 This is Rob Johnson, president of the Institute for New Economic Thinking. I'm here today with my colleague Perry Merling, who has been at the vanguard of the formation of the Young Scholars Initiative, made an enormously successful course on money and banking that's been on a number of platforms and has really been at the core of the evolution of it since it was formed at the time of the great financial crisis. We're here today to discuss his newest book, which is called Money and Empire, Charles P. Kindleberger and the Dollar System. And as he mentions in the preface, I am a person who is very, very grateful to Charles Kindleberger. I had joined as an undergraduate at MIT with the intention of being a naval architect. And Charles Kindleberger inspired me to move in the direction of curiosity, economics, economic history, and financial economics, and had a very, very big impact on my thinking and my career. But Perry, thank you for joining me today. And I'm looking forward very much to what your insights are about this man who helped shape my life. It's good to be here. Thank you for inviting me. How did you come to the place where you wanted to write about Charles Kindleberger and about his relationship to the world, to academia? What triggered your enthusiasm? Well, I suppose it sort of parallels the creation of INET in a way. I was the initial proposal that I made in the first grant round, if you remember, was for a book that was tracing the rise of the global dollar system period. Kindleberger was not so much a part of that. That was meant to be a follow-up to my 1911 book, The New Lombard Street, which was about the financial crisis. And when I got started with that, I found Kindleberger archives. I found some things also in the Modigliani archives, some conversation between them about the future of the international monetary system. And I realized that I could tell the story in a different way, not as the story of the rise of the dollar only, but really through using his life as the arc of the story. And so that's how it kind of got started. And the reason for doing the original project was that I felt that New Lombard Street, when I finished it, when I looked at it, I realized that the global financial crisis, I had told that story as a story of the biography of the Fed that it was created in 1913. And it was a sort of a story of its adolescence and its growing through crises and up to the global financial crisis. So it was a story of that institution. And I realized that what was missing really in that book was the global story, because I focused so much on the Fed. And so that's why I was trying to write the international money story. And I also realized that my MOOC also, which also I published, was originally about the US monetary money markets using STIGM, and it wasn't adequately international. So one of the goals that I had in the last 10 years was to extend the money view to international and using this book as part of the vehicle for doing that, and therefore entering Charlie's mind. Charlie seemed to me when I found him, you know, here's a guy who actually knows something, you know, how does he know what he knows? How can I enter that mind? How can I build on what seemed to me a very wise person? And so it was I had selfish reasons for it. I had there are a number of reasons converging for why for why to write this book. You start the first segments of the book about the formation of Charles Kindleberger's career of life understanding and so forth. And I guess, as the Institute for New Economic Thinking, we're always interested in how unusual or creative people came to life and how they interacted with the profession and what difference they made. So over the course of this conversation, I guess we'll understand more if you can share with us what what took place in the formative experience of Charlie Kindleberger that you think was important in who he became. Well, the first four chapters are about that formation. I should also just alert your listeners that although this looks like intellectual biography and it is an intellectual biography, and that's one of the reasons that people are interested in it, particularly people like you who who knew and admired him. It's also meant to be a history of the global dollar itself, okay, all the events growing, and it's also meant to be a history of the evolution of economic thought. So in every chapter, there's these three stories are kind of intertwined. Sometimes one is more prominent. I think that at the, so I'm trying to set the stage in the first four chapters, particularly for people who don't necessarily have an economics background. So I have to teach them a little economics. And the, and so my strategy there was to basically follow Charlie's own education, okay, and to say how did he learn what he what he knew so that the reader can be educated in the same way. So it's important to realize, so he was born in 1910. And so he sort of came to maturity in the roaring 20s. And in in New York City, he was born in New York City. And the, and then the depression hit. And that was a big, a big effect on his family finances. And he was more or less alone in the world. After that, his father was a was a very well to do lawyer who basically then clients don't pay lawyers in the depression. So the family finances fell apart and he went to graduate school at Columbia. And so I think that the, those years in the wilderness, I guess, you know, in from 1933 to 1937, when he's doing his PhD, are the formation and the key people for in influencing him are, are here, H Parker Willis, who had been played a very important role in creating the Fed in the first place. And I suggest I came to believe that, that in a way, this was a role model for Charlie that he thought he would use that he would spend his life trying to create an international monetary system that was integrated in the same way that Willis had done for the United States, knitting together the different parts of the US. There had not been a central bank, of course, in the US until 1913. And so that sort of, I guess, young adulthood ambition, which is pretty large, I think, helps to explain a lot of a lot of what he continued on doing. So Willis was important. Angel was important, James Angel, as an internationalist American, but an internationalist student Val and young from Harvard. And I think he learned almost like a negative example from Angel that Angel was a big supporter of the League of Nations, multilateralism, and that basically didn't work. And not only because the Congress refused to join up, but Charlie remember, you know this, that in Charlie's mature life, he emphasized the importance of leadership of the United States as a leader, not multilateralism, but more leadership. I think that was because of the disappointing example of Angel in a way. But then most important, I think, was John H. Williams, who was then a professor at Harvard, but he was Vice President at the New York Fed. So when Charlie got his PhD, he got a job at the New York Fed. There were no academic jobs. And so he was a central banker for quite a while. And John H. Williams was his sort of not immediate boss, but was his thinking sort of infused the New York Fed at that time. And in fact, his key currency, he was pushing this key currency idea as early as 1933 at the World Economic Conference in London, which didn't go anywhere. He thought we needed to stabilize Pound against the Sterling, not multilateral. Okay, so this idea of key currencies, it comes from John H. Williams. And it was really all the New York Fed was on board with that, but it didn't happen until 1936, the tripartite agreement, which was to stabilize Sterling and the dollar and the French franc. And that was really why Charlie was hired, to be sort of a staff support for the data behind that. And so that's how he started his career was working toward international monetary stabilization inside the Fed in, you know, as a as a staffer, which he did for a couple of years. And then he moved to the BIS in Basel, which was which he had hoped to be for a long time, but war interrupted that. And he came back to the New York Fed, sorry, to the bought to this time to DC to the board of governors worked with Alvin Hansen for a while, and then had a good war. He was in the OSS in London. And I tell this that story in chapter three, I think that's a lot of where his sort of his empirical approach to the world got started and his willingness to to form a narrative of view on the basis of disparate kinds of pieces of data that you don't need a complete time series or, or, you know, to give advice to the generals about where to bomb in order to hurt the German war effort. You can't wait for all the data. You have to take piece together this and that. And, and I think his intellectual formation that was very key for the style when he became an economic historian later on, you know, that that was the style that he was. And not not mean he was not really one ever for digging in the archives. He was reading all the stuff that other people dug up. They were like the field reports coming in from from that he was an intelligence analyst sort of putting together, well, what do we what does this all add up to? And so I think that was an important formative too. And of course, that's not really he's not an economics job. It's a it's a it's an intelligence analyst job. And he was cleared for ultra. So he was a very high ranking intelligence officer and traveled with General Bradley after D-Day on the on the continent and then came back to the State Department and was the head of the of sort of reconstruction of German Germany and Austria, the division inside inside the State Department, and ultimately worked under General Marshall in getting together the legislation for the Marshall Plan, which almost killed him. It was so much work. But the and then he started his academic career in 1948. So all of that stuff, you're asking about formation. Okay, this is this is a guy who has so many influences, right, before he's before he's 38, that he's in the war and he's in the State Department and he's in the Fed and he's in the BIS and he and the world is chaotic time. Okay, so all none of these these influences are not integrated yet. They become integrated, I think, throughout his academic career that he'd had enough excitement. So sitting sitting in his chair in his office at MIT writing books was perfectly fine with him because he'd had enough excitement, I think, for the first 38 years. And by then he had four children too. So he just settled down and and and stayed and stayed there. And you met him many years after that. But but you asked about the formation. And so I spend, you know, I think there is a sort of inspirational I'm inspired by that by somebody who couldn't he had to adapt, you know, this world is not it's not easy to have a life of a scholar. And so you try to do it where you can, you know, at the Fed or in the State Department or or or even or even in the Army. So the it's you're you're adapting, he became he's a very resilient, and I think sort of emotionally stable person, not not not given to defeatism. And this is where it was all formed in that in those in those early years. So I my strategy in writing these books, this isn't the first time I've tried to do this sort of thing, is I think the juvenilia is extremely important, right, instead of saying, well, what are the most famous books? Let's let's focus on them. I say, let what are the least famous books? You know, what are the stuff he was writing when he never thought anyone was going to read it? You know, then you can find out, you know, where he came from. And so I spend a lot of time on that digging digging up, you know, details from his childhood and who his friends were and things like that, what life was like at Columbia in that period. And that's not that's not just, you know, idle curiosity or adding color. I think it helps to understand the mature man where where he where he came from. Yeah, well, you know, as you have been a Richard Michael Shepherd, and a key shepherd in the development of the Young Scholars Initiative, I think young scholars who are contemplating what direction to take in their career will benefit greatly from the journey you take them on in this book to understand. First of all, what we might call formative experiences inspired him to go in these directions, like you said, his family and losing money, etc. and the disorientation. The second being which which might call that the inferences or the patterns he recognized from his experience in the field. And then the question of becoming an academic. I guess I would say he's on a different trajectory than many people in the post John Hicks and Samuelson era, where quantitative, particularly conceptual modeling is really at the vanguard. And when he comes to a place like MIT, he's really interfacing with people whose quantitative skills are their gift and their focus. What was it like for him to be almost speaking a different language of economics than most of the faculty who were his colleagues? Well, he joined MIT in 1948. And the what we think of as MIT today as this high powered statistical modeling, mathematical modeling, that was really not the case in 48 yet at all. And in fact, I should maybe back up and say his idea of joining academia was to keep a foot in both in the public policy world that he had been in for 12 years. He had been a civil servant really. And he was he wanted to basically do the same kind of work he had done in government except in the university now. And so he wanted to have a foot in both worlds. And then because he lost his security clearance, he was unable to get him to do any government work anymore. So he had to really commit to academia now. He had tried to get other academic jobs he had he had interviewed at Yale and also at Princeton. And the faculty there there were there were always they they they responded negatively to him because he was supporting the Marshall plant. And they were saying all we really need to do we don't need the state involvement here, you know, we should just let the market work. And so they wouldn't hire him. Okay, MIT was willing to take a to take a flyer on this guy, basically. And they he didn't have a job interview really, you know, they just took a flyer on him. And I tell the story about how that happened. I mean, Sam Samson knew who he was. Everyone knew there were so few people in graduate school at that time, right? They all they all knew each other. And and so and his first book, the dollar shortage was really the economics of the Marshall plan. So he he got tenured MIT for exactly this argument about why we need why we need the Marshall plan, whereas other places weren't willing to even hire him for it. So so they they took a flyer on him. And he always was appreciative of that. I think that so some of the story I tell in chapter five about I call it tech, to remind people that MIT was was tech, it was what they called it back at the at the at the at the beginning. And the department was an interdisciplinary department with with political scientists. Originally, it separated later and be and got professionalized. But it was a service department to the engineers, which was most of the most of the students at MIT. And Samson's famous textbook, which he wrote in 1948, was intended to be like, Well, how can we teach economics to engineers? Okay, well, engineers are used to this sort of training. So let's create a textbook that's appropriate for them. That textbook then became the bestselling textbook, and took over all the departments. I don't think that was Samson's intention at the beginning. It was really to teach economics to the engineers. And the and and and there was other things about the early days in MIT that I uncovered. The importance of the of interactions with the IMF, for example, that went both ways. And the so the international, his international economics experience, he was there there were that was a way to get involved with with with policy work, when you can't get hired by by the US government, you could engage with the IMF and and and and also and also the World Bank and the BIS, he had been employed at the BIS, and he never lost those those connections. But so when you say that it was a difficult time for him, I think that difficulty didn't become because of the changing mores of how to be an academic, that didn't really, I think, become a difficulty until, you know, maybe the early sixties or something like that. You know, so what because it was actually 1966, when MIT made a very specific decision, the department, like we are going to to really grab the brass ring and try to upgrade and be the place that ambitious young young graduate students are going to want to come and we're going to provide this kind of training that will will separate us from the pack. So it wasn't it wasn't really until 66. And at that time, Charlie is is 56. Okay. And he is and he is willing to he goes along with this, but he realizes there's not there's not that much place for him in a department like that. So he tries to go into administration for a while at MIT. And he sees the writing on the wall with the student uprising and says, I don't think it's a good time to be administrator. So he he he he goes he takes a year's leave and goes to Atlanta to teach in the historically black colleges. That's when Martin Luther King is is assassinated. And I think that was a big turning point in his life to where he recommitted to the scholarly life. Okay, instead of saying, okay, I guess I'm a washed up dinosaur, you know, he said, you know, there's important stuff that's happening. And particularly also the dollar system was coming under attack at that time. And so I think he recommitted that year away was a period when he recommitted. And when he came back, that's when he wrote the world in depression. That's when he started that line of thinking, which is what we remember him for the world in depression. And then after he retired, 78 was he was forced to retire in 1976, because of the mandatory retirement. And the and so so many his panics and crashes, which is probably his most famous book to the general public was a was a work of retirement, in order to make a little money, because he didn't have a head of rather meager pension. But also he's on his own now, he's no longer, he's no longer sort of has to be a team player at MIT, he's retired, so he can do whatever he wants. So he and then and then the work that he calls his his shadow, the the financial history of Western Europe is is it comes after that. And then he's elected to be the president of the American Economic Association. So he had he had a good, there's a third career here, you know, that comes really after his official retirement. And after he becomes sort of persona, you know, not non grata, but but not necessary. He was not there was nothing he was adding to this MIT strategy. And the that must have felt pretty bad for him. You know, he had been he had been a builder of this, right, he was in he was like, you know, employee number three or something, he was he was hired before solo, right. And so he had really, really helped build this department that then kind of had no use for him. And but he just took that and said, okay, I'll do something else. And that's what he that's what he did. So it's it you're right to say that that it is surprising to find somebody with this pre World War two sort of sensibility at MIT. That is a little fish out of water. It was not so much fish out of water in 48. Okay, it became in fact, because he came from the OSS, you remember, there were some scandals about CIA money being going going into MIT, but but CIA was the the follow up to the OSS. And so he, I think that's actually one of the reasons he was attractive to them when they hired him, that he had this, he had this sort of clearance and this government experience. But then when he lost his clearance, he wasn't useful for that anymore. So, so he had to find another way. And it this is a story of of resilience, of following an intellectual course, and just doggedly, you know, getting up every day and going into the office, and taking advantage of what opportunities arise, and not getting discouraged by get by rejection, just find another way. So it's pretty, it's pretty inspiring. I found, but but so young scholars, you're speaking about young scholars, the, yes, so that so this mathematical and statistical modeling kind of hegemony that's taken over education is is everyone, every department, you have to, you know, get trained to a certain level. The question, though, is sort of where do the ideas come from? Okay. And they I mean, these are these are techniques, right? So they're techniques for but but where do where do your ideas come from? And I think that Charlie, there were people at MIT graduate students at MIT, who really did appreciate him as a man of ideas, right, that you could talk to him about your research, you then had to go to someone else to help you with the econometrics and the mathematical modeling. But he could think without writing down equations, he could think without running regressions. And that was a pretty unusual skill. And so that's partly what the book is about is, you know, understanding, here's a guy who who was right about a lot of things, even when his more technically trained colleagues were not, you know, why was he right? What what? How did he think about the world? What was what was it that he knew that I need to know, and I need to enter that mind. And so that that's the payoff for me is feeling like I can, I know how he thought now. And so I can do it myself. And that's that that's what made it worth it for for me. It's not it's not just because I like writing intellectual biographies. No, I'm trying to learn monetary economics. And and he taught me in international economics, really, most of what I know now, through this project, you know, not that I was ever his his student. Yeah, I had the good fortune of coming on scene in the fall of 1976. Yeah, MIT. And and about a year later, looking so he just retired, he had just retired. Yes. Yes, but he was still teaching international trade. He was teaching half time then. Yeah. And he was teaching, of course, related to the financial history of Western Europe, with the manious panics and crashes infused in it. So I came from a family where my mother had a Scottish father and a German mother. And their professional lives were very disrupted by the Great Depression. So in the, what you might call folklore of my formative years, that anxiety about finance was ever present. And here I am trying to be a naval architect. And then I come across this guy who seems to illuminate with the world in depression and some of these other works that were in progress, the kind of concerns that had unsettled one mother's life. And I think, from what you might call the echoes of her distress, she had ignited my curiosity in a way that he, how you say nourished me tremendously. He was also extremely pleasant. He had groups of students of which he included me that he would take to the Boston Symphony Orchestra's rehearsals. He got somehow C. Joe's hours team allowed him to bring in six or eight people to watch the rehearsals before they would start a new concert agenda. And then we'd all have coffee afterwards. He was just, he was a very warm and magnetic individual. And then as I said, dealing with these things that echoed to the concerns of my family. You'd mentioned in a couple of times in this conversation that Charlie lost his security clearance. And I know that you've also been had access to documentation and so forth in the archives that there was some anxiety that related to which you might call his international connectedness or whatever. And in that kind of hard Cold War period in the McCarthy age and so forth. What was going on there? What was going on that led someone with that much experience and successful experience losing the security clearance? Well, it was, I, so I, you're right that I, he, he got his FBI file through the Freedom of Information Act, which I believe was passed in 66 or something. So he wrote off for this. And initially they sent him garbage and he wrote off again. And so he finally got this file. And so he knew why he, he eventually knew why he lost his security clearance. And he put those documents in the archives at the Truman Library, which Sirius archive. And so we, so I was able to see it and read it. And he wondered for a long time why he did, why he lost that because he lost it in 19, I think it was 1951. And the, and he, and of course they don't tell you, you know, they just say denied. Okay. And that's it. So he had, of course, he had lots of, of interactions with people who were on the left. And in the 20s, in the 30s, you know, certainly New York was a very, a very political place in the 30s. And the, and he had, he had lots of acquaintances who were in various political groups. The, and so he was wondering if that was the problem. The actual, what, what got him was it seemed that Hoover actually kind of went after him. He had been the, So Hoover, you're not talking about, you're talking about J. Edgar Hoover. J. Edgar Hoover. Yes, not the president. Yeah, yeah. Yes. The, he had, as a graduate student, I mean, talk about, you know, sort of bad coincidence. While he was, while Charlie was waiting to get this offer from the New York Fed, which he thought he would get, because he had some inside connections, he was a loose sense. And so he took a summer job at the Treasury. Okay. And under Harry Dexter White. And so he was, when, when Harry Dexter White came under suspicion, anyone who was connected with Harry Dexter White came under suspicion. And he had put Harry Dexter White as, when he was applying for security clearance, he had put Harry Dexter White on an earlier, earlier application as a reference, you know, so this is somebody, and so this brought him to the attention of the, of the authorities. So that was strike one. And, but then they investigated it. And another strike was, was Robert T. Miller, and who was a year ahead of him at the Kent School, and who was a friend of his wife's brother. And so they kept in contact with him. And both Harry Dexter White and, and Robert Miller were brought before the House on American Activities Committee. You know, really pretty shortly before Charlie was denied security clearance. So this was the, these were the two major things. There was another, there was a third strike, which was that somebody who was a member of the Communist Party, I think his name was David Wall or something, had included his name as people in the State Department who are friendly, sir. So meaning probably that he wouldn't hang up the phone on you, or that he might, he might talk to you or something, which of course he would, that's who he was. But he was, but it, that's not to say that he was a, he was working for the, for the US Communist Party, much less a spy for Russia or anything like that. But those were the three strikes that then, that then ruled against him. Now it turned out all though, all that information was available to already when he got the security clearance for to work with the Marshall Plan. Okay. But the people who ran the Marshall Plan overruled it. And they said, you know, look, this guy, we need this guy, none of this amounts to anything. So we're going to approve it. Okay. And so he thought that would happen again. When, when he applied three years later, and it did not because there were different people who were reading the file. And so he was denied. So he, and this is as I, as I mentioned earlier, this is a devastating kind of blow for him, not only because it's, he had been cleared for ultra, you know, he was a very high ranking intelligence officer. And, and all of that was very top secret. And nobody even knew about ultra until many, many years later. And he certainly didn't tell anybody about it. And so, but none of that matter. And he had a, he had a bronze star, you know, he was, he was kind of a war hero. Okay. So to be this, so this was personally, I think, painful, but it was more painful because it meant that he couldn't have the life he was planning to have with a foot in both worlds. And so he had to find another, another way. And the and I think, you know, many of his friends, you know, people were also brought in under this and their lives were also very disrupted by this witch hunt. And some of them lost their jobs permanently, you know, they're so he was relatively lucky that he, you know, MIT was not only willing to take a risk on him, but they were willing to give him tenure, you know, at a time when, when the witch hunt was getting people thrown out of their, of their, so that's another reason to be kind of loyal to MIT. And, and he was a lawyer, loyal sort of guy, you know, in his character. So, but that was, you know, that's also useful to remember that, that those times that it's, it's swept in a lot of people who were, who had, who had, you know, really tremendous contributions to the United States government service, you know, and to be, to be not having their service, you know, I think is is a was a loss to the United States. And it's, you see that as part of the of another obstacle he had to overcome. In his interactions at MIT, after losing the security clearance, did that create barriers to his collaboration with colleagues? Were they, if you might say, embodying a caution light about those? Charlie's not, there must be something on savory, didn't it? I don't think in terms of the economics department, you know, when I, when I, I don't think that none of them thought that he was on savory. Okay. Samuelson solo, none of them. But there wasn't a very important impact, which is that Center for International Studies, okay, which became, which was sort of like the, the Center of Social Science Research at MIT took CIA money, okay, and you had to have a security clearance, okay, in order to be a part of that operation. And so for example, Walt Rostow, who he hired, he had been a wartime buddy of his in London. And so while Rostow was part of that, and he couldn't be a part of that. So he had to find his intellectual community, basically down the river at, at Harvard, or rather up the river, I suppose, at Harvard, at the Center for International Affairs, and where he, and so he did. And he also taught at Tufts, you know, so he had to, luckily Boston is a pretty, you know, there's a lot, there's a lot of intellectual community that you can find if you look around for it. And so he did. And his, but these were, I would say these are more institutional barriers than, than a notion that he was an unsavory character. I remember Charlie inspiring me to cross register and take a number of courses at Harvard that were related to international affairs or the development of multinational enterprise, in particular, Richard Caves taught a course that was quite interesting and deep dive. And I remember he had a student, was it Stephen Heimer, who had written about multinational enterprise. And I read in your book that his work was not allowed to be published in the MIT series. But Kindleberger started us with reading that thesis, and then encouraged us all to go over to Harvard to learn more in what he thought was an enormous, really important development for the future, which proved to be quite true. Yes. So this, this role of the multinational corporation, I think it's right, what you say. So Stephen Heimer was Charlie student, not Richard Caves student. And he wrote his PhD, and he wrote just to be clear, he, he, he, he wrote his dissertation at MIT. And, and Charlie was his, was his supervisor, and he tried to help him get jobs in various places too. And he died tragically early. And so Charlie tried to continue some of that research agenda to keep it a lot, make sure that people notice this. I think Charlie's own interest in this, what, and he wrote even a little book on business abroad or something, a series of lectures. So, and he included this in his international economics textbook. So he, here's the point that, remember, he's, he's thinking that the, that there are forces leading to integration, global integration, and universal money, and so forth. And he's thinking that the multinational corporation is one of them, that the nation state is, is opposing this, right, the nation state is trying to have its own polity. But then the multinational corporation is a global, is a global thing. And so he's quite interested in that. He thought, I think initially, he thought that the, he took from Hanson this idea of secular stagnation, that the way to get global growth was to channel capital from the global north to the global south. Okay, so you needed to have capital markets. So that's why the World Bank was always much more important than the IMF for project finance in his mind. This was, this was true of John H. Williams too. And the, so, but that wasn't really happening very much. So what he saw the multinational corporation initially as well, maybe this is a way through the internal accounting of a multinational corporation to channel capital to the global south. When he looked at it with Steve Heimer, he realized not a lot, that's not a lot of what's happening. What's, what Heimer found is that these multinational corporations are sort of creating branches, okay, in these countries, but then they kind of are locally financed inside those countries. So there's not a lot of capital flow, but there is, they're, they're integrated in, in this goal. So they are an integrating factor, but it's not the capital flow thing that Charlie was initially, initially got interested in. But so there you go nonetheless. So that's why he stopped sort of working on that. And it was really, so it's, that's something I don't make very much of in the book, because I'm trying to follow the money arc, you know, but it is definitely a story that is worth its own, that's a spin off that could be its own paper, I think, to track that, because there was a lot of work there, a lot of books and conferences and things like that. And he collected it all in a book called multinational corporation. So, there, he, there was, that was a lot of work that he did on that. Ultimately, it wasn't, it wasn't part of, I wouldn't say it was central, it wound up not being central once he learned how these corporations work. But so he, this is important to appreciate because, you know, so he has these friends on the left, it's very common on the left, of course, to be anti globalization, anti anti multinational multinational corporation. So he got into trouble with some of his friends about this attitude that maybe, maybe in fact, the multinational corporation is a, is a progressive influence in terms of economic development, in terms of globalization, in terms of integration. And that was not a popular opinion. But he wasn't shy about saying it, because I think he believed it, he believed it. Yeah, he brought a lot of things, I say to the table. When I first met him, I was, as I mentioned, wanting to be a naval architect. And he said to me, why don't you add economics as a second major? And I said, oh, okay, but that's a lot of course. And he said, no, if you take, you're good at math, you take the advanced micro macro econometrics, you get nine courses for taking three, because you get, you take the advanced, which qualifies you for the intermediate and the intro. So you're down the path. And then he said, then what you just got to do is a couple of interesting projects. And he had suggested I go over and meet Raymond Vernon about multinational stuff. And then he said, he kind of stopped me. And he said, I know, you know, with the OPEC crisis, you're working with Morris Edelman. I was what's called undergraduate research opportunities, Europe at MIT. He said, I'm interested in petrodollar recycling to the global south. How does the Middle East money get back to nourishing the LDCs, the low developed countries, as he called them. And how does that work? And then he said, but, you know, the sailing thing, you should bring that to economics. And he told me he was interested in writing a book about how the pattern of trade in the competition between the Dutch and the British Empire was affected by the strategies of nautical technology in each country, particularly how, how did he put it? How a ship, which is going to have precious cargo can protect itself. And he talked about how the British had put the guns on the boat so they could go to Asia, come back and protect themselves. Whereas the Dutch had essentially the equivalent of PT boats surrounding the boat that carried. And so if they went on a long voyage, each PT boat would get picked off in different conflicts. And essentially the treasure could be taken. And he ended up asking me to write my junior paper on these differences in technology and so forth. And he wrote a book, what's it called? It's like Maritime and Markets or something like that. Mariners and Markets. That was long after he retired. In fact, when he moved to the assisted living community at Brookhaven. And I think it was a work of therapy for him to his wife. It had a stroke and he had and he had to leave his beloved house in Lincoln. And so it was returning to a childhood interest. He was he was a he was an amateur sailor. And he loved that he often said that his only regret in life was that he never had enough money to buy a sailboat. You know, but he but he rented he rented sailboat sometimes and went on and did these cruises with with with family and friends. And and when he was a and he when he was in college, he he in fact was on a merchant steamer two summers. You know, so this was a summer job, you know, traveling the world as a as a deckhand. And that was he, in fact, he says a funny thing in his autobiography. He says, for me, international economics began in 1929. Okay. And of course, you might think, well, so it's the Great Depression that made him aware of the Internet. But that's not right. If that's when he was on the first trip, you know, that he got interested in the global world on these boats, and he traveled to Leningrad, you know, and and and met, you know, the Soviet sailors and the and of course, the the the crew in these boats is very international and then pretty rough people too. So he he but he loved it, you know, that was an incredible adventure as a college boy as a college boy. And excuse me. So so sailing to him always had these other residences, you know, of and I think it's even it's even, you know, there's there's certain psychological resonances, right, when you're you're a sailor, so you know that, you know, you're controlling these forces that could kill you, you know, if you don't control them correctly. And you could capsize, you know, or and and you're sailing into the wind too. So the wind is trying to push you this way. And you can actually go into the wind if you are are are appropriate have the appropriate sales and so forth. And so I think there's a psychological satisfaction. And and maybe maybe we could think that he he I told you about his resilience, maybe in his life obstacles, maybe another way to say it is that he he was prepared to sail into the wind, okay, and to find, you know, the setting of the sail that would allow him to make forward progress, even when the wind is blowing straight in your face, you know. And so that image, you know, which is from childhood sailing around Buzzards Bay, actually, in with with friends, you know, and the is he was he was he was a lifelong sailor. So it gave him something, there was something nourishing about that particular kind of sport. Well, that's how he actually I was a student in his class, but not outspoken in anything about sailing. But he had seen a picture of me on deck in Annapolis as part of an MIT crew at a regatta where MIT had, I believe we were the first or second we had placed and it was covered in the school newspaper. And when he asked me about this maritime technology becoming my junior paper becoming a major, he also told me that the person who should be my advisor for as an economics major was Bob Solo, who along with his wife was basically spending summers in Martha's Vineyard learning how to sail and was enthusiastic. He said he'll be enthusiastic about what you know, while you're enthusiastic about what he knows. And the first course I took was advanced macro with Bob Solo. And then I agreed to become a major. So Charlie's sailing. The other thing that I always I actually talked to him about this in the spirit of many his panics and crashes. I become familiar with Frank Knight and the notion of radical uncertainty, Keynes treat us on probability. And we had a discussion one day about when you're sailing, whatever the meteorologist says, you can go then you go out and you basically have to keep an eye on things and improvise. You're not in a structure that we're meteorology or whatever strong enough that you know what's going to happen. But he also he said to me, the interesting thing about sailing, how did he put it? You can't get scared and go down below because things will get worse. You have to stay on deck in that uncertainty. And I said to him, yeah, that's like people in a financial crisis, isn't it? They can't go run and hide. And he laughed. But I remember the sailing analogy is being ever present in his teaching and in our conversations. And it's interesting that you bring that formative experience. So he never really talked to me about his formative experience. He talked about his passion for sailing and for nautical issues, but not the things that you've shared with us here today. He didn't talk about himself very much. I think that was part of his character that he was raised. You're not meant to be boasty. Don't assume that people are interested in your life. That's sort of narcissistic. And so he restrained that. I think that's actually one of the reasons that his autobiography is not very revealing. Because I think after lifetime of not revealing stuff, he's not going to change when he's 80 years old and writing his autobiography. So there's facts and figures there, but not much of a psychological portrait. Let's talk a little bit about this notion of what does finance look like? As an engineer, I could see these models about a terminal condition, optimization, backward induction from the terminal condition, creating the prices and all these things that were even before stochastic, the kind of notion of how dynamic optimization happens. Charlie didn't seem to embrace the capacity of finance to see into the future. That nighty and uncertainty kind of mindset was there. Many people often compare him with Hyman Minsky, who was another person more in the realm of radical assert. Were they colleagues? Did they work together? Were they kindred spirits in the unfolding of each of their careers? Well, I think they were kindred spirits. I mean, I actually have just written a spin off on exactly this point that will be a paper soon. They were both sort of formed in pre-war, so they shared that sort of American institutionalist sort of upbringing. Hyman was nine years younger than Kinneberger, and so the war disrupted his PhD. Whereas Charlie finished his PhD before the war, Minsky didn't until after the war, and his supervisor was at Harvard, was Schumpeter, who then died on him. It was Hansen and others who he ultimately came under the wing. I don't think that Charlie knew anything about Minsky until he started writing manious panacing crashes. He says himself that he learned about him from Martin Mayer, that he mentioned to Martin Mayer that he was writing this thing about he wanted to write this book about manious panacing crashes. Martin Mayer said, oh, well, you should have a look at this paper that Minsky wrote. I think that Charlie had sort of learned in the reception for his first big book, The World in Depression, that people seemed not to get what his argument was there. And I think one reason is that there wasn't a model. So he could argue this whole thing until he's blue in the face, but what economists are looking for is a model. And so he thought, why don't I use Minsky as a sort of vehicle in writing manious panacing crashes? And so he did. And he quotes that one article that Martin Mayer told him about. It's funny, though, and that led to further interaction after that, which I'll tell you about. And it's sort of in the footnotes in the book, but it's not pulled together in a whole narrative like I'm doing now. The article that he hangs everything on, however, is an article that Minsky wrote in 1966, when he really hadn't yet fully formed his own ideas. So the financial instability hypothesis, this idea of hedge speculative Ponzi finance, none of that is in this early article. This early article is an attempt to try to get financial instability into a sort of Hanson Samuelson multiplier accelerator model. So it is a model, but it's not mature Minsky. It's Minsky on the way somewhere. And later on, in later editions of Mayne's panacing crashes, he sort of updates the footnote, but he doesn't actually update any of the argument. So I think that he is not. Okay, sometimes people think, oh, this is Kindleberger learning from Minsky and extending it to international economics. I think that's not really right. That Kindleberger wrote Mayne's panacing crashes as a work of retirement. He's 65 years old. He already has views on international crises that come from his own thinking and transmission internationally and so forth. And remember, Minsky is entirely about domestic and it's about business cycles. It's about the financial forces that are causing business cycles and increasing fragility of business finance so that a little displacement whereas Charlie is about international and it's about how large events like war and reparations are causing structural displacements that then lead to booms and crashes. So he's thinking about depression. He's thinking about war and not about business cycles in the United States. And so they became, though, I think they realized that they were fellow travelers and that they were both very critical of the post-World War II sort of macro orthodoxy, ISLM and so forth, including ISLM BP, the international extension by Mundell, who was Kindleberger's student, as a matter of fact. And they were both critical of this and looking for some alternative. And so they, I think, helped each other in a comradely way. I don't know that Charlie really learned much from Minsky and I don't know that Minsky learned much from Charlie, but they were both moving in similar directions for their own interests. And they became friends and Charlie organized a conference to sort of promote Minsky a little bit. And he also, I think they were both also at the Levy Institute that was created. And so I think they became friends, but I wouldn't say that they were collaborators or anything that close. They were both busy with their own agendas and not to be deflected from their own agendas. But they realized a common spirit. But I think that each was, what am I called, revered for not being part of the orthodox. They may have been in entirely different places, but their similarity was that they were both outside the orthodoxy and becoming influential that people appreciated. And both Keynesian and monetarist orthodoxy. I mean, they're both, in their politics, they're sort of more sympathetic with the Keynesians than with the monetarists, but they were not sympathetic with the mechanical version of Keynesianism that became the dominant form in the post-war war two period. I found it very interesting to be exposed to him and at MIT. And I think about this because I went on to graduate school at Princeton, which was a very game theoretic and mechanical oriented curriculum. When I got there, people like Lester Chandler, William Balmo were now emeritus. And so I get there, and it's very, very rigorous and mathematical. There was a part of me that was a little bit alienated. I was lucky that Axel Leyenhoof was at the Institute for Advanced Studies and he encouraged me. He said, you know, you've done enough math and you're undergraduate years, stick with it. You'll learn and you'll enjoy and take some history courses and meet Albert Hirschman and Marcelo DiCecco and other people who were at the Institute. And at the same time, when I was an undergraduate, I was aware that in the same corridors when I was working with Adelman and Kinneburger was this brilliant guy named Paul Krugman that everybody really liked. And Paul's emphasis was another form of learning for me, which is the models aren't necessarily literal truth, but they illuminate so people can understand the process and the causality that you're trying to convey. And so he felt that, which you might call there was an ambiguity or a muddiness about a Kinneburger or Hirschman, that in not taking the models too literally, but as a parable, you could teach people more easily. And I don't know, you know, Paul then went on, became a journalist and very involved in policy and so forth, but it was a fascinating dynamic. And I guess I want to come as we're, how do you say thinking about the book and your recent writings, I want to come to the question of Ben Bernanke, who along with my teacher, Phil Divvig at Princeton and his co-author Diamond just won a Nobel Prize. And I know you saw how Kinneburger saw Bernanke. I had met Ben and he had let me read his PhD dissertation long before he was a policy official even. I think he was at Stanford, he hadn't come to Princeton yet. But what was going on in the dynamic between Bernanke, who seemed to be reaching back to history and maybe a little more institutional texture than a pure modeler like recruitment, but your article illuminating Kinneburger had some concerns about Bernanke's thinking. Well, I think you're referring to this letter. It's not actually in the book that this, but when I was in the archives, when I was in the archives, I found this letter that Charlie had written to Bernanke in 1981. And you could see that Bernanke was at Stanford and had sent him a draft of this article. It's the article that was published in 1983, the one that's cited in the Nobel Prize. And this is 28-year-old Bernanke sending to 70-something-year-old Kinneburger. Here's something I've written that you might be interested in. I ask you for comments. And so Charlie gave him comments. And he said, really, I think number one, you seem not to have read World in Depression. I have a story about what caused that. And it's about credit, but it's not the credit story that you're telling. And the credit story that you're telling also is not really right. And so he walks him through various criticisms of his article. And also Bernanke had sort of dismissed, well, there's Minsky and there's Kinneburger who just say that it's all about irrationality. And he says, no, that's not in fact at all what we're saying. They're dynamics of instability. And so he tried to set young Ben Bernanke on the straight and narrow and had no effect whatsoever. You can see the published article has made no changes. There's no citation of World in Depression. There's nothing. So Bernanke didn't know what to make of this. And I think you were mentioning Krugman and about this idea of models, that this is one of the things that we can learn from Kinneburger, that if you think that you have translated all of the useful insights of Kinneburger, when you have Diamond Divig model or when you have Ben Bernanke's credit, you haven't. He himself says you haven't. So you should still go back. There's more there. There's more there. Go back. They found some model that seems to have some aspect. But instead of saying, okay, now we can forget about Kinneburger, let's build on Diamond Divig. Let's build on this and let's just create more and more variations of this. I think there's actually peter that that that that graduate students confined in these older texts, inspiration for other kinds of modeling. And you mentioned one of these things about finance. The standard sort of simplification in asset pricing is intertemporal, general equilibrium, transversality condition. They're all where you're imagining that you have full information out into the future. And that gives you a model. It gives you something that you can close and you can solve. It's not true. It's not true about the world. And really everyone knows it's not true. It's a story. It's a story that maybe we sometimes find a little excessively comforting because the thinking that the world is like that is comforting. But the world is not like that. And so if you behave as if the world is like that, it's going to hand you your hat every now and then. And all traders know that. These are really just models. That's not actually how the world works. And neither did Minsky really bring modern finance into their world because they were growing up, you important to appreciate in a time when capital markets were really closed down. In the Great Depression and in World War II, the capital that flowed internationally, this was government finance. It was not commercial finance, not a commercial logic. Capital markets recovered really fine in the 60s and so forth. And modern finance sort of got going in the 70s, which is when I said Charlie's career is already tailing down. So he's really much more on the money side of the world. And where you're thinking about payments, you're thinking about short-term capital flows in order to keep reserves from flowing. So he comes from a money and banking more place and not about asset valuation of stocks and bonds and things like that. So that's when I said I can learn from Charlie. But where we need to then build is you have to bring finance much more seriously into this than either Minsky or Kindleberger did. That's the big thing that got added really when they were at the end of their careers. And so that's my ambition, is to move things sort of in that direction, take some of that wisdom that they have. Okay. And now look at modern finance. This is why I wrote the earlier book, you know, the Fisher Black and the Revolutionary Idea of Finance is to really get deeply into one of the great minds there so that you can see, well, what? Okay. Now we can think. Remember that Kindleberger and Fisher Black are at MIT at the same time. I took courses for both of them. Yeah. And so there's some intellectual cross-fertilization somewhere. And maybe just in the minds of their students, like you, that you could see, you know, there's something each one of them seems to know about the world that seems right. Okay. And yet they seem also in contradiction. So how can this be so? And of course, that's how thought advances. Like how can this be so? How can this be so? And that's instead of saying this one's right, that one's wrong. Say, well, each of us has a little piece of the truth. It's touching the elephant, you know, that we're trying to figure out what this creature is, you know. And if you're just touching the tail, you have no idea. If you're just touching the tusk, you have no idea. You need to touch it in multiple places to get a picture of this elephant. That is the global economy. Well, it's funny when I became an economics major, I had grown up in a very turbulent place called Detroit, Michigan. And in my first advanced micro course, I listened to these conversations about equilibrium. And I raised my hand. I wasn't trying to be a smart ass, but I raised my hand and I said, you talk about equilibrium. Is it like, is that like assuming a happy ending? And to submit not that semester, but the following semester, which I took my first econometrics course, we were in the middle of a section on Fourier transformation, which is something as an electrical engineer, which I became my other major, I was doing a lot of Fourier transformation. And I remember saying to him, Professor Koo, I'm having a hard time because when you do a Fourier transformation in a laser light laboratory or whatever, it fits exactly. And when you do it with time series data and economics, the answer, it just looks like mud. It doesn't look like it. So there was something about the formalism that I was curious to learn, but I thought it applied very well to engineering or boat design or aerodynamics. I didn't find it transportable with the same kind of what you might call quality of result when it came to economics. And then meeting Kilberger, who was coming from another direction, or meeting Fisher Black, who was course on options and so far that I took at the Sloan School. I just kind of, how would I say, I didn't feel like I needed certain answers, but I was skeptical about whether economics could teach me about what happened in growing up in Detroit because it never felt like an equilibrium. It felt like an avalanche. I don't know if you know that I was born in Detroit, but we only lived there a couple of weeks, so I don't remember. But it's on my birth certificate still. So Charlie viewed, as an American institutionalist, his image of the economy is much more biological than engineering, right? That it's about institutional evolution. Darwinian, he would say, Darwinian evolution where there's challenges, environmental challenges, and you're responding to them, but the environment is changing too. And so this is what we need to appreciate. So when you're looking at a time series, you're looking at data that's been collected over a long period of time, when in fact the beginning data generating process is not the same as the data generating process at the end. Yes, there's a GDP in each place, but assuming that these data are being generated by the same process, and therefore you can use a transformation, that's what you're assuming when you're doing these Frey transformations, right? That there's an underlying constancy which he would deny. That's just, and of course, he denied that because he grew up in the depression and World War II. It is these moments of discontinuity are formative in his idea about how the world works. And not in the transformations after World War II as well. I mean, remember that the European currencies were not convertible until 1958. And then Nixon takes the US off gold in 71. This is a big transformation. And then the Volcker shock of 79. It just seems unlikely that the resulting data series is the result of a stationary process. And so you can throw this math at it. But what knowledge are you going to get out of that? Is this really the right method? It depends on what questions you have, of course. But for him, I think he sometimes would pretend that he never retooled. When economics moved in this mathematical direction, he never retooled. I think he never retooled because he never saw the reason for it. That he had in 12 years of government service played a very important role in shaping the post World War II institutional structure and without the help of advanced mathematics and econometrics. And so did everyone else in the New Deal. So he knew that the old ways could work. They could really help you. And so he was never that impressed. And in fact, late in life, I quote some of this in the book, too. He, of course, couldn't say that so much when he was on the MIT faculty. But later on, when he was not in the MIT faculty, he would say things. I use this as an epigram in one of the chapters. The day of positive economics is not yet. We don't have enough knowledge of how the world works to know that if you change this dial, this thing will happen. We don't know that. We don't know that. We know very little about there. There are some things maybe that we can build on. But they're very primitive and they're very fundamental. And that you can rely on. That's how he was thinking in his third career, post retirement. He was quite evangelical about that. And maybe he encouraged you because you were good at math and he felt that this wasn't, and you could do history, too. And so this was not somehow distracting you from learning about the world. And maybe some of it would wind up being useful. He didn't view this necessarily as the enemy. In that sense, he's not actively heterodox or something like that in the way that sort of Minsky kind of became. And why isn't he? Well, because he's a central banker. He knows how central bankers think. He knows how the economists of the State Department think. That's not heterodox. That's just useful. That's just useful. So he never felt himself to be, he was an outsider. He was on the fringe of academia. But he never felt himself to be somehow not part of world history. I think he did feel that he had ancestors and that he would have a legacy also that would follow after him despite the fact that he was on the fringe during a certain historical episode. And he had that long view. And I think he was right about that. And I told you, you started this by asking, how did I come to this? That I wasn't originally going to do Kindleberger. I was going to do the global dollar. And when I found Kindleberger, I found somebody who really helped me do the global dollar. And I think he will help the people who read the book, too, to understand what are the dynamics that are driving this. That the key currency approach is kind of correct and has been proven by history. And so the insistence on sticking with Mandel Fleming or jazzing it up by now, let's add another tweak or here. That's how academia works. But you should look outside the window a little bit and get some historical perspective and appreciate there are other ways of thinking about the world that might give you more, that might get to the core of what's happening better. I know years later, I saw a report that David Collinger and Bob Sloan wrote and they had surveyed economics graduate students about what did you need to know? And basically, 90 or 85 to 95% said you need to know statistics and math and be good at those things. Only 13% said you need to know anything about the institutions of the economy. But, you know, as I was one of those students, I was at Harvard then. I found that fascinating. And then as I moved along, when I was in graduate school in Princeton, I went down to Rutgers and Paul Davidson was talking about the lack of ergodic stability. And he was writing a book about Keynes. And then later on through the economist Peter Kennan, I met Paul Volker, who liked to go fishing. He had a nautical propensity as well. But he really was not at all convinced by what you might call the efficient markets or stable, ergodically stable dynamic programming or any of that kind of stuff. He was, I felt like having known Charlie a little bit helped me feel comfortable in getting to know Paul Volker as you. I'm sure. Well, sure. He's a central banker. He's a central banking kind of view of the world that central bankers know has badges said a long time ago, you know, that money doesn't manage itself. And Lambertzry does a lot of money to manage that it is a system that, you know, tends to crisis. And so it needs to be watched. And that's something that's not really in the economic models, you know, but it's in the world. And central bankers cannot avoid it. That's in fact the center of their attention. And Charlie had a big lesson in that, you know, at the New York Fed. And at the BIS, which he never forgot. So he's a central banking sensibility, I would say. And naturally, that would connect with Paul Volker as well. Well, we, as you know, from the outset of our net, we did a lot of work with the Volker Alliance and found him very nourishing. But let me, I think we draw things to a close here. If the spirit of Charlie Kindleberger were to join us on this cast, what would he say about crypto and what's happening in the crypto world these days? Well, I think he would add a chapter to Mania's Panic and Crashes and put out an 8th edition. And in fact, that's what is happening, that Robert McCauley, who was a student of his, is now putting out the 8th edition of Mania's and Panic and Crashes. And I understand that he's added a chapter on crypto as well. So that it would be one of those, you know, there's nothing new under the sun. We're seeing, it's different technology, it's different, all of this, the formal structure, but it's not something we haven't seen before. And he would analogize to previous crises. So the displacement that God crypto started, I imagine he would talk about the global financial crisis and the response to that, which was zero interest rates in the global north. So that crypto grew in that kind of unusual experience. But that's not going to go on forever. And now we're in the discipline phase and we're finding out what was real and what wasn't. And most of it, most of it was not the, you know, Bitcoin was supposed to be a kind of digital gold. I remember when students were with this, so this is before FTX and modern stuff, you know, that it's an asset that's nobody's liability. And they were often analogizing to the gold standard. And of course, Charlie knew how the gold standard work. And he would say, it's not really right to say that gold was money, sterling was money. And what is sterling? Sterling is a promise to pay gold. It's credit. It's a form of credit. And under the dollar standard, it's the same. Under Bretton Woods, the dollar was a promise to pay gold. When you took gold out of the picture, it's still a promise to pay. So it's a credit system really. And so Bitcoin is not the notion that you're using wrong monetary theory if you think that Bitcoin is going to challenge the dollar. That's not going to be right. That's not going to work. And I told my students that when Bitcoin, and so I didn't pay attention to it because of that. Because this claim that it was going to replace the dollar seemed to me so obviously false. But it did other things. So they created this little parallel bubble universe. And then the stablecoins came along, which created a bridge between Fiat World and Crypto World, which really blew things up, which is now collapsing that we're seeing. So you'll see this chapter by Bob McCauley in many of his panties and crashes. I think he is trying to channel Charlie in thinking about this issue. Excellent. Excellent. Well, thank you for that. Thank you for writing this book. Thank you for all you do for iNet. I'm sure they will enjoy hearing your thoughts today at the Young Scholars Initiative and and beyond. But but I'm pairing you've been an enormous contributor to iNet and you've been an enormously interesting writer about finance throughout your career. And I'm very grateful to know you and I very much admire the work that you do. Well, thank you. And thank you for iNet support. It's made a big difference these last 10 years. It really has. Well, you've made a big difference. So we got value for money. This isn't Crypto Scholarship. This is the real thing. Anyway, let's adjourn for today. I look forward to the next chapter with you down the road. Maybe we'll bring on Bob McCauley and do a three-way discussion of the augmented media's parrots and crashes. It'll be fun.