Debate "Housekeeping" (04:09)
John Donvan explains the format for the virtual debate about whether the global financial system was better prepared for the pandemic than in 2008. He introduces the panelists and instructs viewers to vote.
Opening Statements For: Jason Furman (04:45)
Council of Economic Advisers Former Chairman Furman states that COVID-19 created human and economic tragedies, but advanced economies have had enough space in their fiscal policies to adjust. Interest rates have not increased like in 2008 and the banking system was prepared for a crisis.
Opening Statements Against: Gillian Tett (04:12)
Financial Times Editor-at-Large Tett questions why policymakers had to take extraordinary measures in 2020 to avoid a financial crisis. She cites six aspects that indicate the global financial system was not better prepared than in 2008.
Electronic Trading and Financial Status (04:51)
Donvan summarizes opening statements. Furman states the stock market has had a rational response to a massive economic shock. Tett counters that the rise of electronic trading has changed the liquidity provision.
Rates and Risk (04:48)
Furman states that pre-crisis goals were to have low unemployment and stable inflation; one can become overly focused on market gyrations. Tett counters that ultra-low interest rates and quantitative easing have become permanent measures that negatively impact the financial system.
Central Bank Response (03:28)
Furman argues that the economy has never experienced current negative growth rates, but the Fed has room to respond; the markets function perfectly in the big picture. Tett explains that the Fed's "peace" comes at a high price for the future.
Financial System Stability (03:23)
Furman acknowledges that if the economic position remains the same over the next year, the financial system will have problems, but the banking portion is in better shape than in 2008. Tett concedes the point in relation to America only; shadow banks are a problem.
Q/A: Outstanding Debt (08:03)
Robert Rosenkranz reflects on his changing position about the state of the financial system and government capability. Tett believes the debt burden will result in several years of low growth. Furman believes people have massively overstated the impact of debt on crises.
Q/A: Corporate Bond Market (01:51)
Furman states that Central Banks are the lenders of last resort and providing liquidity during a crisis is their job. Tett counters that the need for Fed involvement reveals that underlying dynamics are not stable.
Q/A: Polarization and Leadership (03:22)
Tett believes America does not have a mechanism that can spread the pain of the crisis smoothly and fairly enough to result in buy-in. Furman considers the impact of "America first" on the global financial system.
Q/A: Global Interdependency (04:49)
Tett states that despite most problems existing internationally, governments are operating on a national basis; the rate of interdependency has not increased higher than the generation rate of new regulations and tools. Furman counters that national operations is nothing new.
Q/A: Deficits (03:09)
Tett and Furman discuss when deficits matter. America has the advantage of a reserve currency, but will domestic investors keep buying American debt? Fiscal sustainability requires an economy that can repay the debt.
Closing Statements For: Furman (01:54)
Most of the ways in which we were not prepared for the pandemic are in the health sector. Central banks have functioned well, fiscal policies have been good, and governments have rolled out tools faster and on a larger scale than in 2008.
Closing Statements Against: Tett (02:14)
To understand the global financial system's position today, consider the Maginot Line. The need for central banks to double down has resulted in markets no longer functioning like free markets.
Voting and Reflection (10:40)
Donvan instructs the audience to vote and cites upcoming debates. Tett discusses the premise behind "How Much Should It Cost to Contain a Pandemic?" Panelists consider the lasting effects of the pandemic and share their hopes and fears.
Credits: The Global Financial System Was Better Prepared for the Pandemic than 2008: A Debate (00:05)
Credits: The Global Financial System Was Better Prepared for the Pandemic than 2008: A Debate
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