The total size of their trade balance surplus is only 2% of GDP. It's not like 10% the way it was in 2010. But they've gotten a lot bigger. It's still huge compared to the world. So I mean, in crude measures of if their exchange rates overvalued and undervalued, I don't think you come to a simple answer. The dollar is very rich. I mean, so in a sense, everybody seems cheap to the dollar right now. I'm sure you've experienced that with your, anyone coming from abroad, even from Japan or Switzerland, you know, oh, my gosh, it's so expensive here.

• 8:56Tyler Cowen?

  Feel free to give a wonky answer to this one. But why do you think it's been so hard for economics to develop a satisfactory theory of exchange rates? So purchasing power parity seems to hold only within very broad bands, something like 2X, and the rest just seems very murky. Why is that so difficult?

• 9:15Speaker 01

  Well, I mean, part of it is if you have floating exchange rates, there's a lot of financial factors that are hard to understand that move it around a lot. We're not able to easily identify those factors. But I think more and more theory empirics is coalesced around, you know, things like bank balance sheets. So can banks arbitrage exchange rates and various pricing imperfections? So I think the weight of research the past 10 or 15 years has been that the exchange rate moves a lot, but it's not necessarily moving around the economy with it. And we thought that for a long time. But I think the general view today, I mean, it isn't always true,

• 10:00Speaker 01

  but that a lot of the movements have to do with financial frictions and financial factors, not, you know, some gnomes controlling the exchange rate, that there's a lot of random noise.

• 10:12Tyler Cowen?

  But do you think we need a good theory of both real and nominal exchange rates to make reliable policy recommendations? If we don't really know what the exchange rate will be doing and why, doesn't that put us in the slightly odd position? That we're saying do this, do that, but the most fundamental price variable is a mystery to us?

• 10:32Speaker 01

  As you may know, I mean, I think my first important paper was showing how hard it was to explain exchange rates. I'm embarrassed to say it's like 45 years ago. And I think the policy conclusions people drew out of that is look at the exchange rate. When you're, you know, trying to figure out what policy should be, look at inflation rate, look at output. I think for some countries, they're so deep into dollar debt, they're so connected with the dollar and trade, they do worry about their exchange rate. So it's sort of depends on if you're talking about a big country like the United States, or are you talking about New Zealand or something like that. But I mean, I think generally policymakers

• 11:14Speaker 01

  need to recognize there's a lot of noise. So trying to target the exchange rate is a fool's game. And if the Trump administration's trying to do it, you know, they might get lucky, but you know, it's pure luck.

• 11:30Tyler Cowen?

  So if I take the country of Pakistan, I think it's now been through maybe 23 or 24 IMF bailouts. That's a lot. The problems aren't fixed. So we would all say here's ways Pakistan could improve. Probably you and I would largely agree on those. But just from an external point of view, say you're dictator of the IMF, you're the dirt managing director, you're the board, you're the staff. What is it you would actually do with Pakistan?

• 11:56Speaker 01

  I mean, that's, you know, the deep seated problems, the military is very, very powerful in the country. The military is very corrupt, runs a lot of the businesses, has a lot of control. So, I mean, it really runs deep into the institutions in the country. It's not something you can like airlift some expert like you or I and just tell them what to do. I mean, believe me, there are a lot of very smart Pakistani economists who know what to do.

• 12:28Tyler Cowen?

  But do you sign off on bailout number 25 when that comes along? You're in charge.

• 12:34Speaker 01

  I mean, first of all, if you don't sign off on bailout number 25, they're going to default on bailout number 24. You're rolling over this debt all the time. And it's, you know, very sensitive politically. Pakistan's a country that's very, very geopolitically important. So you can't look at the programs there as if you're lending to the UK. It's something very different. And the amounts are small compared to if you're lending to the UK. But yeah, it's, it's, you know, frankly, my, what I have advised on things like Pakistan is just give them aid. Don't give loans. You're never going to collect the loans. You're not seriously meeting their loans. And so it sounds great to say, well, we just lent the money

• 13:18Speaker 01

  to Pakistan. But I think in general, in money we're giving to developing countries, too much of it comes in the form of loans. And it it distorts what we do because we don't get them all repaid.

• 13:32Tyler Cowen?

  How many Latin and Caribbean economies should dollarize? A few have, right? Should more?

• 13:39Speaker 01

  I mean, it's a pretty desperate measure when you dollarize and there are different ways to dollarize. You know, when I just came into the International Monetary Fund in 2001, Argentina had dollarized. They had been dollarized for 10 years. And I said, you know, isn't this great?

• 13:55Tyler Cowen?

  But that was a peg. It wasn't real dollars, right? I mean, like El Salvador, Ecuador, Panama.

• 13:59Speaker 01

  I mean, actually, you want to actually use the doll, circulate the dollar.

• 14:03Tyler Cowen?

  Because that's credible. And those of, whether you like them or not, they've all stuck, right?

• 14:08Speaker 01

  I mean, you can do it. I mean, it has its costs. The biggest cost is if your banking system runs into trouble, you can't bail them out. So in most countries, the currency that we think of the physical currency is just like a little piece of the animal. A lot of it, we, you know, you might think of your checking account or your savings account as dollars, but they are. That's a lot of the money supply. So when you say they're, you know, just using real dollars, they don't have real dollars to back those bank accounts. So it can work, but you're Run into banking crises, you run into debt crises. And then when you're dollarized, it's it's hard to fight it. So it's it it's doable. It's absolutely doable.

• 14:53Speaker 01

  But I'm not sure necessarily it's advisable. It depends on the alternative. If the country's been run into the ground for 50 years and you're trying to reclaim territory, it makes sense.

• 15:05Tyler Cowen?

  Why isn't it easy for a lot of countries? Say you're Barbados, that's a small country. Most of your visitors are from the US also. Your banking system, you can just buy external insurance, right? There's an insurer that can cover the Barbados banking system if need be. Buy it from China if you have to and then just dollarize. Why aren't they just better off?

• 15:25Speaker 01

  Okay, I'm being naive, but is there an insurer who's going to bail out the Barbados banking system? I mean, I think our regulators would make that difficult. Their regulators would make it difficult. I mean, you would need to have something like that. And there's a lot of moral hazard. So you really, if you're going to be an insurer, you can't just insure. You have to have, you know, 150 people on shore, uh, looking at them all the time. I mean, it's not easy to do. The only country in the world, really, which can bail out its banking system is Hong Kong. They have enough dollar reserves to bail out everything. But that that's the problem with dollarization is that it's, you know, if you're not going to have banks, it's great. But we want to have lending and mortgages and car loans and stuff.

• 16:10Speaker 01

  And you, you know, it's very easy to run into trouble.

• 16:15Tyler Cowen?

  Why did Japan never have a financial crisis? So very high debt to GDP ratio. Growth rate is mostly slow. In per capita terms, it's not as bad as it sounds at first, but nothing gangbusters. How have they held on?

• 16:30Speaker 01

  Well, they did have a financial crisis, the mother of all financial crises in the 90s.

• 16:35Tyler Cowen?

  Oh, sure, but since then.

• 16:36Speaker 01

  And since then, well, have they hung on? In 1990 and even in the early 90s, their per capita GDP was 80% of the United States and purchasing power parity measures. You know, trying to put into common price level. But in dollars, it was well over 100% of the US. Today, it's 60% in those measures. I mean, it has not held on in per capita terms. It has just, you know, not had growth for a long time and they're running into trouble.

• 17:07Tyler Cowen?

  There's per capita growth in Japan. Maybe, I don't, it's what.

• 17:11Speaker 01

  Yeah, but nothing like in the United States. I mean, we.

• 17:14Tyler Cowen?

  Well, we've beaten every advanced economy, not just Japan.

• 17:17Speaker 01

  Yeah, that's fair, but they've fallen behind France, France, the UK, Germany, they were ahead of all them. They've fallen far behind and they're in trouble now because they're finally having inflation. They're needing to raise interest rates. They've stuffed government debt into every orifice of the economy, into the pension systems, into the banks, into their postal savings system. And now they're talking about cutting pensions, cutting old age benefits, because suddenly they're having to make interest payments on the debt and it's hard. So I think people who use Japan as an example of everything's fine,

• 18:02Speaker 01

  you know, have their head in the sand. I mean, it's an example of if you're very rich, you can go down slowly. But it's not an example of how, you know, you can have fantastic economy with debt like that.

• 18:17Tyler Cowen?

  But why do some places, say the much earlier UK, they have crises? And Japan, whatever the standard of living issues may be, right? There's no crisis. There's no run on anything. It's quite peaceful.

• 18:30Speaker 01

  It is, it is a very, you know, society which obviously is very high degree of cohesion. And that's a tremendous strength of Japan. I just have got a side mention if I can. I mean, I, I was a visitor at the Bank of Japan in the early nineties in the middle of their meltdown. Although I didn't see it and I don't think anyone did at the time. And I had to eat at the cafeteria every day and had almost the same food that you had to eat. And it was good, but then I saw another line once and I asked, can I go in that line? And the people said, oh, well, that's if you want a smaller portion. I mean, it's a very different society than, than we have. But they have a lot of financial repression.

• 19:16Speaker 01

  Financial repression is going to be part of the solution in every advanced country, where you force banks, insurance companies, pension funds to hold more debt. We've done that already. And they've done it in a big way. It's hurt their financial intermediation. So it makes lending less efficient. And that's, you know, part of why their growth has hovered. So they've done a good job doing a slow, becoming sclerotic slowly. But I hardly think we would want to imitate them, especially if we intend to compete with China.

• 19:51Tyler Cowen?

  Is that what the European Union is going to do? Financial repression?

• 19:55Speaker 01

  They did it already. I mean,

• 19:58Tyler Cowen?

  But they'll have to do it again. They still have all these major debt problems.

• 20:01Speaker 01

  Yeah, I mean, they did it big time after the European debt crisis. So just a simple fact about that is it used to be that, say, Italian debt was held in Germany, Spanish debt was held in Germany, spread all over. Now, the vast majority of the Italian banks are holding all the Italian bank debt. Spanish banks are holding all the Spanish debt. Do you think that's because they're diversifying? No, it's because they're being ordered to do that. So they have a lot of financial repression already. They don't have dynamic capital markets for a lot of reasons. And obviously, they need to remilitarize now. You know, Germany has a lot

• 20:45Speaker 01

  of fiscal space, so they can go all out. But especially now that interest rates or real interest rates are hitting a higher level, they're going to have to do it. But I think they're going to find they have to give things up in order to do it because the interest rates aren't zero anymore.

• 21:03Tyler Cowen?

  So you think they'll actually cut spending, say, in France?

• 21:08Tyler Cowen?

  It's hard for me to believe. I don't disagree with you, but it somehow feels unimaginable to me.

• 21:14Speaker 01

  Yeah, I mean, many of the European countries actually tightened their pension systems a lot during the European crisis. They set it in place to take place 10 or 15 years later, not France. Yeah, I do. I think this is a real existential challenge to the French state. I mean, maybe they'll take over as the tech capital of the world. Maybe they'll, you know, find ways to solve their problems. But they've been free riding off the United States. There's no question about that. And now they have to spend more. I'm not praising Trump's policies. Let's not conflate those two things.

• 21:51Speaker 01

  But yes, I think I think they're going to find they're going to be they have taxes are very, very high in Europe. In fact, so much so that there's no question it holds back a lot of investment. Europe has very few world beaters in terms of tech, finance. They're the biggest companies. Set aside the Danish company, that's Ozempic. They're things like Hermes, you know, Prada, sort of lifestyle superpower stuff. No, I think this is absolutely an existential crisis for Europe. It may lead to them becoming more cohesive. It may lead to them becoming more more of a geopolitical power. But yes, they're going to have to make choices which they haven't had to make.

• 22:36Tyler Cowen?

  If the nation is Italy, and I think that the birth rate, TFR is about 1.3 on average. Are they just going to wake up one morning and say the whole welfare state thing was a mistake and we're getting rid of it? I mean, isn't that the implication?

• 22:50Speaker 01

  Well, that's a kind of strong statement and they're not going to do that. But

• 22:54Tyler Cowen?

  But if the country keeps on shrinking, the age pyramid gets worse and worse.

• 22:58Speaker 01

  Yeah, we all we all face. We all face this issue and hope that innovation and growth or something will help. But yeah, I know the demographics is is a problem in every country in Italy, as you say, as much far, far ahead of the United States on the demographics. Or, I mean, an interesting fact is they spend a mind numbing 15% of GDP on old age pensions and support now. I mean, we're half that, you know, all in. And 15% of GDP. And so, yeah, they they have a lot of constraints and their tax rates are very

• 23:38Speaker 01

  high. They we they're not corrupt like in Pakistan, but it's, you know, it's not Sweden either. I mean, it's got a lot of problems.

• 23:48Tyler Cowen?

  And just predictably, what do you think the United States will do with its fiscal position?

• 23:54Speaker 01

  That is a darn good question. I mean, looking way forward, I would just say we're on an unsustainable path. We will continue to have our debt balloon. And eventually, not necessarily in a planned or coherent way, I think we're going to have another big inflation soon, next five to seven years. That's maybe sooner with what's going on. And that's going to bring it down, just like it did under Biden. It brought the debt down. But then, the markets are, you know, fool me once, shame on you. You know, fool me twice, no, we're raising the interest rate. And then we'll have to, you know, make choices. I mean, I think in the United States,

• 24:38Speaker 01

  a lot of the choices, I'm sorry to say it, probably point towards higher taxation, because we're hardly running a welfare state. It's not all due respects, and I'm not sure I have any due respects to Doge. There are not that many things to cut in the United States compared to to many other countries. So I don't know what the choice will be. I mean, I probably won't be here, and you might not be there when we're making the choices. But eventually,

• 25:04Tyler Cowen?

  I think we'll both be here.

• 25:06Speaker 01

  Well, it could be, it could happen much sooner. I mean, on the other hand, it's hard to know what's going through Trump's head. So I, you know, I presumed he was going to blow up the deficit like everybody else. We'll see.

• 25:22Tyler Cowen?

  And when you say big inflation, how big is big?

• 25:26Speaker 01

  Well, I think this time it'll be, so last time, we probably had a bonus 10% inflation over the 2% target cumulatively, maybe 12%. I think this time it'll be on more in the order cumulatively over the 2% target, 20%, 25%.

• 25:43Speaker 01

  I mean, there's going to be an adjustment. I don't think the debt is going to be the sole contribution to that. There are many factors. You have to impinge on Federal Reserve independence. Probably there'll be some shock, you know, which will justify it. I don't know how it's going to play out. But I, I think, I know that for years, people have said the US debt is unsustainable. But it hasn't come to roost because we've lived through this post-financial crisis, post-pandemic era of very, very low and negative real interest rates. That is not the norm. There's regression to mean. You know what? It's happened.

• 26:25Speaker 01

  And suddenly, the interest payments start piling up. I think they've gone, at least doubled over the last few years. They're on, quickly on their way to tripling, going up to a trillion dollars. And so suddenly, that's, it's more than our defense spending. That's the most important macro change in the world, that real interest rates appear to have regressed more towards a long-term trend.

• 26:52Tyler Cowen?

  What's the most plausible scenario you can imagine where the US does not have to make any major adjustment? I'm not saying you're predicting it. I'm not saying you think it's very plausible, but you have to come up with something. What is it?

• 27:05Speaker 01

  Oh, I don't think there's any question. It's that the AI revolution turns out to, you know, just work magically much better than we, you know, anyone imagined, that people like me quietly acquiesce to just getting transfers from the government instead of having jobs. And we just, you know, continue to have a high income and the robot income pays for everything. I mean, but AI is absolutely the thing which is most likely, you know, some kind of technological change. You know, other than that, the problem's in our politics. It's in our DNA. We're convinced that, you know, we're immortals and we can just do whatever we want.

• 27:49Speaker 01

  That's, you go around Washington, whatever they say, I think that's what they think. And again, this key thing is that real interest rates, the interest rate adjusted for expected inflation, and I'm looking at the long term, they've come up and they're not super high, but they're more like they were in the early 2000s. And I think of reasonable projections, they're going to stay around the level they are now.

• 28:14Tyler Cowen?

  I'm sure you know the classic Paul Samuelson paper on overlapping generations model. And in that paper, the real interest rate is equal to the rate of population growth. There's other papers where the real interest rate is in broad harmony with the rate of productivity growth. If either of those models are correct, aren't we okay again?

• 28:35Speaker 01

  Well, first of all, if it's population growth and productivity alone, then you're losing tax dollars at the same time you're paying less interest. But it turns out those variables don't work so well over a longer period. I have a paper in the American Economic Review just last August about this. You look over longer time periods, you know, just because economists think that those should be the dominant variables, it doesn't turn out to work that well. And all this stuff, there've been a lot of papers by economists looking at the decline, it's going, the real interest rate going down, demographics going down, productivity going down, looks great. If you look at a longer period, there's no there

• 29:16Speaker 01

  there. I mean, it just doesn't stand up. So I think there are other factors having to do with liquidity, default risk, changing nature of the production function, globalization. You know, I think there are many variables where assuming there's going to be some reversion to mean is just a pretty good thing to have in the back of your head. You know, you know, Carmen Reinhart and I had this book, This Time Is Different, very much on the theme of people just looking at five years or 10 years and thinking, oh, it's just great. It's just going to go like this. And I think the real interest rate's an example. I would say the low inflation's another example. My students, for a long time, just didn't

• 30:01Speaker 01

  believe there'd ever be inflation again. I would teach it, they would fall asleep. I mean, I remember asking a question even to someone who was a research assistant at a big central bank. Explain this to me about inflation. And she said, my generation doesn't ever expect to think about inflation. We don't have it. Please give me examples of this. So, no, I, I, I would suspect we will have high real interest. And by the way, AI will raise the interest rate.

• 30:28Tyler Cowen?

  But productivity too. Well, that's the case where it goes up with productivity.

• 30:32Speaker 01

  It, it does raise productivity, but the, the usual thing about demographics is there are less people to work with the machines. And therefore, the return on the machines is lower and the interest rate goes down. But if the people are being substituted for, which is new. I mean, we've always found a way to reinsert ourselves. You won't necessarily, even in a theoretical model, like Samuelson's or Sol, or Solow's, get that effect.

• 31:02Tyler Cowen?

  You wrote a famous 1987 paper on political business cycle theory. How relevant do you think political business cycles have been since then?

• 31:11Speaker 01

  Well, there've been a lot of papers on it. I mean, I don't think there's any question. Every politician in the world, if they have the power, tries to goose up the economy before it happens. I, I think empirically, it's overwhelming that it's true. The question is, why does it fool anyone? Everybody should understand why that's going on. And without going to tails, that paper was about the paradox that. I know you're just making things look good. I know you're hiding something from me so that, you know, you're exaggerating. How long this can go on, how much it's costing, but I'm going to vote for you anyway. And so, you know, that's what that paper was. It looked at as, as a signaling model that's getting really wonky.

• 31:56Tyler Cowen?

  But the fiscal versions of political business cycle theory, they don't have to fool anyone, right? You do get the money and society as a whole has to pay it back, but you can come out ahead.

• 32:08Speaker 01

  Okay, so there's another, I'm going to just translate it a little bit from my model, one that Alberto Elsina, my late colleague Alberto Elsina did and a number of others that said, part of the reason debt keeps piling up is we have, you know, the Liberal Party, the Conservative Party. When the Liberal Party is in power, they know that debt is bad, but they know they can spend now. And they know they might not control it in the future, so they spend a lot and they borrow. When the Conservatives are in power, they cut taxes and build up the debt. I think that's a very powerful, very, very powerful theory of part of why debt bills up is whoever's

• 32:52Speaker 01

  in power, you know, says, eh, don't pay any attention to it. And of course, you know, I, I, I think we end up where we are now.

• 33:01Tyler Cowen?

  In an earlier book, you called for phasing out of currency and large denomination bills. Do you still want to do this?

• 33:09Speaker 01

  Oh, I call, I call out for phasing most currency. I'm, I'm not phasing it all out right away. That takes, you know, generation.

• 33:17Tyler Cowen?

  Well, Sweden's done it. I mean, it doesn't take that long if people are on board. It's very hard to run across currency in Sweden today.

• 33:25Speaker 01

  You're right.

• 33:26Tyler Cowen?

  And they didn't even pass laws.

• 33:28Speaker 01

  You, you're right. You have to travel 150 kilometers to get to an ATM machine, but it's not completely phased out by any means. I mean, it's still there. So first of all, we've had enough inflation that the hundred dollar bill is now a $75 bill, I'll say to start with. But, you know, most of the world's currency is held in these large denomination notes. I mean, I've done further work, very little of it's used in transactions. I think most of it is in the underground economy. It's used, it's not necessarily nefarious. There's drug dealing, human smuggling and everything, human trafficking. But I think the large majority of it is tax evasion. I mean, lots of people do that.

• 34:13Speaker 01

  Okay, I mean, I'm not trying to be holier than thou and, you know, just say everybody who does that is evil, but I'm looking at it from the government's point of view. Making money by saying, hey, people love these hundred dollar bills and not figuring out that they're using them not to pay taxes. I've argued that that's penny wise and pound foolish. And yeah, that's, that's sort of the core of the argument.

• 34:38Tyler Cowen?

  But from an efficiency point of view, don't you want to kind of price discrimination in your tax system? So say people pay their nannies with hundred dollar bills. They wouldn't hire the nanny if they had to pay taxes. Furthermore, if the transaction were recorded, they'd have to worry about social security issues. It's a lot of paperwork and bureaucracy, very forbidding for a lot of people. And you're just lowering output by not making it easy for them to pay the nanny with cash.

• 35:05Speaker 01

  So I do think about that, but the questions, why we need hundred dollar bills for that. I mean, you can pay your nanny with twenties and they'll be perfectly happy because actually the hundred dollar bills are harder to work with, you know, for them. So, no, I think you want to have ways that you can evade the law up to a point. I mean, marijuana is now legal in most places and maybe the whole culture and society wouldn't have evolved if we didn't have a cash economy, you know, that could pay for that. So I, again, you know, I think it's a question of calibration, regulation, you know, where you want to put things.

• 35:45Tyler Cowen?

  Do you worry about the example of the Canadian truckers where it becomes too easy to cut off people's bank accounts and there's too much social power over a lot of people?

• 35:55Speaker 01

  Well, again, I'm getting rid of the large denomination notes and not straightforwardly the others. And so, yeah, no, we don't want to over, I absolutely agree. There's government excesses, the questions, you know, do we have, you know, we have, we have drugs that, you know, help people after an operation, but it, and we want to have them, but does it want to mean, mean we want to have them freely floating in the economy? And also, we can phase out hundred dollar bills and fifty dollar bills and we can change our mind later, you know, and decide that we overdid it. I don't think we would. I think, you know, continue to go in that direction. But it's a matter of costs and benefits.

• 36:38Tyler Cowen?

  Do we also have to ban stable coins then? Because you can make a hundred dollar, five hundred dollar transaction in stable coins. And not everyone's used to doing that now, but you figure within two years, your AI can do it for you if need be. And we're just pushing more people into stable coins.

• 36:55Speaker 01

  Well, absolutely. So in the same book, I said, we need to regulate cryptocurrency. And there are different kinds of stable coins. And it's not clear where it's ending up in the long run. But I think stable coins eventually have to have some kind of parallel revealability to what bank accounts have. Not necessarily exactly the same, but I know that's where we're headed. I think the regulators are pretty favorable to stable coins actually on the whole. But not if they're, you know, being used to evade taxes and all kinds of regulations.

• 37:30Tyler Cowen?

  But the issuers can be abroad. In that sense, it's quite different from domestic banks, from currency. Someone has a stablecoin account, you know, in the Cayman Islands, and they make a transaction with someone with a stablecoin account in Estonia. How much say do the US regulators really have over that?

• 37:47Speaker 01

  We don't have much say over that. I mean, we do now with bank. You already have that the case to some extent with bank accounts. And you can mitigate the problem. You can't eliminate it. I mean, that's generally true of cryptocurrency. You can, you know, try to try to regulate it. You can't completely eliminate it. I mean, probably a lot of sanctions evasion is being done with stable coins and cryptocurrency. And clearly, we have not been able to touch that.

• 38:16Tyler Cowen?

  Should the US issue, you know, a CBDC, a digital coin?

• 38:20Speaker 01

  Let me put it this way, I don't think we should be the first to try this. Right now, we're on top. I mean, I kind of think we peaked, but that's another question. We're winning. Why do you want to change the rules of the game when we're winning? Because it's not about the currency, it's about treasury bills, it's about the interest payment, it's about market clearing. And also, we're so big, we probably are more likely headed towards having competitive stablecoins, which are regulated, which have some kind of lender of last resort than a CBDC. I'm skeptical of that. And, you know, you put yourself in a position where one screw up,

• 39:03Speaker 01

  you know, can paralyze everything. And it wouldn't be good if we had five stablecoins and one of them had a problem. But I tend to think that's something for, you know, Latvia or Singapore to try, and not necessarily the US. Maybe in 50 years. To be fair, Europe's talking about it. But they're talking about what we call a wholesale CBDC, which is among the banks, and that's a completely different animal.

• 39:28Tyler Cowen?

  A standard macro puzzle today. We had a disinflation from post-COVID inflation. It went from 8.9% to something not too far from 3%, and there's no big recession. How do you interpret that? Were the rational expectations, people right that it was credible and we just did it? Or the people who say it was all supply shocks, are they right? Or it's a big puzzle to me. What do you think?

• 39:52Speaker 01

  Well, I think it is a big puzzle, is the first thing to say. I mean, I'm not going to claim I thought that was going to be painless, bringing the inflation rate down. I don't think I was out there quite at the Larry Summers level banging on the table, you know, saying that there had to be a big recession. I certainly do not buy the idea was all supply shocks. That's just nonsense. So there are these people who say, oh, it was just the supply chain, the shipping lanes were closed and all that stuff. And as soon as the supply chains were back, inflation was down. Excuse me, the supply chain problems make the price go up. When they go away, the price should come down. It did not.

• 40:31Speaker 01

  And so there clearly was, you know, even in countries which didn't do as much macro stimulus as we did. They did a lot, and they all, of course, kept their monetary policy easy. But yeah, I mean, the credibility is remarkable. I mean, if you look at inflation expectations, they moved a little bit. I mean, I'm talking about the professional, the consumer ones moved a little more. But consider what just happened, that inflation expectations didn't move more. It's remarkable. And to come back to the earlier point about solving our debt, if we ever have an inflation, I don't think that's going to happen again when we have a second inflation. That time, that time, the credibility is really going to be shot.

• 41:16Tyler Cowen?

  What else do you think of as an unresolved puzzle in macro besides the disinflation?

• 41:22Speaker 01

  Boy, that's a really good thing because I think about research questions all the time. It's certainly been very surprising to me of how much bank regulation has created all these arbitrage issues across things that didn't exist. Like, I'm not sure this is completely unresolved, but you know, when I was doing my book with Maury Obso, we thought of what we call covered interest parity as just, you know, something that holds like, you know, law. In other words, if you borrow in one country and you borrow in another country, but do some kind of forward contract on do it, you get the same interest. It's not true anymore.

• 42:05Speaker 01

  And I think there's just a range of these puzzles that have come up since the crisis. I suppose another one would be, you know, what kind of inflation rate do we really want to have? There's a lot of debate about that. There are people who say it shouldn't be 2%. It should be 4%. Some people, it should be 0%. I think that's a big question.

• 42:28Tyler Cowen?

  Do you have any guess on the covered interest parity issue? Because that bugs me all the time. Do you think it's an institutional friction or there's some kind of unmeasured risk that we're not seeing or picking up or something else?

• 42:39Speaker 01

  I mean, it seems to be that the banks are prevented from undoing it, that we have some of these regulations, for example, that just restrict the size of your balance sheet.

• 42:52Speaker 01

  And the banks used to just be able to freely borrow and lend and undo things. So you'd borrow in one currency, lend in the other currency, and that's it. That's how you'd undo it. But there's, there's just been a range of puzzles like that. And of course, the biggest puzzle is productivity. Like if I go to a country like the UK, how do we get productivity? And exchange rates are still a puzzle. I mean, you asked a question about it before, but we don't have a good, you know, fully satisfactory explanation of them.

• 43:24Tyler Cowen?

  You'll be doing a book tour in the UK soon. Why is their growth, their productivity growth been so slow? Again, we all might admit this is a puzzle, but it surprised me. They have plenty of science. They have some great universities. They played a key role in developing vaccines, other innovations, and they seem entirely stuck.

• 43:45Speaker 01

  Well, I mean, it's been a generalized problem in, in Europe, although you think they'd been doing better. I think part of it is this sucking sound of the United States with the brain drain that we have. You and I both know about DeepMind, British company, you know, ends up in California. And I think there are many examples like that, where when something goes well, the US sucks them off. Probably they have this profound problem of the North and the South. The South is rich and the North is poor, and they just have not been able to figure that out. So that, you know, if you go to London, they're doing great, and they're still doing great.

• 44:29Speaker 01

  But they've had trouble finding jobs. The manufacturing jobs are going. They haven't figured out how to substitute for them. The US has had the tech revolution. I mean, if you took that away, we don't look so good anymore.

• 44:43Tyler Cowen?

  A lot of countries don't seem to have a sucking sound problem, though. So the talented people in Northern UK go to Southern UK. But you look at Germany, the Netherlands, you don't see the same thing happening in those places. Is it because London is so good that the country as a whole grows more slowly? Is that a kind of curse for the aggregate number?

• 45:06Speaker 01

  You know, it's it's still the case that those countries have hardly been models of dynamism, Germany and the Netherlands. They you're right, they've been able to keep people more, partly because they're not English speaking. But again, a lot of the difference in how we've done is our tech sector, that's been a lot of the innovation going through the economy. And I don't want to sound like I'm drunk with what's going on with our tech sector and how it affects other things. But if you took that away, our numbers would look like theirs.

• 45:40Tyler Cowen?

  Is Malay going to make it succeed in Argentina? What does it depend upon?

• 45:45Speaker 01

  Well, I hope so. I think he's the best chance that Argentina's had in a long time, which is fair to say a very low bar. The thing that he's done that I have not seen before is balancing the budget. If you're a big borrower and you keep defaulting, sort of a starting point is figuring out how not to have to borrow money. He's managed to do that. I mean, I don't know that all his libertarian visions necessarily will come to pass. No, he's provided some stability, any inflation. I mean, it's so, Argentina, as you know, was one of the richest countries in the world by any measure at the turn of

• 46:26Speaker 01

  the 20th century, you know, in 1900. Now they're lower middle income country. Their per capita incomes below Brazil, which is hard to get your head wrapped around. So, I mean, I think there are many reasons, but certainly, you know, parrenism, socialism has not done well by Argentina.

• 46:46Tyler Cowen?

  But has he balanced the budget? I know he announced a balanced budget, but this is April 2025, and they just borrowed $20 million from the IMF. It doesn't sound like a very balanced budget.

• 46:58Speaker 01

  Well, I mean, it's counting the interest payments on the IMF. And yeah, I mean,

• 47:04Speaker 01

  He inherited this big debt. They're paying the interest. It's very low interest on the big debt. And I don't know how that's ultimately going to get resolved. I mean, they have a lot of problems ahead. But, you know, there's a lot of strength in Argentina if they can grow again. I don't, I don't want to sound, you know, Panglossian about Argentina. But goodness, they had inflation of 200% when he took over. The economy was in freefall. So, and look, you know, there's no magic wand you can wave over the last 80, 90 years of Argentina and make everything right.

• 47:43Tyler Cowen?

  Okay, some chess questions. Once a grandmaster, always a grandmaster. So you can't just say you don't know. Is Duquesne the next dominant chess player? Or will he be first among key equals?

• 47:54Speaker 01

  Well, he's not even nearly first now, even among, you know, others. I mean, there's a number of Indian players who are very good. I wouldn't put him ahead of Nakamura or Caruana, much less Carlsen. But he's ambitious. He's talented. I wish him the best. I mean, it's wonderful that he won, but I mean, he's got a long ways to go to be Kasparov, Fischer, Carlsen. It'd be fabulous for chess if he does that. I, I don't see it yet, do you?

• 48:24Tyler Cowen?

  Well, Nakamura, Caruana, in five years, they'll be out of the scene, maybe before then. Carlsen is already, in a sense, out of the scene. I think he has a 30 or 40% chance of being not a truly dominant player, but say the way Anand or Kramnik were at their peak. You know, one of the top two or three very consistently and world champion for some number of cycles. Not the way Kasparov was, but something quite impressive. I'm close to.

• 48:52Speaker 01

  Well, it may be fantastic. Yeah, yeah, okay. I thought you were asking a different question.

• 48:55Tyler Cowen?

  No, the next, not the current dominant, but is he the next dominant player?

• 48:59Speaker 01

  He could absolutely, I mean, Anand and Kramnik were amazing and he could absolutely do that. I mean, he's close to having done it. If he met, he'll have a much more difficult challenger next time, I would suspect. I mean, Ding is an uber talent, the person he beat. But clearly had all sorts of mental problems in the match. I mean, he's been depressed and you could see him sort of losing it in some games.

• 49:25Tyler Cowen?

  What were your impressions of Bobby Fischer when you met him?

• 49:30Speaker 01

  Well, I mean, he was amazing. First of all, when I met him, he he came every day to the 1969 US Junior Championship over 10 days. And he sat and he analyzed with us. And the first thing we just thought, what's he doing with us? Why is he wasting his time with us? We just thought he was so generous. But obviously, you know, his absolute intensity, his commitment. I don't know if you remember, it's hard to imagine, but he actually used to be weak at rook endings. Weak for somebody like that.

• 50:03Tyler Cowen?

  Yes.

• 50:03Speaker 01

  So he locked himself in a room for three months and did nothing but study rook endings and got to be very good. He got a hotel, he told us about it, got a hotel room, you know, with no, no view. And then, you know, certainly some of the ideas he showed, I, I, I still think about it. I won a game and he went over with me against Steve Spencer. It was the last game of the tournament, which I won. And he showed me his ideas. I was like, I hadn't thought of any of them, you know? It was just the, his fertile, I don't know if they were better, to be completely honest, than what I played. I mean, of course, he's much better than me.

• 50:44Speaker 01

  But I mean, just the imagination of there was this, then we're talking about on move four, on move five, of just things that wouldn't occur to me.

• 50:52Tyler Cowen?

  And part of the Fisher legend was that, at least supposedly, he was the greatest over the board analyst of any chess player.

• 50:59Speaker 01

  Well, Garry Kasparov was no fool and same as Carlsen. I mean, I don't know. But he was, he was a staff, he was way above everybody in his generation. He did not have the prep that the Russians had. He worked on his own. He was not working with a team. The Russians had all this communication and coaches and everything. And by the way, you know, I was representing the US in the World Junior Championships and things like that. It was a big disadvantage that you didn't have a trainer or a coach, you know, organizing information. Fisher was doing that at the highest level. So he must have been by far the best over the board player then.

• 51:39Tyler Cowen?

  But not the player. I mean, just someone, if you would sit down with them at the board and show them your game. The claim I've heard is that Fisher was a more astute analyst even than Kasparov. Kasparov might have been the better player. But just willing to put his entire mental energy into over the board analysis, sitting there. I think that's part of the Fisher legend.

• 52:00Speaker 01

  I mean, it's part of the legend. I mean, he was amazing. I played against really all the top players then with the exception of Spassky. And, you know, they were, they were all phenomenal, but they weren't all equally good calculators. So the best calculator I ever played was actually a Yugoslav player reached second or third named Lubievich. And he beat me. I don't know. I was 16 years old. And to try to salvage some ego, I said, well, what did you, what if I did this? What were you going to do? And I showed him my best. I thought it was just like a great variation. I don't remember how long, 10 moves. And he goes, mm hmm, mm hmm. Yeah, but then I do this. Actually, it's this. And

• 52:44Speaker 01

  he goes something 15 moves. I never played Fisher. He wrote an article about me once, as you know, but I never played him. But of course, I could well imagine it would be the same. But I'm not sure I could tell the difference with Kasparov, Carlsen, you know, at that level.

• 53:00Tyler Cowen?

  When Magnus spoke with Lex Friedman, he drew a distinction between players who were incredible calculators. He called Gukesh one of those, and players who were incredible with evaluation. And he called himself one of those. He thinks he's actually not the best calculator. Do you broadly agree with that distinction?

• 53:19Speaker 01

  Well, I think, I think it's an interesting question. It's funny because I've seen him write about Karpov, who I did play. And he said, I don't know how Karpov does it. He just knows where to put the pieces. He just knows where everything goes. And he's not having to calculate like I do. And between his great nemesis was Karpov. And between the two of them, he was the calculator and Karpov was no slouch. But Kasparov was better. I think maybe as Gary gets older, you know, I mean, your comparative advantage as a calculator is probably at your peak at a younger age. And Gary, you know, developed other tools. But I'm gonna, he was really good at both. So I, but I would have put Kasparov as a calculator, like a fierce calculator.

• 54:05Tyler Cowen?

  Now, you must have been out of practice, but I believe you drew Magnus in a game of Speed Chess in 2012. Is that the correct year?

• 54:12Speaker 01

  Yeah, it really, it really happened.

• 54:14Tyler Cowen?

  How did it happen? What's, what's the story?

• 54:16Speaker 01

  Well, sort of what I tell people is if you were a professional golfer once and you play three holes with somebody, anything can happen. You know, the law of large numbers. But, you know, going more into it, he let me have white. We played a Rui Lopez Spanish opening, which he had been playing all the time. He played a variation. I looked, I hadn't prepared. I mean, it's just what he was playing all the time.

• 54:42Tyler Cowen?

  Did he play the briar like he used to do?

• 54:44Speaker 01

  He played the briar. No, that's right. He played the briar. And I didn't, I didn't even know that he played it at the time. I mean, he played a lot of things. I didn't know he was playing that. And, you know, so I knew where the pieces go. I didn't, I knew what I was trying to do and where the pieces go. And at one point, he, you know, he made an overly aggressive move that just was a big mistake. And I saw it. And I got a winning advantage. It wasn't an easy winning advantage. I'm convinced that if he had continued the game, he would have won. But at some point, he had a choice of repeating moves and he was losing. And so, you know, he just repeated moves. I'm not saying I would have

• 55:25Speaker 01

  won. I think I would have lost if he kept playing, but it just happened. If I did it 10,000, 20,000 times more, I don't think it would happen.

• 55:35Tyler Cowen?

  What do you think of Fisher Random as the future of chess? Because that seems to be what Magnus wants. I don't like it frankly, but what's your opinion?

• 55:42Speaker 01

  I'm with you, Tyler. I mean, I mean, I take joy from classical chess. I love watching a beautiful classical chess game. I can relate to it. You know, I, I mean, I'm hardwired to think about it. And Fisher Random chess, I mean, it's a little bit like looking at problems. I respect chess problems, but the positions are often weird and improbable. I just have trouble relating to Fisher Random chess. I hope I change. I'm just speaking from my age, but I'm so invested in classical chess. I love classical chess. I think about classical chess all the time. I don't know. Why don't, what's your, what's, why don't you like it?

• 56:24Tyler Cowen?

  With classical chess, not every game, but most games, I feel I can look at the board and have a decent idea what's going on. And I might be wrong, but even then, I can figure out ex post why I was wrong. With Fisher Random, I don't have that sense unless it evolves back into a classical looking like position. So from a spectator's point of view, why should I care? That's how I would put it.

• 56:46Speaker 01

  Yeah, I mean, we're on the same page on that. But on the other hand, you mentioned Gukesh and the computers have just dominate the preparation. That's why Carlson stopped. He didn't want to spend all the time.

• 56:58Tyler Cowen?

  Yeah, how are we going to solve that problem then? If we don't do Fisher Random, what is your proposed solution? Because I have one, I'll tell you mine, but you

• 57:05Speaker 01

  Tell me yours. Tell me yours.

• 57:07Tyler Cowen?

  That we randomize the first few moves of the opening. So some percentage of games through computer randomization would be like 1b4, 1b6, and then they start playing. But you do that with many permutations. They're all playable positions. As you well know, no grand master game would go 1b4, 1b6. But there's no reason why you can't play from that position. And if you have 500 opening alternatives like that that the players don't control, I just don't think they can, you know, prep that much. The Berlin, the Marshall, the whatever, all these forced draws. I think they actually have to play chess.

• 57:41Speaker 01

  I love that idea. And yeah, it creates some randomness in what initial positions you get. But I love that idea. I mean, that that sounds much better to me. I would much should I have to say as a player, I played like that because I was very isolated in the United States. I wasn't following all the opening innovations. So I played all kinds of openings to be unpredictable.

• 58:04Tyler Cowen?

  But if everyone does it, it's easier to do. It's like every game is between two Ken Regans is one way to put it.

• 58:11Speaker 01

  Yeah, no, no, I like your idea. I think it's a great idea. I endorse it.

• 58:16Tyler Cowen?

  Thank you. Final question for you, for our listeners. Your book's coming out. It's on very important issues of currencies, international trade, international finance. It draws upon a lifetime of your learning and practice and advising. What is it you think you'll do next?

• 58:34Speaker 01

  Well, I have a lot, you know, like any academic, I already have my next few years of projects. Some of them frankly, you know, go out of the book. I think people forgotten about political economy. They just think, you know, if the central bank says the inflation rate's 2%, on average, it'll be 2% and we go home. And I worked on that early in my life. I wrote the first paper on why you should have an independent central bank. And I'm working on it again, admittedly with some very talented young people, including Marina Halleck at Yale and Pierre Yarad, who's at Columbia, but now actually on the Council of Economic Advisers. And just thinking that, no, the political pressures are important. So that's, that's an important topic.

• 59:19Speaker 01

  I'm also working on China scenario. I've been working on for a long time. So I have some thoughts about comparing China and Japan, for example. But I have a lot of things I'm excited about. The part of what was so great about the book is I've had sort of, I would describe a mini renaissance in my research. And I'm able, at least I feel that way. I mean, I don't know if the rest of the world thinks that. But it, it gives me joy sort of to have some confidence about, you know, some of, some of the ideas, although as you say, there's much more to it.

• 59:53Tyler Cowen?

  Again, everyone, Ken's new and excellent book is Our Dollar, Your Problem. Ken Rogoff, thank you very much.

• 1:00:00Speaker 01

  Thank you.

• 1:00:04Tyler Cowen?

  Thanks for listening to Conversations with Tyler. You can subscribe to the show on Apple Podcasts, Spotify, or your favorite podcast app. If you like this podcast, please consider giving us a rating and leaving a review. This helps other listeners find the show. On Twitter, I'm at Tyler Cowen and the show is at Cowen Convos. Until next time, please keep listening and learning.