How The Coronavirus Crisis Pushed The Fed Into Truly Uncharted Territory

Joe Weisenthal (0:12)

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

Tracy Alloway (0:18)

And I'm Tracy Alloway.

Joe Weisenthal (0:20)

So Tracy, this is obviously for the two of us in our careers we've discussed numerous times already. I mean, this is the second big crisis that both of us have been involved in covering.

Tracy Alloway (0:33)

Yeah, you know, I kind of always used to think that nothing would ever top the 2008 financial crisis.

And boy, was I wrong, because I'm pretty sure this is going to be a much, much bigger economic crisis. Maybe not as big a financial crisis in terms of what's happening to the banking system, but definitely bigger from a sort of macro perspective.

Joe Weisenthal (0:56)

Yeah, definitely bigger from a macro perspective. It's a more global crisis, even though 2008, 2009 was global. It's also just like, you know, from a societal perspective, like obviously the last crisis had huge ramifications for the financial system, but for the most part, like it didn't really change how people lived. There wasn't really much ambiguity about, you know, that much about what the post-priceless landscape would look like.

Whereas in this case, I don't think anyone really has any solid prediction.

Tracy Alloway (1:28)

Yeah, for sure. This one is much wider in scale with the potential to affect not just the economy, but politics and society as a whole.

And even back in 2008, in the worst of the crisis, you know, right after Lehman collapsed, when people were really worried about the entire banking system, they were still going out to get sandwiches, you know, still going out, getting haircuts, going about their sort of day-to-day business more or less. And all of that is very different right now.

Joe Weisenthal (1:57)

Yeah, that's exactly right. Well, there's never anything good by and large about crisis. And this one is particularly horrific from so many dimensions.

But one of the things that's interesting to see, and having seen the last one and this one, is that in any new crisis, sort of new voices are brought to the fore. People with expertise that previously weren't being paid as much attention to suddenly become very widely read and widely followed people. In this case, of course, numerous epidemiology and health experts, but also people who really have a detailed understanding the financial system who can really explain all of these sort of new monetary interventions and innovations that central banks around the world are doing are in high demand.

Tracy Alloway (2:49)

I remember one of the, I guess you would say, the few good things about the 2008 financial crisis was that it sort of gave birth or gave a boost to this really lively community almost of independent financial bloggers. And I still remember some of them. Some of them have been on Odd Lots before. And also, again, I remember this because I was blogging at the time over at FT AlphaVille, and it was my first job basically writing specifically about finance and markets. And the great thing about the situation was there was a really even playing field because everything that was happening was so new.

It basically meant that even if you'd been following finance for 10 years, you were sort of in the same position as a newcomer who was learning it all at once in real time. So it was really great to see that conversation happening.

Joe Weisenthal (3:44)

Yeah, novel crises have a nice way of, as you say, leveling the playing field and the sort of old incumbent pundits don't really have an edge, which is kind of nice to see. So today-

Tracy Alloway (3:57)

The sad thing is we are old incumbent pundits now.

Joe Weisenthal (4:01)

I know, but at least we could talk to the new ones. So today we are going to be talking to someone whose voice has really become extremely influential, really just over the last several weeks.

Lots of people reading his writing as one of the sort of premier experts on this crisis, particularly from the actions of the central bank and particularly all of the extraordinary moves that we've seen from the Federal Reserve really since late February through now.

Tracy Alloway (4:30)

Yeah, so I know who we're about to speak to. And I have to say, I sort of don't know anything about his professional background. I just know him from reading his blog or Substack. And also I think we did karaoke once.

So I'm really excited for this conversation. I want to learn more.

Joe Weisenthal (4:49)

All right, me too. So I don't know anything really about his background either. And I even know this guy. So let's bring him in.