The 2008 Financial Crisis Ten Years Later With Adam Tooze

LINDSAY: [00:00:01] Welcome to the President's Inbox, a sea of our podcast about the foreign policy challenges facing the United States. I'm Jim Lindsay, Director of Studies at the Council on Foreign Relations. This week's topic is the 2008 financial crisis, ten years later. With me this week to discuss the global consequences of the crisis there brought the international financial system to the brink of collapse is Adam Tooze. Adam is the Shelby Collum Davis Chair of History at Columbia University, where he serves as a Director of the European Institute. He is the author of four highly regarded books often coming with accolades like masterful, highly intelligent, and pathbreaking. His most recent book is Crashed: How a Decade of Financial Crises Changed the World. Adam, thanks for joining me today.

TOOZE: [00:00:52] Thank you for having me on.

LINDSAY: [00:00:54] It is a terrific book. I really enjoyed reading it and perhaps you could really begin where you begin in the book with your main claim. Let me just quote you, you say "the financial crisis and the economic political and geopolitical responses to the crisis of 2008 are essential to understanding the changing face of the world today". Can you sort of explain that for us?

TOOZE: [00:01:20] Yeah, I mean I think you could take this at different levels. One way would be to think geographically. If you think about the state of American politics today and particularly the state, say of the Republican Party, 2008 is as good a moment as any to begin that kind of diagnostic effort. Huge fissures opened up within the party that premonitions, I think, of the situation we confront today in Europe. You could argue that the economic crisis has never really ended. An economy like Italy for instance is substantially not growing since 2008, and the Spanish economy - which is a Texas sized piece of the global economy - suffered an extraordinary shock and is recovering. Greece, a much smaller piece of the picture, is in a state which resembles that of the Great Depression. And then if you looked at Eastern Europe which is often forgotten because an element of the 2008 crisis, the destabilisation of Ukraine, which is too often attributed to political factors or culture or history or the aggression of Putin - none of those factors are of course unimportant, but none of them I think either would have the impact that they did if the if Ukraine had not suffered the crippling financial shock that it did in '08. And then from a completely different point of view and from a different part of the world in East Asia - China, in particular - charges to the '08 recession on the back of you know an epic act of fiscal and monetary stimulus the likes of which we really have rarely seen, if ever, outside wartime and struggling with the consequences of that. Now though there's a huge overhang of debt that's built up there and the concern of so many analysts can be traced back to '08.

LINDSAY: [00:03:01] So in that sense 2008 is still ongoing - we're still feeling the consequences.

TOOZE: [00:03:08] Yes, like any other shock like this. It has an enormous hangover. Things I just don't think ever going to be quite the same again. If you look at central bank balance sheets, for instance, they're still at these extraordinarily inflated levels. And even if they managed to get them down, the act of so-called normalization will itself have huge ripple effect. So we never really get back to the pre-crisis state.

LINDSAY: [00:03:30] I want to really delve into the issue of consequences, but perhaps before we do that, we should explore causes. What was the cause of the 2008 financial crisis?

TOOZE: [00:03:43] Well, I think we have to take seriously that it was a financial crisis, so this was not simply a real estate bubble that burst. I mean, a bursting real estate bubble leaves you with the economic flu, as the bursting of the dot com bubble did. What we saw in this case was a near fatal heart attack of the CAP the banking system on both sides of the Atlantic and in East Asia.

LINDSAY: [00:04:06] In both sides, because the story normally is told of the American subprime mortgage market exploded.

TOOZE: [00:04:15] Well, that was the trigger. But the Spanish real estate bubble burst too, the Irish real estate bubble burst too. Once that started happening, what really threatened the world was a huge banking run, and a banking run affects banks whether or not they made good investments. It's a matter of your funding, not your investment.

LINDSAY: [00:04:30] What exactly is a banking run?

TOOZE: [00:04:32] So, a bank run - we really do have to think, you know, like the classic American bank runs of the 19th century, in the early 20th century. It's a situation where depositors in banks or people who provide the funding for banks - modern banks, especially those before 2008 didn't rely on the positives as much as would have been good for them. Those providers of funding suddenly decide for whatever reason - and it really doesn't have to be a very good reason, they just decide on any given day that they'd like to have their money back. And when that happens, any bank however will run - the most solid bank in the world - cannot survive that shock. And so that's really what makes 2008 different from other financially driven recessions, or from other bubbles bursting, is that the losses which were on the asset side of the bank balance sheets - where they put people's money - were the trigger of a massive withdrawal of bank funding. And that's not what happened during the dot com bubble. When that burst, the first round of losses inflicted on investors around the world - but specifically of course in America - probably larger than the first round of losses in the real estate bust. But it didn't precipitate a banking crisis because the investments were not on the balance sheets of the banks. They were in savings funds, you know, people's savings, they were in 401Ks, they were in pensions funds. So those people took losses and that caused the flu, it caused the major recession in the United States but not a financial crisis. '08 is both a recession and a financial crisis and it affects South Korean banks which have no stake in subprime.

LINDSAY: [00:06:00] So that the financial system, in that sense, it's almost like the nervous system of the overall economy.

TOOZE: [00:06:07] I think it's really cardiovascular, because it has the capacity to just bring everything to a halt suddenly. GE, a pillar of American manufacturing, couldn't get short term funding.

LINDSAY: [00:06:17] And it turns out that General Electric was as much a finance company as an industrial company.

TOOZE: [00:06:21] But even its industrial arm - Harvard University was struggling to raise cash. That fall, trade collapsed with extraordinary rapidity because short term funding for trade became very difficult to access.

LINDSAY: [00:06:35] The beginning of the crisis is often dated to mid-September of 2008 when Lehman Brothers declares bankruptcy. Why was the Lehman Brothers bankruptcy pivotal?

TOOZE: [00:06:49] Well, you could quibble with that. Many people would argue that really August 2007, more than a year earlier, is the crucial moment because Paribas, one of the really giant European banks, a French bank, declares that three of its American real estate funds cannot make payouts to investors and the crucial words they use is "there is no liquidity in the market". There is no price for this stuff. When that happens then all of a sudden the entire pyramid begins to collapse and Lehman is one of many which could have gone down. Merrill Lynch could easily have gone down as well, Morgan Stanley was vulnerable, even Goldman Sachs was vulnerable. and then amongst the big high street banks Citigroup - and that's just the American case. It's not counting the British or the German or Benelux banks. So Lehman is crucial because that's the moment at which a bank actually fails. So they had managed to contain the crisis at Bear Stearns so they managed to contain even the crisis.

LINDSAY: [00:07:44] And Bear Stearns had failed earlier in 2008.

TOOZE: [00:07:47] It looked like it was going down and had been sold off with a subsidy from the Treasury and the Fed to JP Morgan. The British managed to contain a really dangerous run on Northern Rock ultimately also having to nationalize it. But Lehman was actually just allowed to go into bankruptcy. So we broke through the ice at that point of confidence, and when that happens all sorts of decisions have to be recalculated because you're all of a sudden in a much darker world. So their money market funds begin to run - AIG, which would almost certainly have failed anyway, rapidly moves towards failure and the pressure on the investment banks begins to build up to unsupportable levels.

LINDSAY: [00:08:25] So clearly by September of 2008 American officials - particularly the Federal Reserve officials - realize they have a massive problem on their hands and they begin to mobilize. And you write somewhat approvingly of the way the Fed handled the crisis, you wrote here: "The Fed's liquidity provision was spectacular. It was historic in lasting significance. Among technical experts it is commonly agreed that the swap lines with which the Fed pumped dollars into the world economy was perhaps the decisive innovation of the crisis." But on the other hand I get the sense that you're critical also of the Fed's decision.

TOOZE: [00:09:11] Well, I think one has to has to grant that in a very bad situation they did the right thing. And what they did was efficacious, but it was indeed a really bad situation. And some of that damage being done not just to the American economy, but to American society and American politics would only make itself felt over the years to come. So we have to credit them. To call them tragic figures would be would be grandiloquent, I think, I mean it exaggerates their status. But faced with an extremely bad situation they took tough and important and in some senses brave decisions to do extremely unconventional policymaking.

LINDSAY: [00:09:49] But these decisions were being made by the Federal Reserve not by the United States Congress or the president.

TOOZE: [00:09:54] Well that's another element of their situation is that they know the political backdrop for this is anything other than supportive, because crucially the GOP has gone AWOL at a time when the Bush presidency is struggling to maintain its grip and you're in the middle of an election season and the congressional party just announces that the Bush administration should expect no support from from the Republicans which they also dont get. The crisis fighting insofar as it has a political base is that fragile coalition, which is now completely ruptured, between centrist globally orientated Democrats and the smaller group of centrists globally orientated Republicans, and that coalition historically of course has been crucial for American foreign policy, it's foundational for the Council of Foreign Relations. And that that coalition is is really showing its limits in 2008. So part of the bravery of Paulson and Bernanke and Geithner and so on is that they simply have to find political support wherever they can get it, they have to cross party lines and build a coalition that's necessary. And of course the Democrats also are the party that ultimately pays the heaviest political price for having supported the bailout because they've distanced themselves from their left base.

LINDSAY: [00:11:04] And the bailout comes during the Obama administration is passed.

TOOZE: [00:11:09] Well no, the crucial elements of it all passed during the Bush administration, they were all passed in the fall of '08. But of course the Democrats controlled Congress. So it has to be done on a bipartisan basis or at least the White House, the Treasury, and the congressional majority have to cooperate with each other. So you - no, it's kind of that coalition of American globalists that you can see all the way back to the Marshall Plan era. You know it's one of its last kind of gasps really, and then by 2010 obviously the Democrats lose control of Congress. And from then on in congressional behavior towards America's foreign economic policy is just frankly obstructive. I mean all the way to, you know, blocking the adjustment of the Chinese quota at the IMF by means of linking it to the question of federal funding for Planned Parenthood which is something you simply cant go to a G 20 meeting explain to Beijing that we can't get the shift done that we agreed at London in 2009 because we can't find the majority in Congress.

LINDSAY: [00:12:12] While you are - well you praise U.S. policymakers particularly fed for making the right calls in a tough situation even though recognizing it creates further problems down the line. You're quite critical of how European officials handled the crisis.

TOOZE: [00:12:29] What you see there really is a classic problem of collective action. I don't think that any one of their positions individually would make no sense. I mean you know this is one of the basic principles of historical interpretation is that you ought to be charitable to the people that you're thinking and writing about and presume that they come with some kind of coherent strategy, which in their own way - I think the French, the Germans the ECB, the IMF, and the Americans - the Treasury - was deeply involved in Europe, in eurozone policymaking - all had in their own way reasonable positions. But when you put them together they didn't result in a coherent strategy.

LINDSAY: [00:13:02] Well the American strategy overall was to be stimulative, to try to inject liquidity into the system to get it going again. The response in Europe was contractionary.

TOOZE: [00:13:13] That's the net effect. I mean America in fact is profoundly divided over these issues, and Ben Bernanke faces massive criticism from conservatives in the U.S. including in fact from members of the CFR; Amity Shlaes was a vigorous critic of Ben Bernanke.

LINDSAY: [00:13:31] She was a fellow here back at that time.

TOOZE: [00:13:34] Exactly, during that period. And there are Democrats who are, you know, fiscal conservative since the 1990s. That's I think the thing to understand is that this is not a straightforward party fight by any means. And what results in the U.S. is in fact quite a contractionary fiscal policy in the U.S. as well, except that the difference is that the Fed acts to offset that I think is the big difference whereas in the European case both the ECB stance, the central bank's stance and fiscal policy are simultaneously contractionary - in fact in the central banks' position is even worse than contractionary because it basically risks if not deliberately courts the risk of a panic in the bond markets. And theres one thing, you know, a sustained and deliberate contraction, another thing all together is to in fact incite a forest fire of confidence in the bond markets or rather lack of confidence.

LINDSAY: [00:14:27] So why was the net effect in Europe to put the foot on the brake rather than on the gas pedal?

TOOZE: [00:14:33] Well in both cases there is a fiscal contraction from 2010 onwards, but the crucial thing is that theres a massive blow to confidence that comes from the mishandling of the sovereign debt crisis - mishandling is perhaps not even the right thing -

LINDSAY: [00:14:46] The sovereign debt crisis is what?

TOOZE: [00:14:48] The sovereign debt crisis is the second phase, if you like, of the financial crisis one which people are expecting in the U.S. as well never seems quite to arrive, but basically the first phase of the of the financial crisis of '08 is a mortgage crisis or a private debt crisis. Everyone was expecting a public debt crisis it never happened. This was a private sector issue in Europe as well. The big pieces of the eurozone like Spain and Ireland are private sector bubbles that burst; the effect of that on government budgets, in part because of the stimulus programs that they adopted deliberately and in part because of the so-called automatic stabilisers, which clearly unemployment insurance and tax revenues go down at given tax rates so you get a stimulative effect, you get a major increase in the deficit which is good for aggregate demand but bad for the long run sustained -

LINDSAY: [00:15:38] All of a sudden the government's running a much larger deficit and we discovered that they already had big debts, it wasn't that they had piled up.

TOOZE: [00:15:45] This is the crucial thing right? A state like the US or Japan or Germany can absorb that kind of thing. But if you're already just about coping as the Greeks were and you're fragile anyway and this will push you over the edge, and if then your central bank is not supportive and stabilizing the bond market for government debt which is the historic role of central banks, then all hell can break loose and it promptly did in the eurozone. And then what you get is the added effect which is that in truly critical cases a banking crisis, systemic on the scale of the Irish crisis.

LINDSAY: [00:16:19] If you could explain, people probably do not remember the Irish crisis.

TOOZE: [00:16:22] The Irish crisis Ireland is as though you took the island of Manhattan - that's about the size of it -and made it responsible for bailing out Wall Street and then Wall Street collapses. That's essentially what happened to Ireland and they guaranteed the balance sheets of banks which are larger than the national economy of Ireland. And the though the Irish government started with that balance sheet its public debt was very very healthy is very low. It rocketed into a situation of unsustainable public finance. So that's the next phase. Greece is a case where a precarious public financial situation is tipped into crisis by way of the general economic crisis. Ireland is one where you just have to straight through line from the banking crisis to public debts and you need that in both cases the Central Bank, the European Central Bank, was not willing to provide a stable stabilising framework. We can test that proposition by looking at the situation since 2015, and since 2015 the ECB has been draining Europe's bond markets, government bond markets, engaged in quantitative easing like Ben Bernanke had three phases, and that has the effect of basically neutralizing the government debt market. So even with the current political problems in Italy which are very very serious we haven't seen much panic in the bond markets yet because the ECB is buying the debt up.

LINDSAY: [00:17:44] So eventually the ECB went down the Fed's path but it went down several years later after a lot of reckoning.

TOOZE: [00:17:51] Timing is everything in a crisis.

LINDSAY: [00:17:52] My sense was on the fiscal side, government side, many governments - the British government, the German government - their message was austerity, that austerity was the way to get out of the crisis. And I think in retrospect it was not the way to get out of the crisis, and made the crisis worse.

TOOZE: [00:18:07] Absolutely if you look at the actual data, the American fiscal squeeze from 2010- 2011 onwards because of the inability of the parties to agree in Congress and the nondiscretionary - the automatic cuts that they that they agreed to the so-called sequester. The net effect in the US is pretty contractionary too. Historically this was one of them. This is one of the recessions in which government fiscal policy taxing and spending policy turned contractionary soonest in post-war history.

LINDSAY: [00:18:38] So the consequences of the crisis weren't just about economics, they were political. Can you walk us through on both sides of the Atlantic you see the consequences of the 2008 crisis playing out?

TOOZE: [00:18:54] Yeah I mean I think it's important not to generalize - not because it isn't useful sometimes to generalize and use terms like populism but simply because they mislead us to whats going on. So for me the financial crisis is a bit like an earthquake and then of course that will knock some houses down. But others will remain perfectly intact. So it crucially depends on as it were the underlying architecture and robustness of your political system. And some countries come through this a relatively intact so remarkably for instance in a place like Spain - the problems that Spain have is truly critical are things like Catalan independence and autonomy. The Spanish political system spawned new democratic parties that were pro Europe, it didn't spawn anti- systemic parties.

LINDSAY: [00:19:41] And the consequences of 2008, they were huge for Spain.

TOOZE: [00:19:42] Absolutely. So despite the fact that it's suffered you know youth unemployment pushing 50 percent in an economy the size of Texas. So imagine if Texas had 50 percent youth unemployment there would be a national political issue in the United States. Spain was basically left to work its way through this deep, deep problem and we dont see a crisis of Spanish democracy. We certainly see one that has to do with Catalan independence. I think that's rather different, but in both Britain and the United States you see I think a fragmenting of the center- right parties. This is the really crucial thing that's happening and that runs basically down the fault line between the globally orientated, business orientated, elite of those parties which were crucial for instance in pushing through NAFTA in the American case or Chinese accession to the WTO or EU membership in the British case. And on the other hand the base of the center-right Conservative Party, which in more or lessover ways was being mobilized by appeals to nationalism, to xenophobia, sometimes outright racism or at least Islamophobia, and that is an incredibly tense formula which really began to come apart after 2008.

LINDSAY: [00:20:58] But haven't also the center- left parties been falling apart, particularly in Europe. Center- left parties seem to have really lost their way, shrinking shares of votes across the continent.

TOOZE: [00:21:10] Yeah I think in a case like France, you have the complete evaporation of the Socialist Party. The Socialist Party in France doesn't have the history of the SPD in Germany, it's a relatively recent formation of the post-war period. So it was always more tenuous but it's nevertheless an earthquake. I would think that there's really an interesting - parallels is perhaps too strong a word, but there's a simultaneous shock to the coalitions which underpin both the center- left and the center- right. On the center-left, problems in fact go back to before the crisis, I would argue that they really begin to emerge in the late 1990s when you had Clinton in the United States, Schroeder in Germany - Chancellor Schroeder - and Tony Blair know initiate a kind of centrist move of the Third Way and that always came with the risk of leaving your blue collar support, your organized labor support behind and that seemed a risk worth taking at the time. Of course the question is where do those voters recirculate to, and who do they end up being appealed to by, and the center-right was doing a reasonably good job of containing that now floating blue collar vote. That's the thing that's the group they lose.

LINDSAY: [00:22:19] What other countries came out of 2008 doing well? Or surviving it with institutions intact, not being changed in the way you just described?

TOOZE: [00:22:32] I mean the most dramatic case of the emerging markets. I mean China is the most astonishing case of a regime which - and I think it's fair to call it a regime - which saw the shock of 2008 coming towards it, it was losing export orders. They respond very sensitively to rise in unemployment and reacted with an absolutely massive stimulus. This wasn't uncontroversial in China. It looks to us like a giant economic policy success but it kind of reverse the trend to a rebalancing that they were on and substituted a new rebalancing tendency. So China from '08 onwards -

LINDSAY: [00:23:02] What do you mean by rebound?

TOOZE: [00:23:04] So the thing about the Chinese economy is it grows incredibly fast. But what is it that drives that growth? And there are kind of three elements that could drive its growth. Exports, investment in heavy industrial production of various types, and consumption. And what happens in '08 is that the export bit goes away and the Chinese regime substitutes an epic burst of investment. This is heavy industrial. It doesn't necessarily benefit people's living standards immediately and it's very bad for the environment and the environment is a critical problem in China. It's not some problem of the distant future.

LINDSAY: [00:23:37] Anyone who's been in Beijing or Shanghai -

TOOZE: [00:23:40] You can't breathe, you can't see outside, you know it feels dangerous to breathe, that's like India at this moment too. So the stimulus shifted the Chinese economy towards an investment driven domestically fuelled boom which was controversial and still is controversial and carries with it the risks of a bubble bursting its increasingly reliant on debt as well.

LINDSAY: [00:23:59] It seems to have also created some international tensions because the Chinese have overinvested in a variety of industries deal and the like.

TOOZE: [00:24:07] Exactly and then theres the - I mean the effects of the Chinese overinvestment on international trade are indirect, probably because the Chinese are not overall relying on exports to drive their growth, but certainly the kind of capacity theyve got in steel right now.

LINDSAY: [00:24:26] When you swamp the world with steel products it has consequences, as we've seen.

TOOZE: [00:24:29] Yes it does, and of course it's then a matter of deciding whether increasingly rich society like America really needs to worry about its steel industry. I mean it takes a particular type of politics to -

LINDSAY: [00:24:39] But the concerns about Chinese steel aren't limited to the United States, other steel producing countries are worried as well.

TOOZE: [00:24:48] Yeah but no one else. I mean the Europeans don't think of themselves as steel producing countries anymore. They do produce some steel -

LINDSAY: [00:24:56] Well yeah, they do produce steel and they do want the Chinese stop flooding their markets so I wouldn't have so much to say that the Europeans have lost interest in steel or other heavy industry. So looking at the situation right now, and I think you hinted at this at the beginning of our conversation, can we go back in time? Can we recapture the world that has existed before the Great Crash or the Great Recession?

TOOZE: [00:25:26] No, I mean you never can. I mean modern history has this extraordinary dynamic growth. To my mind, the best way to think about this is the theme of climate change and environmental change. We've pumped more CO2 into the global atmosphere in the last couple of decades than in the entirety of human history to date. That's the kind of way to think about modern history. I mean economic historians used the phrase the hockey stick, you know, it's a right angle. And so for me you know the most dangerous element of Trump's slogan "Make America Great Again" is not the' great', but the 'again'. There's no do overs. So no, there's no way back. What we can think about is you know how we have what we learned from that crisis and what we can modify since we decided and essentially there were political decisions made in 2009 not to pursue massive structural reform. The banks are bigger than ever in the United States. They're smaller in Europe but that reflects the recession and the European economy.

LINDSAY: [00:26:28] I'm curious on that point, because you make the case that the Fed's innovation sort of kept the circulation of the financial system going. We didn't have cardiac arrest and that was good, but it had all these consequences that no one at the time was really thinking about because they were immediately focused on keeping the patient alive and part of the political consequences is that it really does fuel the Tea Party movement, this outrage against Wall Street machinations and what have you. Could this tiny electoral system have been saved, could Wall Street have been saved without triggering a revolt on Main Street? Or is that inevitable?

TOOZE: [00:27:10] I mean I think it's difficult to hypothesize about this, but what is striking is the lack of punishment. So you know if part of that indignation is the sense of a broken contract. People want to see the people responsible for a broken contract punished in some way. They want them to feel the pain too and they're even willing, in that kind of situation, to accept a slightly slower recovery, to accept a little bit more pain themselves, if only they feel that in some sense somebody paid the price for what was done. I think that's really an area where the Obama administration - if you talk to senior former officials of the administration - they will admit that they have a sense of regret that that they didn't actively go after leading figures. The irony of course is that in due course American banks paid larger fines than any American corporates have in history. Bank of America pays extraordinary levels of fines but it's done years after the event and it has virtually no political payoff. No one really benefits, there's no collective sense of justice being done than justice being seen to be done that comes out of that.

LINDSAY: [00:28:24] That brings to mind the old saying that in American politics its more important to be on the right side of the issue than the winning side of the issue, and in that sense the Obama administration wasn't seen as standing up for Main Street, for people who had their lives upended, and that's really sort of the genesis of the Tea Party moment, the sense that as you put it that the contract is being broken, they've been harmed by others.

TOOZE: [00:28:50] Well the funny thing about the Tea Party - I mean I think in general this is right - the funny thing about the Tea Party is its a protest after all not against the bailout of the banks, but its a protest against the prospect that mortgage holders, ordinary people who take out mortgages they couldn't pay, would be bailed out. So it's a sort of anti-welfarist protest triggered by the financial crisis that itself was in turn incited by indignation of the bailout of the fat cats on Wall Street. I think that's absolutely correct. But there is a deep irony in the fact that that went through anyway. And then when the discussion started and maybe doing something for ordinary house owners that's when the Tea Party really kicked in. And to that extent it's a little bit like the response of that kind of anti-welfare mobilization in the 1970s and 1980s where blue collar America is going through a wrenching transformation. That's really where the rust belt was first you know first made its presence felt and where manufacturing jobs really collapsed at that moment precisely you see this kind of self lacerating almost kind of mobilization against welfare as a moment when millions of Americans are going to rely on it. So to my mind the Tea Party has that kind of slightly twisted logic.

LINDSAY: [00:30:02] One of the things that stood out to me in reading your book comes early on where you make the caution, after observing that you wanted to write sort of a 10 year retrospective on the financial crisis, that's really it's beginning, that if you were to have written a ten year history of the 1929 crash you would have written it in 1939 before all of the truly earth shattering events occurred. And that's one of your great cautions you give the reader in reading the books. I will note that as your caveat. But where do you think we stand today, are we in another 1939 moment or is it the case that history doesn't repeat, it doesn't rhyme, it finds other ways to surprise you?

TOOZE: [00:30:55] Oh that's really fascinating, I haven't - your way of reading that comment is different from what I intended but I actually quite like your way of reading it. So when I said that I meant in other words I would be writing it as catastrophe broke out. That's what I meant to say ten year history - '29 would have been written in '39 - whereas what you're saying, which I think is very interesting, which is that in '39 we didn't even know how bad it was going to be yet. So there could be could be even greater catastrophes just around the corner.

LINDSAY: [00:31:26] Or maybe a real surprise that it's positive. Trying to get a sense -

TOOZE: [00:31:31] Exactly, the point I was trying to make was that the deterioration between '29 and '39 was even more comprehensive, after all war between China and Japan had already started, the Spanish Civil War started, the Germans and the Soviets were carving up Eastern Europe. To that extent the post-war order installed after World War One which I've written about in the earlier work was already dead by that point. So I don't think we're quite there yet. But I do think there are - and I actually started writing the book in 2013 when I went I thought the story was broadly an optimistic one - optimist, that's a strong word - but at least the sort of somewhat redemptive. In other words there was this transatlantic capacity for action which had not been really openly discussed by either side, the Fed and the Treasury had no interest in talking about their action to support the European banks and the Europeans had no particular interest in admitting how reliable they were on the Americans and the aim of the book was really Atlanticist and its intention was to celebrate the latest installment and to ask the question you know "why". To celebrate - perhaps it's not quite the right word. Maybe I'll have that back. The intention was to to document the success of another important moment in transatlantic financial relations and to ask the question why it wasn't more publicly celebrated and then of course I find myself writing a very different book. Faced with the escalation of crises both in Europe and in Eurasia and then of course the political fallout in both Britain and the United States. So it is very difficult I think at this point to make is difficult to see you know much by way of a positive surprise in our immediate future. I find that short of some miraculous tech breakthrough on carbon capture or something like that. What we know is obviously we've we've witnessed with TAC Treaty stupendous devolution over the last 20 years. So maybe that is indeed the salvation, but the sort of elements discussed in this book don't point in the immediate future to any easy resolution of our problems. The trade war is really the least of our problems. The real issue I think is financial coordination.

LINDSAY: [00:33:42] On that sobering note I'll close up The Presiden't Inbox for this week. My guest has been Adam Tooze, a professor of history at Columbia University. He is the author of Crash: How a Decade of Financial Crises Changed the World. I'll also throw in I highly recommend his book The Deluge, which the New York Times book review called "an essential book epic in scope boldly argumentive deftly interweaving military and economic narratives. A splendid interpretive history about early 20th century history". I highly recommend it, it was a delight to read. Thank you very much for joining me here today.

TOOZE: [00:34:25] Thank you for having me on.

[00:34:26] Opinions expressed in The President's Inbox are solely those of the host or guests, not of CFR which takes no institutional positions. Today's episode was produced by senior producer Jeremy Sherlick, Chris Vieira was a recording engineer. Special thanks to Corey Cooper and Gabrielle Sierra for their assistance. This is Jim Lindsay. Thanks for listening.