September 24, 2020

Adam Tooze: "Until the next crisis we will not know if we are sufficiently protected" | Economy

Adam Tooze: "Until the next crisis we will not know if we are sufficiently protected" | Economy



Adam Tooze, 51, is the author of one of the books of 2018: Crash How a decade of financial crisis has changed the world (Critical Ed.) His 750-page study of the fall of Lehman Brothers and the financial collapse it unleashed is notable for its clarity among those who have published on the subject this year, on the tenth anniversary of the debacle.

British, although raised in Germany, he received his doctorate in Economic History from the prestigious London School of Economics and has taught at the universities of Cambridge and Yale. Now he does it at the Columbia in New York. A curiosity of his family tree: he is the grandson of the Englishman Arthur Henry Ashford Wynn, a communist and spy recruiter for the KGB in Oxford. Tooze is uncomfortable when asked to deepen his relationship with 'agent Scott'. He tells that he has asked the secret services of the United Kingdom and Russia to send him his files with information. Both his grandfather and grandmother, who spoke languages ​​and read international press daily, contributed to Tooze's recognition as a European rather than a British citizen.

In Crash, first it plunges into the causes of the crisis, showing how rotten the European and American financial systems were, and then goes on to detail the consequences of the collapse. Tooze attends the headquarters of the Rafael del Pino Foundation in Madrid. It is probably one of the people who, when a central bank raises or lowers the price of money, better understand what is triggered next. Tall, with an impeccable suit, no tie and with his hair a bit messy. In his answers, he modulates the tone of his voice from enthusiasm to monotony. It would seem that in this way gives clues about what questions you like and which not so much.

Being aware of the consequences of each economic decision that a government takes is a gift or just the opposite?

"What Europe needs is a Central Bank that works with a currency that is an alternative to the dollar"

I do not have it clear. After studying carefully what happened after the First World War, I started to think about politics or economics without seeing the consequences of each thing, with its duration and depth. But that means being willing to read and read and want to have enough knowledge to tell what happens. For me it has become a way of life. What I basically do is filter everything I've been reading seasoning with my knowledge in world economic history. My training in macroeconomics allows me to reach political conclusions.

Do you think that European politics is more connected than it seems?

I'm convinced of that. If you look at how the crisis developed, it is clear. It may be in the hands of the elites and not affect all citizens equally, but both EL PAÍS readers and those of Le Monde or Financial Times they are looking at what is happening in Catalonia, in Italy with the Northern League or in Germany with the elections in Bavaria … Everything is recorded on the seismograph of what is happening in Europe. We must not underestimate the impact that history and globalization have on the way we relate to the world. We may not be aware of it because it is something we do not choose, but it happens.

Should we be calm with the changes that have been made to avoid another disaster like the one of 2008?

At the banking level, the structure remains the same, although the risk of a bank falling now is much lower and the market in which these entities can request short-term funds has been restricted. Technically, we are more protected than 10 years ago.

But…

On the one hand Trump has started a plan to reduce banking regulations that were launched after the crisis. On the other, we do not know what can happen. We lack internal information from some 50 US banks and around 20 from outside, as well as the relationships of each of them with regulators. Relationships can be tense, or quite the opposite, as it happens now in the US. There the regulators have their hands tied, and the latest tests of resistance to banking seem more like a toast to the sun. Until the next crisis we will not know if we are sufficiently protected.

In Madrid and Barcelona, ​​the real estate market is experiencing an alarming price increase; On the other hand, in the rest of Spain, prices do not come close.

"It is unknown but the United States brings incredible financial stability to the world economy"

Inequality is a subject in both Europe and the United States. Some areas do not grow since 2008, but others do and a lot. One of the current problems is how you organize with countries that grow completely divided. Because the interest rate and the fiscal policy that works for one party does not do so for the other.

And what would you do if it depended on you?

What we need is an EU that works, with a Central Bank that works with a currency that serves as an alternative to the dollar. In the end, who grants liquidity to the planet is the Federal Reserve of the United States. They did not choose it but the fact is that it is the currency that most countries use. They always have the doubt of whether their decisions will end up causing a rebound in their own economy, that's why the credit tap increased after the crisis.

The right is making room all over the planet. Where are we heading?

You have to look at the world map. Bolsonaro's situation in Brazil is terrible, but it is not a problem for the world economy. Russia we already know what's going on. Italy could break the system. It is the fourth European economy, with a huge debt to many eurozone banks. If they lower the qualification, the Europeans would lose control of the situation. And in the United States we have Trump, the greatest risk to the planet. Until now, the sector in which it has most influenced is trade, but global crises are not triggered. What it has done is to tell the Fed to reduce the growth of interest rates, which will help the rest of the planet. It does not seem that Trump, at the moment, is breaking the deck.

What did you look for with this book?

That Europe and the United States understand their interrelation and interdependence. There are times when the world needs a leader. The United States, financially, brings incredible stability to the world economy. Neither of the two parties usually mention it and receive little recognition for it, but the Federal Reserve gave 2.5 trillion of liquidity to the European banking system and another 2 trillion to the European banks settled there. But he is not interested in telling that story to the Americans, nor do European banks want to tell their governments, which in turn do not want to recognize it before the citizens. Financial globalization until 2008 was a euphemism for integration between the US and Europe. And there is still no political framework that articulates it.

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