 Mae'r ddwylo llwedde allan nhw, mae'r ddwylo llwedd i'r gwneud y ddrwn Carlos Rogenhysg iawn. Wrth gwrth gwrs, mae'r ddwylo llaw'r ddwylo llwyddiad, ddos o ddwylo llwyddiad yn ein hyfforddiant, oherwydd nid o'r panfyrddau o'u gwneud, oherwydd yn holleg o'r cynnig o'r ddwylo llwyddiad. Mae'n meddwl i'r gêmau bod yn ddau'r ddau iawn, ond mae'n meddwl. Mae'n meddwl i'r meddwl a'r meddwl. Mae'n meddwl i'r meddwl i'r meddwl. Gweithio'r meddwl i'r meddwl i'r meddwl, a daith i ddau'r meddwl i'r meddwl. Mae'n meddwl i'r meddwl. the more of it you print, the less real value it will have, et cetera. But it is an intriguing circularity in that effect. The other thing to say about money, and the book has quite a lot on this, is trying to get to the key thing of what is money. A lot of money originally was either money that society simply decided that we'll use these copper beads or something as our medium exchange. A crucial development then was public money, and the Chinese were the first of this. I mean, when Marco Polo went to China, he was amazed to see that the Chinese emperor paid his soldiers with paper money. And Marco Polo went back to the doge in Venice and said, why are we spending all this difficulty trying to get hold of gold which is a bit expensive, you know, you can just print the paper money. And the answer is you can provided you don't print so much of it. So there's some real mysteries about that. And then the other thing to crucially say is most money in modern economies is created by private banks. Only 5% or so of our money in the eurozone or the UK is the monetary base which exists as a liability of the central bank either in notes and coins forms or in reserves. The other bit has been created by fractional reserve banks which by a process which a Mervyn King calls the alchemy is, you know, it becomes money in itself. So the simple answer is money is something that has value because you think it has value. But behind that lay a lot of complexities. I think on Japan the crucial case I think essentially a day factor in monetisation is occurring but the problem is that as long as we don't tell the Japanese people that it doesn't have the stimulative effect that it should. Because if you keep on the bank of Japan buying this government debt but you still tell the Japanese people you ought to be very worried about your 250% debt to GDP ratio and if your Ministry of Finance keeps on producing things which say because of this 250% debt to GDP ratio we're going to increase the sales tax next year and we're going to have a tight fiscal policy that takes us to a fiscal surplus by 2020 then you are offsetting through that rhetoric the potential stimulative effect. You have to, what Japan has to do now is loosen the fiscal stance and it has to tell people we are able to loosen the fiscal stance because a lot of what you thought was debt of government isn't really debt of government at all. That's the essence of that answer. On financial engineering, I mean I do suggest support for a financial transactions tax I don't think it's the answer to everything but I think there's a good case for it. I think there was a huge explosion of unnecessary financial engineering and trading before the crisis. It's interesting though it's important to know where that occurred. The one area which really didn't cause problems in 2007 and 2008 for instance of the foreign exchange market and it was in the foreign exchange market that James Tobin in the famous Tobin tax originally suggested a financial transaction tax and people still because they just sort of creatures of habit often say we need a financial transaction tax for foreign exchange markets and you say well it might be a good way to raise money but actually the one thing that didn't go wrong in 2007 and 2008 was excessive volatility in foreign exchange. What went wrong was excessive complexity in the credit intermediation process with the creation of completely unnecessary complex credit securities, CDOs, CDO squads, CPDOs and huge levels of trading activity. In a sense we sort of are imposing a financial transactions tax but people aren't quite noticing it in this fashion. What we have done since the crisis and this is one of the things that I was involved in as a sort of global regulator we've dramatically increased the equity capital requirements against trading activities and an equity capital requirement imposed on a bank is a subtle form of a tax imposed on a bank because the returns to equity are not tax deductible whereas the returns to everything else on the bank balance sheet or the interest on the bank balance sheet is tax deductible. So in a sense when we impose higher capital requirements we are on trading activity we are throwing a bit of grit in the wheels in any case and I was a strong supporter of that and I think we might want to do even more. Could it ever be one off? There are two arguments about should it be one off and could it ever. In the book I say I would like to believe it's one off because I think if it's one off it's easier to contain the political risk and I think I could imagine us doing either one off for three years returning to a reasonable level of inflation and nominal GDP growth and then as it were putting it back in the taboo box for the next 25 years till we faced another similar crisis. The economic argument that makes me not absolutely sure that that is possible is the argument about secular stagnation. I presented earlier as to why we are where we are was fundamentally the Carmen Reinhart and Ken Rogoff debt overhang explanation of why recovery from 2008 has been so difficult and that's what my book sort of 80% of the book argues but in the book I also explore a little bit the alternative or additional hypothesis that there might be a real secular stagnation effect the sort of things that Larry Summers is arguing about that have sustained imbalance between how much people want to save and how much investment is occurring. If you really believe that at the limit you might have to do monetary finance as the answer year after year after year which was actually what Milton Friedman suggested in 1948 I'm more worried about how we contain the political risks if you have to use it year after year because if you use it year after year that then starts to train the politicians and train the populace that it's available year after year and the dangers of political misuse increase. As for growth, there was a section of the book which I took out of my editor's suggestion because when you're writing a book you do have to somewhat focus on one argument and not overcomplicate it which was does growth matter and it drew on arguments from my friend Robert Skidelski whose books you may know on how much is enough etc and I am doubtful as to whether for already rich societies on average and I would put both the UK and Ireland in there how important further increments in GDP per capita are I think they certainly become less important it's incredibly important to get GDP per capita growth in Kenya I think it's pretty marginal to welfare in Ireland or the UK however even if you believe that we've got a hell of a problem because we have created debts which only make sense on the basis that there will be growth so one of the real problems to the Japanese debt level is if they had that debt level and they were like China in a position where you could imagine another 20 years of 6% GDP you can imagine them growing out of it in the way that the UK grew out of 250% public debt at the end of World War II and it had gone down to 50% by 1970 because when you have a large rate of growth you can grow out of it in Japan now with its demographics and being right at the frontier of technology in a rich society it is very unlikely that the Japanese economy is going to grow more than a half or three-quarter per annum and when you put those figures into the mix this debt simply can never be repaid so I do share a bit your feeling we shouldn't fixate on growth but if that was going to be our point of view we ought to have developed that point of view 20 years ago and we shouldn't have created too much debt because a lot of this debt only makes sense if you believe we're going to have a high rate of growth ok I'm just going to ask you a question about redistribution is it neutral that between the nuclear power plant in the east and money creation and share of that what are the redistributive effects? yep ok Mike Mike will talk to your retired public servant given your pessimistic outlook there for scenario one I wonder do you think we should jump to scenario three and have a break up with the government so that we can know then your individual marginalisation and not be stuck by the Germans very interesting I'm going to hear it from the central bank I suppose when monetary stimulus has been undertaken or maybe even prepared in Japan and Europe it will be most effective when the banking system is fully functioning and Japan was quite slow in reforming its banking system early and that will definitely be an impediment to effectiveness if the Eurozone can tackle the reform and improvement in the banking system to what extent does that make existing monetary stimulus more effective and perhaps less leading us to the terrorism effect? redistribution the comparison of the distributive effects of QE versus monetary finance crucially depends on how you do the monetary finance and there are an infinite set of ways to do the monetary finance but it's certainly possible if you wanted to make the monetary finance much more progressive in its distributive effect than QE I think it is almost inevitable that QE is somewhat regressive in its monetary in its distributive effect because it reduces the interest income on bank deposits whose capital value does not rise when the interest rate goes down but for people who are the owners of marketable securities like equities or bonds although the interest rate goes down there is a one-off capital gain from the fact that the interest rate goes down and it is simply an empirical fact that richer people tend to the people who own marketable securities whose value moves in inverse to yield whereas poorer people tend to hold most of their financial resources in straightforward bank accounts where the interest rate goes down but they get no capital uplift so I think there is a reasonable argument that QE is regressive in its distributive effects and there was a Bank of England study which tended to support that in which I quote in my book As for monetary finance it just depends what you do I mean you could do a one-off tax cut and you could make it the same percentage for everybody or you could make it a thousand euros for everybody and if it was a thousand euros for everybody that would clearly be a very progressive tax cut because it has a much bigger effect for poorer people than richer people so you just have an infinite variety of how regressive or progressive you can make a monetary finance operation The euro zone, that's a very good question I sometimes do say to German colleagues look bluntly if you are going to keep arguing against any fiscal stimulus whether debt financed or money financed or keep arguing even against QE or negative interest if you are going to compete bombarding what was it Mario Draghi said the other day he said that the German attitude was null nine nothing never you must do nothing and I think Mario is getting quite frustrated by that I sometimes decided if that's what you really believe the best thing for the euro zone would be for you to leave the euro zone for the Germans to leave the euro zone and for them then to presumably have a rapidly appreciating currency with the beautiful irony that if the new Deutsche Mark began to appreciate against all the other currencies of the remaining euro zone I would be willing to bet a large amount of money that in those circumstance the Bundesbank as it did throughout the 1960s and 70s would start intervening in the foreign exchange markets to stop the appreciation and to do that would buy the government bonds of all the other euro zone countries it would do outside the euro zone what it steadfastly tells us we must never do inside the euro zone I think it's I don't know what I would advise Greece I guess I would say to Greece stay in break-ups are very very difficult at the FSA we were looking very carefully in 2011 and 2012 about whether there would be a Greek exit and we were very worried about the knock-on effects because once one goes there's an expectation that another goes then the bond yields start moving then people start removing money etc breaking up is hard to do in currency zones it's not straight forward you have immense complexities about which contracts re-denominate into the new currency X has lent money to Y has that re-denominated into the new currency or is that still a euro zone these things are quite disruptive so I think the best answer is to try and make it work together but I don't exclude the possibility that it could get so extreme in its deflationary tendency that it might be better to do a controlled break-up but I think ideally that would be deemed to two or three blocks rather than to all the way back to whatever it is now 19 completely separate currencies I think a fully functioning banking system would make a difference but is not completely transformative the crucial issue here is the relative weight that you attach to a sort of credit crunch driven by the inability of the banking system to lend money versus a lack of credit demand driven by the fact that real economy borrowers feel that they are over leveraged and although a lot of people attach a lot of attention to the zombie bank hypothesis and there's a series of articles on that in 1990s Japan the point that Richard Coo makes is by 1995 there are a whole load of banks willing to lend money to companies at 2%, 1.5% and they're not borrowing so that rather pushes one towards maybe it's more the demand side and indeed if you look at I quoted in here some of the versions of the ECB monthly bulletin I remember this one I can't remember which particular date it is which tried to work out whether the slow rate of growth of credit was a demand side hypothesis side or a supply side it basically implied that it was more demand rather than supply though there was an element of supply and if the fundamental reason why credit growth turns flat to negative after 2008 is as much or more to do with the demand from the real economy borrowers as the supply from the banks then more rapidly solving the banking system yes it would have helped but it wouldn't have answered everything it would have been much better if we had been able to do better and more radical stress tests on the European banks not just the eurozone banks but the European banks back when we did them in 2010-2011 and I was part of the euro-systemic risk board and debating that the fundamental reason why we couldn't do really strict stress tests which were fully convincing to the market was we couldn't answer what are we going to do if there's an equity hole because if you said these Spanish banks you know are short equity and the private market wasn't going to provide them were you going to ask the Spanish government to be the backstop to that rescue of the banks it was already so indebted and this was the sovereign bank debt loop and America completely got round that in 2009 by a very straightforward exercise that says we run very tight stress tests on the banks when we work out whether you've failed you've got six months to raise private money if at the end of six months you haven't raised private money the treasury will recapitalise you but you won't like that because you won't be allowed to pay bonuses and your existing equity holders have diluted we just couldn't do that as straightforwardly as that because we had a whole load of governments whose credit worthiness was also being doubted at the same time as the bank's credit worthiness and that's why we... so that would have helped quite a bit but I don't think it would have answered all the problems A thousand euro in the post for every adults in the eurozone would come to about 15 weeks of asset purchases by the ECB at the moment so I think it would have something more in effect so I think we all had a very enlightening and interesting talk there I'm sure we could have gone on I know there are more questions and apologies to at least one person who wanted to get one in but we're a little over time already thank you so much, it was a pleasure thank you