Adam Tooze On How This Crisis Is Different Than The Last

Joe Weisenthal (0:10)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:16)

And I'm Tracy Alloway.

Joe Weisenthal (0:17)

Tracy, obviously on the podcast lately, I would say we've been talking about events in this crisis that are extremely fast moving, and we've kind of been joking around that, perhaps in some cases, by the time people actually listen to the episode, it'll be irrelevant or extremely out of date by the time it actually gets out.

Tracy Alloway (0:40)

Yeah, I'm not even sure it's a joke, really, because there have been a few episodes that have been sort of superseded by events. It's been a struggle.

Joe Weisenthal (0:50)

So in light of that, I think today's episode might be a little bit risky, like even riskier than our normal one.

Well, the reason I say it is because we're going to try, and I don't know if we'll be successful, but we're going to try and look a little bit big picture and sort of bigger lessons, bigger themes that we can take away from all the events that we've seen over the last couple of months. And I think almost everyone who tries to project forward on what it all means will probably be looking a little bit foolish in some respect, but that's kind of what we're going to attempt to do today.

Tracy Alloway (1:28)

I mean, it's what everyone is interested in at the moment, but as you say, forecasting this is hard because as we have discussed sort of ad nauseum at this point, everything has the potential to change with the current crisis. And we really are in uncharted territory in many ways. So yeah, sympathy for the forecasters at this point. It's a tough call of putting your neck out there for something completely unknown.

Right.

Joe Weisenthal (1:54)

So fortunately, I don't think we're going to make our guest today forecast the future, which is, as you say, extremely difficult even in normal times. But our guest today is someone who has a sort of a very good ability to sum up the big themes of the moment and identify what at essence, what a crisis is really all about.

Tracy Alloway (2:19)

Great. Who are we speaking to?

Joe Weisenthal (2:21)

So today we're going to be speaking to Adam Tooze. A lot of people will know him as the author of the book Crashed, which was the sort of magnificent overview of the last financial crisis. And he is also the Catherine and Shelby Cullen Davis Professor of History at Columbia University. And for those who don't know, who didn't read it, Crashed was, you know, there were a lot of crisis books, but Crashed really sort of identified the tensions that emerged from the sort of global dollar system and how that really sort of played a huge part in the coming undone of the economy just over a decade ago.

And we'll talk to Adam about what he sees as potentially the equivalent stresses that he's seeing in the system today. So Adam, thank you very much for joining us.

Adam Tooze (3:11)

Joe, it's a pleasure to be here.

Joe Weisenthal (3:12)

Thanks for having me on. Your book, Crashed, I think it came out in summer of 2018 I actually did read the whole thing during a week vacation that I had on the beach. I was a big fan of it. But for those who don't know, I sort of gave a half a sentence summary, but it came out, so basically eight years after the crisis.

What was it about that crisis that took so long for you to sort of really tie together the big themes and to sort of put it all together in such a big work?

Adam Tooze (3:47)

Well, I think, I mean, I'm a somewhat accidental tourist, if you like, in 21st century financial history. I've now found myself marooned and stuck on this particular island, but I came to it somewhat obliquely, I have to say. I mean, I came to the topic through the history of the Eurozone crisis, which concerned me deeply as somebody who's deeply passionately identified with the EU as a result of my upbringing.

And then thinking hard about what sort of a crisis that was, following the track back to the story, really, about the bank-based crisis, as opposed to the sovereign debt crisis, as being the kernel, really, of the disruptions, setting aside the immediate Greek issue, thinking about the instability of the European banking system that echoes through from 2008 And then basically stumbling across the BIS papers, the work of Shin and Borio and others, that mapped this very, in some sense, sort of counterintuitive story of the world before 2008, not as a world of driven essentially by current account imbalances, trade deficits, and services, but thinking through the flows of money through the global dollar system and understanding that as one of the ways in which the supposedly American subprime crisis of 2008 in fact entangled all of the European banks. And it was really that that set me going.