when i started out as the wage unemployment guy and now everything i wrote was fine up to 2008 it's not true anymore so but i'm allowed 2008 was a structure structural shift everything i mean it's a structural shift but things were leading up to it and then i think workers just got scared senseless the balance of bargaining shifted and the world changed i'm going to give you a great quote so this is this was written by keynes in 1931. sure have you seen the quote absolutely so i'm going to start with that and that's where we are this is the long dragon a uh professor hello thank no you sorry i'll speak slowly try um so this is a talk about the new book that i have written um it's basically been 30 years in the making and it's about many countries including italy and it's about the phenomenon of a changing labor market i worked on this really for 25 years up to 2008 and everything that i knew up to then has actually changed so 2008 has become something quite different and the concern is that prior to 2008 policy makers including me i was at this at the bank of england voting on interest rates um basically missed the big one they missed the great recession and unfortunately in the decade since then we've seen a lot of errors and mistakes particularly arguing right now in countries like germany the u.s and the uk that they're at full employment and i'm going to show you that there were huge mistakes in the past huge mistakes now which has led to difficulties for workers and ultimately i'm going to show you that what happened in the labor market essentially explains right-wing populism i can show you that essentially explains votes for le pen votes for brexit votes for um for trump and and elsewhere in italy and other places so the book's actually about the opposite of what we were talking about a moment ago it's not about bad jobs it's about why aren't there good jobs and i started writing it and i went to gallup you may have heard of gallup the world's biggest polling organization and they say on their website one of gallup's most important discoveries is what the whole world wants is a good job and in some sense you might think all the stuff we've seen in the last five years or so is about the fact that decent jobs that pay well have basically disappeared especially for people with lower levels of education and the question is why is that uh and what are the consequences of that and i think what i show in the book is that low earnings and the loss of high paying jobs have led to feelings of instability insecurity and helplessness and one of the big things i'm going to talk about is the spreading of hurt the spread the spreading of pain around the world and especially in the united states we've seen in fact a huge rise in what i'll call uh deaths of despair um okay so so that's where i'm going the slides i'm going to make available to people um there's many more that i will actually talk to but i think it would be quite i'm happy for people to download them and take a look so i'm going to talk particularly about the us and the uk and germany but i'm also going to talk about italy too the reason the us and the uk and germany are particularly interesting is that they essentially have the same problems that italy has in many ways the same but they have unemployment rates in the threes and they have the same issues the same issues of populism the same issues of low wage growth as elsewhere so the question is well why is that okay so let's try to make a start um a lot of the stuff that i'm talking about has a lot of technical papers to back it up one of the things that i quite like and i pop if you see there this thing called the national institute economic review i quite like it because it's a it's a journal where unlike in most things in economics you write a paper you send it off to the journal five years later it gets published which is much use isn't much use for policy making this is the only great journal in economics where you send it to them they send it back to you and three weeks later they publish it which is i mean so it's really good because these papers that i wrote them they were quite useful for those three months today who would read them so this has some benefit of timeliness so here's where i want to start you going and i think the world has missed this so there are two great financial crises that have existed in the last 100 years the great crash of 1929 was a financial crisis and it led to the great depression the great crash the great recession the great financial crisis that i sat and watched at the bank of england occurred 2007 and 8 and the world missed it but the thing i would say to people is but unlike the great crash and the great depression in 2008 we'd already seen the great crash in the great depression and didn't learn from it so i started to try and think about what did keynes say so most people know about keynes's work in the in the general theory written in the mid 30s but i i've used this quote and every i've done it to me again every time i read it it sends a shiver down my spine this was written by keynes in 1931 just after the great crash so the crash comes the market crash falls and then he says what's coming now folks and here's the quote and i want you to think this is where we are we're in the long dragging conditions of semi-slump for it's a possibility that the duration of the slump may be much more prolonged than most people are expecting and much will be changed both in our ideas in our and in our methods before we emerge not of course the duration of the acute phase of the slump that's the crash but that of the long dragging conditions of semi-slump or at least sub-normal prosperity which may be expected to succeed the acute phase i think that's absolutely crucial we went into a crash which i'm going to talk about we we emerged from that crash by finding canes putting stimulus in the economy and that was true in europe in america in britain in japan around the world and then around 2010 austerity in many places kicked in and i'm going to show you that was the worst most terrible decision that was made and we're all paying the consequences of it in the uk i would argue that brexit is entirely a function of the decision of a government in the in the spring of 2010 to impose austerity and so this i think is the background to what i'm going to talk about the second most important part to this is actually policy makers understanding in these three countries but particularly in the us and the uk what constitutes full employment um and uh what we've seen is that as the unemployment rates in these countries have started to fall central banks have said haha all is fine everybody's doing great it's time to start raising rates which is what happened in the us in 2017 and 2018 which at the time i thought was a huge mistake but it turns out that that was probably right and i'll just talk about it so the question in the society is not true in italy but we certainly need to understand what's happening in the united states we need to try and understand what full employment means for the technically minded what's the nehru the nero it's called nairu it's the full employment rate of unemployment and as unemployment has moved from six to five to four uh central banks say haha we're at full employment time to crank on the on the brakes try to stop the economy but the background to this actually which people should read in fact was a story it was a paper written by william beveridge in 1943 churchill said we need to understand in the uk what's going to happen when the war is over go away and think about what full employment means so beverage wrote this great this great book in 1944 and i was actually fishing in florida and i tried to get this book and i couldn't find it and i went to amazon the wonderful amazon and i found i've never seen it before i found the 1960 version of this of this book so i go to the 1960 version and it turns out there's a great introduction i've ever read before and and beveridge says in my book i said that three percent unemployment was full employment and when we got to that point that's the point at which wages are going to take off that's the full employment rate in an in an economy and he said and i love this story he said well i wrote this in 1944 and john maynard keynes wrote to me it's not like you know you and i write keynes wrote to him keynes wrote to him and said that's a really good idea but i think it's too low i think three percent but let's you know let's see how we do so that was 1944 and the 1960 prologue he says well now i can look at what happened and look at the numbers so we can look at what happened well it turns out three percent wasn't too low actually the average from 1948 to 1960 was one and a half percent and once the economy got to about one and a half percent unemployment by the end of the 1950s wages started to tick up and the thesis in my book is that why everyone's hurting so much is actually full employment is probably when the unemployment rate's about one one and a half two or so um and and this is the explanation for weak wage growth we have to think why around the world are wages so wage growth so weak the answer probably is the world changed in 2008 people were hurt they lost their pensions they lost their jobs they became many places they lost their houses so in 2008 things changed and my thesis in this book is that actually um what we should be doing i say put the pedal to the metal keep the economy cranking if you can and in italy the reason why this high unemployment is there's not enough demand central banks have not put enough stimulus into the economy fiscal authorities are wrongly worried about non-existent inflation so that's what i'm going to talk about but put the pedal to the metal let's let's get unemployment down so my story was that in 2006 i went on the bank of england the central bank in in england and i watched as economies around as the us and uk economy started to collapse and basically central banks missed it and i gave a speech in 2008 when i said my concern is that something horrible is going to happen and something horrible did happen but the concern around the world at the ecb and at the bank of england and that the fed is that if we have something horrible happening again which i think is coming actually is that there's very little ammunition left so in 2008 interest rates in in europe and in the uk were around five and a half percent and you could cut them from five and a half to zero and even and even lower and you could do quantitative easing so in 2008 i was worried about something horrible happening and today i'm also worried about something horrible happening and i'm going to talk about it so economist effect essentially miss i say missed the big one i'm going to show you some plots they essentially missed the big one and can i show you just that this chart is kind of important because i'm going to end up saying this i'll say it slowly we didn't we did we didn't know where we were we didn't know where we'd been and we didn't know where we were going so the problem in economies is that if you get to what i'll call a turning point it's very hard to know when you're there and my suspicion is that today we're simply repeating what happened in 2008 so let me try and explain this so i said in march 2008 something horrible was happening and that the economy was headed into recession and i kept saying that from march and april and may and june 2008 and i kept saying oh the economy is i'm sure has gone into recession so this is the chart where it's very hard to actually know where you are and that's what the book in fact talks about so can we see at the top left there that number 0.2 so in july i made speeches saying i'm sure the economy is going into recession so this is the actual data that was published in july 2008 turns out i'll explain in a second it turns out that the uk and italy and the uh well uk and italy and and france and germany have actually been in recession since april and the us have been in recession since december but the fact was nobody knew but let me show you the problem here so this number came out it's called the first estimate and estimates in economics um they take it it takes a time to get to all the information in so they take an estimate they take actual data and lots of forecasting so the first thing i see is plus point two which threw me it completely threw me well then uh in september we had the failure of layman's in 2008 we'll we actually had the failure of rbs and we still had no actual data showing you that what had happened in q2 2008 in october we got estimates for the for the third quarter that minus 0.5 but it wasn't until july 2009 that we actually the estimate started to actually go negative so everyone sees theirs it's the same quarter in july it's 0.2 then it gets revised to zero then it gets to revise the minus 0.1 and today we know it's minus 0.7 we we realized by the time we got to about january 2009 that the economy had gone into recession in q3 but we didn't actually know just so everyone gets this we didn't know until july 2009 that the economy had gone into recession in august in april 2008. should i say it again we didn't know until july 2009 and i re i mean by that two successive quarters of negative growth so we didn't know until july 2009 that the economy had actually gone into recession so to put that in context if we were in recession today the likelihood is we probably wouldn't really know that for at least a year because it's very hard to work out turning points especially turning points downwards so here's here's a forecast that i was part of so this is where central banks were in august 2008 and let me just explain what this is this is forecast so i have to show you what errors people made and why we're in the trouble we're in because we're doing the same thing now so i'm going to show you what happens then i'm going to tell you where we are now and tell you that they've got it i've seen a big mess so this green band is what do you think is going to happen to output so this is the committee that i'm on and it says output's going to drop a little bit and then it's going to then it's going to pick up and the reason there's a big wide green band to the right is because the further out you are the harder it is to forecast that's the first thing second thing is actually it turns out that we have to do what's called a back cast because because i showed you about the revisions we don't actually know what's happened to the past so actually we have we have if you like back cast to the to the left side that gets narrower the further we go out and the black line tells you that that's the actual data so this forecast says three things it says we think the past is better than the actual data says because the green line is above the black line so we think the past is better than the data really says we think the present is better than the data really says and we think there's going to be no recession i say it again we think the past is better we think the actual data's got it wrong the past is better than we thought we think the data the 0.2 we just got the date is actually better than that and we think going forward there's going to be no recession how did we do well guess what the past got revised down the present got revised down horribly and there was the mother of all recessions we could we could call it the father of all recessions too but here's what we actually got that's what we actually got um we got the past this was the biggest recession in a hundred years and there's a fa the most famous it turns out the most famous quote was actually from the queen of england about the recession and the queen of england was actually had gone to the london school of economics to open the new department of economics and they said to her queen this is this new department of economics it's got 100 people 100 economists working in it and the queen said well that's fine but when there was all these hundred economists why did they miss the great recession and the chairman said to her queenie they were working on something else okay so that wasn't good so she she won the business quote of the year with that one um okay but it turns out there was lots of evidence around what i call in the book i talk a lot about the economics of walking about go and talk to people talk to them about what they think about what they think is going on so in europe we publish every month a thing called the economic sentiment in this for every country it's true of italy and france and germany and britain well it turns out these indices had actually got it right they collapsed well before this i'll just show you a little a little series i don't want you to worry about what these numbers are all i want you to look at is this is reports from businesses banking they had agents they go out and talk to the business and they say how are you doing literally kind of how you doing and they say oh we're doing okay and they say you're going to hire lots of people and they go no and so this is just a score it's not technical at all it's just the score and i've got like a dozen there and they say well tell me about what's happening to your retail sales tell me about what's happening to your output tell me about how good it is for hiring people tell me about your capacity and basically this is what the economist missed it was clearly there in the data and i'm going to show you something at the other end of course replies to today and what you see is that don't worry about the numbers all you need to see is a bigger numbers better a smaller numbers worse so in every single case and it's true in every single country the um by around may 2008 i mean that forecast was for august but by about april may of 2008 in every country in europe in the united states and around the world it was blindingly obvious from the data that this was really going to be bad and the policymakers in the ecb and at the bank of england and the fed and then the governments around missed the big one this is the biggest recession in a hundred years and they were completely clueless i'm sorry to tell you i haven't any confidence that actually we're in a good situation now so let me keep and then what you ended up there i put italy in italy of course the big story here is that italy um each of these countries has relatively weak growth since then in very weak compared to every other recession and of course italy has had very weak recovery much weaker than elsewhere and that's why people are hurting and that's why this is searching out uh populist parties i mean yesterday in the polls in the uk for the first time a brexit party came topping the polls ahead of both the labour party and the tory party and this is driven by lack of growth lack of good jobs so now let me show you where we got to i just want everyone i mean this is i'm an economist i'm showing you that you shouldn't believe what columnists are telling you look at this so this is i think this is really embarrassing and i'm going to show you this is where we are now so this is a forecast for productivity i like giving you these graphs they look all complicated and they're not so here's the deal so recovery comes in 2000 does this thing point can i get this thing to point no i guess it doesn't okay well maybe i can use the mouse so i can use the mouse so here's recovery since 2009 so we have recovery it gets to here and it's true in many countries so then what happens is you come in and you say right we found keynes for 18 months we don't like him anymore austerity we're going to make the poor pay because it was their fault we had the great recession so what we're going to do is we're going to put in austerity so there's the day you put in austerity and the red line is your forecast as to what's going to happen to output okay so now you get 20 different goes at it and so every time you ever say what's going to happen to output you say that's each time you get another goal so each of those lines you get another goal right okay so there's about 20 goes at it and every single time basically you say the same thing right but the black line along the bottom is the actual output there's the actual answer the black line flat is a pancake but every single time you say well i was wrong last time but i must be right this time and you say it every year for 10 years in a row that i'm it's going to be like this but it was like that but it's going to be like this again and it's going to be like this again and it's going to be like this so that's what central banks have been doing and that and they say don't worry we've sold everything you're all going to be fine okay so then so then in 2017 they said oh we got this a bit wrong so we'll we'll change it a little bit and we'll put the blue line in so i stopped that in march 2017 and now my next slide so obviously we got to march they'd solved it productivity was going to rise just like they said so my next slide shows you the actual output what happened each of the next three quarters have been negative so not up down so that's what's called the productivity puzzle and this and the central banks around the world said we've got to raise rates we've got to make things tougher for people because productivity is about to take off and they said it 20 times in a row but it never did okay this is worrying right so let me show you something else another another crazy one and this is exactly the true in the ecb it's true at the bank of england it's true in the fed in america so this is the forecast for wage growth so every the big deal in all these countries if you're an unemployment rate of three percent wages ought to be exploding and they're not anywhere so this is what all these central banks think so let me just show you again it looks technical it's not so what this is so this is in 2014 q1 you can make a forecast of what you think wage growth is going to be in 2014 and you get four goes in it and there's the actual answer so then in 2014 q1 you get to have a go in 2015 and there's the actual answer and basically you do exactly the same as we just saw what you do is you say wage growth is going to be four oh but it ended up as two but don't worry next time it's going to be four and it ends up as two and you do it 21 times in a row because you always say look you say in 2014 q1 it's we think it's going to start out two and three quarters but it's going to be three and three quarters and in fact in may of this year uh sorry in may of this year the bank of england made the same forecast basically as it did in 2014 q1 so the answer is they always think it's going to be four and it's always two and it's never four and they never change right and so central banks say we've been tightening rates and we're tightening up stuff and we're rate and we're not we're not business in the economy because we just know that that this is all going to happen and of course that's just that's just nonsense i'm just going to finish one thing here and then i got to try and get to think about populism so here's the worry here's the worry so the mistakes that were made in 2008 where you missed the great recession and that hurt people terribly so now you have this horrible slow recovery and you say and the central banks say everything's great we're at full employment and everyone's going to be doing just fine so this is the fed's forecast this is the latest forecast we have from the fed how am i what's the music are we all right okay let's keep going this is the this is the forecast from the fed this is the federal reserve in the united states so the united states is very important to the world economy not least because of because trade the trade wars coming out of the out of trump but let's just look at this so the current rate is 2.375 percent basically and this is um the 16 the 17 people on the fed are asked what do you think is going to happen to interest rates in 2019 and they say well four of them say it's going to rise by by 250 basis points and two of them say it's going to rise again so six people think rates are going to rise in 2019 and in fact of this of the 17 and four of them think in 2020 rates are going to rise by a bit and and several of them think interest rates are going to rise like crazy so the banks telling the markets this is what we think is going to go on we think we're at full employment we've made all those forecasts well very interesting but nobody believes them so can i show you so everyone has in their head the bank the fed says we're going to keep raising rates and that caused trump to go after them and trump says you shouldn't be doing that well we can work out what the market thinks let me show you what the market thinks and the problem with this chart is that this moves in real time so i did this yesterday at noon but it moves in real time because you can read out in the markets what the markets think so can everybody see what i've got here so if you so there is not an on those chart i just had a moment ago not a single person of the 17 people on the committee who've been doing all these forecasts and missed the great recession not a single person thinks there's going to be a rate cut does everyone see there's not a single person who's below that i mean there's no one below where i've showed you there's nobody under 2.375 well look at where we are now so let's just look at this so so if i give you the december 2009 team that says there's a 5.9 chance that interest rates will be the same as they are now at their december meeting six percent chance that interest rates will be even where they are now so there's a 94 chance of an interest rate cut nobody on the fed even they all think there's gonna be rate rises but the market doesn't believe a word of it because they listen to me and there's a 94 chance of an interest rate cut there's a there's a there's a 75 chance of an interest rate cut in the october meeting and by the time we get to january there's a prospect that's built in here there's the market thinks is the very real prospect that by the end of 2019 the fed will have cut three times so i gave it to you again there's the disconnect the fed missed the great recession missed everything a year in had no idea that the great recession had come today it says all is well the people don't think it's well and the markets don't believe them so that's a big problem um and obviously if you're at the ecb you have a problem because you can't cut far what are you going to do so this presents major problems for people how am i doing for time i've got about how am i doing i lost my how am i doing all my okay i've got 12 minutes perfect okay so the story i want to get to is what have these folks missed what actually is going on um why is the weak wage growth and in a sense what the fed and the bank of england and the ecb kind of says is that everything's great productivity is going to take off wages are going to take off all is well that's not kind of i mean think of the gig economy think of insecurity think of hopelessness and populism and all the rest of it so this is about the fact that there's been very in reality none of that's happened wage growth has been weak and people are hurting which is my story and there's a lot in the book about why people are hurting um it turns out that i'm just going to go through quickly it turns out and i will summarize this pretty quickly and i don't obviously need people to read the chart so what's happened is that globalization has moved on workers feel like they have no strong bargaining power there's a big big in the uk four million people from eastern europe showed up from 2004 through 2019 so that's had an impact on workers but the other thing in a place like italy and elsewhere firms realize that if wage if wages were to rise much they can move their production to ireland to thailand to india so basically what's happened is that labor market slack is much greater than people think and it turns out that the most important measure that we've been working on is is actually about under employment and by underemployment i mean this and it's different from unemployment the unemployment wanted to get jobs and wanted pay the higher the amount of unemployment the weaker the bargaining power of workers was okay but the problem in lots of these countries now is the unemployment rate is three and a half and there's still no no bargaining power well why is that turns out since 2008 i'll say it try and put it simply pay in the past was pushed down at the external margins it was pushed down by people unknown people you have a job you have a job but your pace kept in check because all these people over here you don't know are unemployed but now what we see in the data is that there's masses of people around the world true in italy through around the world who say i'm in a part-time job and i'd like a full-time job and i can't get it and i'm in a part-time job and i've got 15 hours but i'd like 25. so that turns out to be the new phenomenon and i'll just say what we've seen in the past is something at the external margins have now been turned to the internal margin think of the the people in the gig economy people in the gig economy these people over here in the gig economy but they're in the same firm as these people over here and they're quite aware who they are and they also know them you know him right so this intensive margin this internal margin means the gig economy has meant that the pressure's coming from within firms and my view is if we were at full employment we wouldn't see that workers would have much more bargaining power and we'd be able to say well i don't want this job if you don't give me more hours i'm quitting and so that's a big indicator so it turns out i'll give you another story as well in the book i talk about what i call tv junction and tv junction is quite interesting because it happened to me in 1974 i was a student and the labor market was hot and i got hired by um tarmac a construction company and i got hired at the lowest of the low levels i was called the chain boy so i was the boy in the in 1850 who would carry the chain to measure things right but nice but i was the guy who worked with a surveyor and i carried the theodolites and the slitting down and anyway but the point of my story is that the labor market was so tight that for the first time in 50 years they couldn't get chain boys at chamboy rates so i was paid full labor's rates for a chain boy job my point is that there's the there's the there's the pyramid of jobs if you like the job pyramid and when times were good i would enter the pyramid higher up than i should have done you know i could i could have been there you know if i'd carried on i could have taken a phd in chain carrying but anyway but the point of the story now the underemployment that i see now and it's around the world it's not just that people have less hours it's that people with a degree are doing jobs of people with a high school diploma people with a high school diploma are doing jobs if people who are high school dropouts and everybody's pushed down the job pyramid we see no evidence in any of these countries suddenly that people are now rising up the job pyramid which is what you would see if you were at full employment so i want to show you a couple of things so this is what david bell and i have done we've done it for italy we fight for every country so this is the data that seems to be the most important so we ask people and we use the european labor force survey for the technically minded it's true for every country it i've got it for every country in europe i have it and particularly in the uk and this is just we ask people how many hours are you this is just for workers and this is really the big phenomenon we ask workers how many hours do you work when they say 26 and we say okay are you happy with those hours if not would you like to change them yes some people it turns out say i would like to work less hours right and some people say i would like to work more hours and we can work out how many hours that amounts to well it turns out so in the uk and i've done it for it but i'm just use this chart because it's nice turns out the red line is the total number of hours that you get from people who want to work less but the big blue line is this line which says i would like to work more hours and it turns out this is the really big deal the unemployment rate doesn't matter it turns out this is what matters because that line as you see that's millions of hours you can translate that into unemployment equivalence but that line is nowhere near back to where it was at the start if you've got weak wage pressure wages haven't gone to where they were in the past you need a series you need a series that has that characteristic and this series uniquely does it in every european country does it in the uk does it in the us and the story is this even though unemployment is back at very low levels underemployment isn't underemployed is what driving people and this is what's hurting people people are pushed into low-paying jobs jobs with less hours than they would like and that's making them unhappy so you even have poverty out of work and added to that now we have poverty and hurt in work okay so let me just i'm going to stop in a tick so in in italy we see so here's the numbers i do for italy in countries with high unemployment rates underemployment adds a little to the top of it but actually in places you see like france i mean that the amount of this is this is you add underemployment on top of unemployment and it turns out these numbers are pretty big italy it's not so big but what you'll often see is unemployment comes down and underemployment doesn't um so real wages everywhere are very weak i just want to get to this and i want to show you some pictures and then we're finished so basically so the policymakers missed the great recession they're missing everything now they think we're at full employment but inconsistent with that would be this and the book documents it documents it across countries so an example in the united states is that we've seen this horrible death of despair epidemic huge 72 000 people last year dying from opioid poisoning and opioid overdoses driven in part by a need to to deal with pain pain in the despite the big rise in opioid prescriptions pain in the united states is hugely up and a typical american even though they take all these things are much more in pain than anywhere else in the world a quarter of all visits to a doctor in the united states someone reports being in chronic pain i mean i wouldn't have thought that would be true at full employment so hopelessness is up anxiety's up um the death toll from not just opioids but from suicides and and drug and liver poisoning from drinking is up doesn't sound like what's happened at full employment and so there's this gap i want to just show you a couple of things and then we can obviously go to questions and people are really very worried about this these deaths of despair spreading around the world in the uk life expectancy and the us in the last two years life expectancy has fallen for the first time in like 50 years so but everyone says we're at full employment i want to show you some plots so then the question is what's going on does the labor market drive things and i'm going to show you just some pictures some pictures and i can do the same for italy but i probably should but i'm just going to show you pictures from the united states from the uk and from france and the question is who votes for trump brexit and le pen okay well the first thing i'm going to show you this so this is i'm not just talking about individuals i'm going to do it by place so think of a county some the characteristics of a small place so which count is voted for le pen which count is voted for trump which count is voted for brexit and the answer is the votes are from places that hurt so the first one here is who voted to leave based upon the average wage in the county so the lower the average wage in the county the more likely it was that people would vote to leave so now i just plot do a more disaggregated one let's do it by ward so let's take the proportion of people in the ward who have a degree i mean look i mean these patterns you don't you don't really have to you don't have to do any econometrics or anything fancy you could just see it okay so lower levels of education more likely to vote for brexit so now let's go to trump and i'm going to show you exactly the same it's exactly the same by state so which states voted for trump answer the states with the lowest wage try another one so this is just to make life easy instead of just saying let's see who voted for trump that's dominated by the fact that trump votes are in certain places so the simple thing to do is just say let's take a county let's see what vote romney got and then see what vote trump got and then let's just take one from the other and plot that turns out that the higher the trump romney difference the higher is the unemployment rate and it turns out that if i show you anything bad anything bad will do so the the shorter life expectancy in the in this in the area the more likely the vote for the for trump romney i can do it by suicide by heavy drinking rates by um obesity rates it doesn't matter you just get the same pattern and then if you do the same in france it's exactly you get exactly the same thing it's positively correlated with the with the unemployment rate i'm just going to stop there for a second the problem with all of this clearly is that economic factors lack of decent work has led to these um issues there are a couple of problems i'm just gonna am i can i do three minutes i think i'm a couple of problems i'll just go to so promises have been made and i want to think about the promises that have been made i will give you a little story promises have been made that you know brexit trump whoever the parties in italy the promises have been made that they can make life better so the question is is that true and what happens if they don't make things better it's clear in the united states things have not been better for those who voted for trump but his polling pretty much remained the same but i want to tell you a story about luzerne county so it turns out one of my colleagues comes he told me this story comes from lucerne county which is a coal town and it's up it's in pennsylvania and it had obama won twice there by about 16 points trump went there and said i'm going to bring coal jobs back to luzon county um and won by five points so loser encounter i mean i went so i went and did some research and my friend told me to go look at this it turns out the luzon county was the center of the pennsylvania coal mining in the 50s and then it turns out that the susquehanna river the big river through pennsylvania changed its course and flooded the mines and there was a terrible mine disaster and from about 140 000 miners in the 50s the numbers have collapsed as they have in the uk so i went and started to talk to people at the luzon county office and they said go and look at the website so i went to the website and it says tells the story of coal mining in luzon county and it says and it was fine until the river changed its course and this has changed everything to sort of destroyed mining in the area and it says on the website there are millions of tons of coal in lucerne county none of which is mineable not none of which is mineable because it's under a thousand feet of water so coal jobs aren't coming back they're certainly not coming back to luzon county even though people think they are um in the uk um every english seaside town voted to leave apart from the one i was born in which is brighton and the reason that they're hurting is because of italy and greece and spain because in 1950 in britain the coal miners and the steel workers closed for two weeks a year and they all went to blackpool but in 1965 there were cheap aeroplanes that could bring them to trento and blackpool is not gonna blackpool is not gonna get tourists because okay so the last thing the last thing is look at what the people say so here's a little story about where we are now what people say so this is a series i think is quite interesting and this suggests to me that things aren't very good and people know so let me just show you this series so the red line is the unemployment rate so the thing particularly to look at is the obviously the red line in the uk this is so unemployment comes down from um um unemployment comes down from around eight percent falls steadily gets to here around six percent so here's the unemployment rate gets to six percent and then it falls steadily down to four and everybody should be feeling great the unemployment rate says the central bank means everything but the blue line asks people how you feeling how how's things going and they say to them what do you think is going to happen to the unemployment rate in the next 12 months so it turns out over here okay that was pretty good right that was pretty darn good people over here said i think unemployment is going to rise so since 2014 despite the fact that the unemployment rate has fallen for the last two years everybody says i think unemployment is going to rise right so you the central bank says everything's great unemployment's going to fall and everybody says nah it's going to rise i'm not feeling good because even though the unemployment rate is coming down i think it's going to go up so there's this big disconnect i've tried to get to policy makers people hurting the gig economy people not having significant wage growth and not being able to move to big to good jobs so the worry is that they've missed it again so i think unemployment rates are at historic lows underemployment has replaced unemployment but i'm going to finish with a little quote and i have had two extracts of my book were published by bloomberg last week and i'm just going to finish with that and say i'm afraid i don't think much has been learnt in the last 10 years and i finished with this we don't know we didn't know where we were we didn't know where we'd been and we didn't know where we were going same as now sorry the la the last thing i should say the worry is you came into this room feeling depressed and you're going to leave feeling worse a presentation take this oh i i well i i agree with that i think what i've actually shown you is that if you talk to the real people certainly if we look at 2007 8 and 9 ordinary people got it if you looked at what they said and you looked at the evidence real people were saying that it was hurting so i was sitting on the committee at the bank of england and we'd have several hundred economists and then we'd have the bank agents and the economist would say all kinds of stuff and it was almost exactly the opposite to what the bank's agents were saying what i mean by that when i say the bank's agent all the bank's agents did is they went out and talked to people they went out and talked to individuals and firms and they said this is what the people said and at the end i got myself into big trouble because i said well we didn't really need the 600 economists you should have just listened to the people and i and at one moment i said well actually we'd have been better off if the 600 economists have been delivering pizza and someone said to me no that would have been no good because they'd never found the right house i think that sort of sums it up and obviously the chart i showed you at the end suggests that people are not feeling uh what the central banks are saying in countries like the us and the uk there is no wage growth people are hurting when you ask them how you doing they say i'm in pain i can't sleep i'm feeling bad i feel insecure and and the central banks and the policy makers have sort of ignored that at their peril because the people i mean i do think that the people i mean the data that i have the people got it then and they get it now and if central bankers keep saying and elites keep saying everything's great that's why we've got populism because nobody believes that nonsense i i agree i mean i'm going to speak in italian this is the format uh anyway um i think what you said is completely right but what i showed you is that there has been no learning no learning but there will be i mean unemployment mental unemployment um i i i think the perception is right i guess a statistic i should give you is that um i had a conversation two days ago on twitter with a guy called rupert harrison who was the chief advisor to the economic minister in the uk and he said economic miracle employment is higher than it's you know it's been in the past everything's wonderful and i said hmm real wages today are six percent lower in the uk than they were in 2008 so that means just think what does that mean it just means my pay packet would buy stuff in 2008 today my pay packet by six percent less than i could buy in 2008 we expect overtime real wages to rise so the answer is the policymaker says everything's great and you say but i'm worse off than it was 11 years ago there's the disconnect and i think that the people are right because real wages are down six percent and actually they're falling they were five percent um below four months ago so not only are they lower they're it's actually getting worse so there's the disconnect and i and i believe the people i believe the people are right that this it's not an economic miracle it's a disaster and it turns out in the uk that everyone says what a great recovery it's been i wrote a column which said i've actually looked at the data we now have data for 600 years in the uk it turns out this is the third slowest recovery ever the slowest was the black death 600 years ago um and the next one the next slowest was the south sea bubble 300 years ago so we're now i mean so policy makers want to tell you everything's great you this is the worst recovery in 300 years sorry um so thank you professor so you you were showing the table from the fed and you are showing that they are thinking that rates will rise despite their opinion of the markets so my question was do you think either stupid or they are um great dreamers or maybe they are great economies so and by the way you are so maybe um you you gave me the answer but i would like to listen also to the answer from the professor so you were saying that maybe they are trying to fight uh some pessimism or fake news so they are trying to say acender lamicha so um to make things things to make the economy start starting running again so yeah it's a very great question um um i was on a committee when i was on when i was on the bank of england there were nine people and me and it turns out that the vote was always one against eight and it took me a very long time to realize that actually there were two opinions eight of them had the same opinion and me and there were two opinions so the first one was the tyranny of the consensus which is a very big deal i also think that we've now put ourselves in a position that paul degraw said it very well he said that many of these people are their memory is inflation in 1974 and he thinks that the tools of the central bank is essentially the economics of the maginot line right the line of defenses that was okay for the first world war but it was irrelevant in the second um i don't know whether the answer is that they're stupid um i i it's consistent with that as an explanation let me say that i'm not going to say it but that's consistent i mean especially when i show you no learning right i show you no learning and that i mean on my committee in august 2008 on july 2008 people were voting for rate rises and in in the minutes of the committee meeting in september 2008 i voted for a 50 basis point cut and i said the world is collapsing around the floor and i got about that much in the minutes and there's about two and a half pages about why we should raise rates so the answer is that um i mean phrases like tyranny of the consensus sticking with old stories and not learning the book is about can i tell you a little story i may it may be it's i might my editor was kind of worried so i went this may be the answer but i'm not going to quite say i went to a meeting in newfoundland of what was called the american learned societies so i went to the meeting and the taxi driver picked me up and i said i want to go to what they call the learned and he said hmm yup the learneds have been here all week and the locals have redefined their name i said well we said we don't call them the learnings i said what do you call him he said the stupids that's a good answer that's my best i can do someone saw me sorry wave english italian that's um um i i think you're right that we have somewhat changed um let me just explain so i sat on a committee that actually watched i mean when the governor of the bank of england actually had no idea that there was a great recession coming also had no idea that northern rock was actually going to fail in the first time in 100 years in the in the uk we had thousands of people standing outside banks so that was about two years before the failure of rbs and then three weeks after that the failure of lloyds obviously we've tried and we didn't learn from the fact that the the great recession started in the florida housing market so the great depression started in the florida housing market and pretty much so did the great recession obviously we've tried to adjust and improve um bank balance sheets and so on but i think the big issue i mentioned it before is that um policymakers don't have any weapons left and it's and your point is well taken it's hard to believe that for example could the british government do anything well the british government couldn't do anything about anything at the moment i mean they don't there's there's not a credible government anymore so the concern is central banks don't have any firepower maybe things are a little better than they were but when this shot comes it doesn't look that we have any weaponry to deal with it and the last thing i would say the markets are probably going to crash more than they did before this is my pet thesis because in the past people realized that central banks could cut rates can't do that so what's the only tool that central banks have got more quantitative easing so that means you know that if the markets crash then the central banks are going to come in do quantitative easing and raise equity values so that suggests that the decline might well be greater than it was in the past because you know that the central bank is going to step in so i i agree with you i don't think we've learned that much and my concern is that because there's been no learning and the central bankers just look completely clueless maybe stupid it's a big worry i agree with that i'm sorry oh my god uh also um yeah i think the world's changed i think particularly in the us um we've seen this enormous rise in in income inequality and especially in wealth inequality um my old friend who actually recently passed alan kruger has a new book out talks called rockonomics and it talks about how the music industry is much like the world in that sales of stuff has stopped you they're not selling music and basically what they're doing is selling um tours but superstars dominate everything right so the superstar rock band takes 95 percent of the of the income and so i think the evidence is that rising inequality both in income and of wealth but then think about what the central banks did central banks stepped in to rescue homeowners and rescue those who held assets young people neither had homes nor assets so the the central bank stepped in and and no none of the people who basically caused the crisis went to jail so i think it's that rising inequality particularly wealth inequality i'm trying to find the charter that i have i can't remember where i put it there's a chart which shows the proportion of wealth held by the top point one percent um is equal to that of held by the bottom ninety percent and that was only true in the 1920s and that gap there was a huge gap between them for the last 75 years and now we're back to levels of inequality that were true in the 20s and i think relative things matter so i do think our generation um i mean what we saw in the 70s and 80s we saw a rise of unions we see narrowing of equality less inequality than in the past so inequality is important and i've written about stuff in happiness economics and what we've learned there is relative things matter if i get a bmw and you don't it makes me happy but if i get a bmw and you get one that doesn't make me happy i'm just as happy as i was before relative things matter um crazy equities um i don't know quite what to say about the first one let me just spend a little time thinking about the second question um i sat at the central bank and by november 2008 it was quite clear that we were gonna have to do quantitative easing right um and we had no idea how to do it so the reality was i can tell you what the discussions in the room were and it was the same with the ecb and the and the fed we had no idea how to do it we had no idea what to buy we had no idea what units of observation well i mean what how much should you buy no idea the other thing we didn't know was well what would it do right so if you want you say okay we want to buy treasuries or we want to buy brick gilts we'll call it well which ones do you buy do you buy three year kills you buy 10 you buy 30. well it turned out that um that we just did not know we also don't know we had no idea what to do as you come out of the crisis so the answer is you're living in a world of i don't know um the problem it turns out well the first problem for the united states is the fed has can only buy three things so if you know this i actually know this i was in ben bernanke's office and he took the fed and he told me this so the fed is restricted to only buy three things it can only buy federally insured assets so that means treasuries it means mortgage-backed securities which is done and it also means short-term municipal bonds which is never done but the fed explicitly is not allowed to buy etfs anything the discussion and i agree with what you said that's going to limit the fed because obviously the question is well what do you buy now and if you can't if the stuff that's had the biggest effects already been bought it means maybe the marginal effect as you go down as you get bigger is smaller so we were told and i think this is probably right the central bank is part of its quantitative easing program could buy anything so if i could buy a company the danger would be if i buy the company and then the company goes bust people would say it's an unmandated fiscal policy but in principle and this may they'll be where we're going to go because we've seen the ecb and the bank of japan broaden what it buys i mean the bank of england bought which is quite interesting the bank of england at its last go-round bought private sector bonds of companies that made a significant contribution to the uk economy half of those companies were american firms so the the us is not buying corporate american corporates but the bank of england is buying american corporations the ecb could buy american corporates so the answer is that we just don't know the potential is that they're going to have to go and buy all sorts of things which is back to my earlier point this is going to be very positive to equities after the crash that comes right um but the search is going to be on on what to buy so for investors that's going to be a positive but for people who don't have assets who've lost their houses and all that stuff i mean think of people who think of student loan debt i mean one obvious thing that central banks might want to do around the world is actually start to buy student debt i mean which in the uk i think the government's borrowing at whatever is one and it's charging student six well we're going to see students defaulting so i mean your question's a great one this is going to be a big problem but the fed is stuck and we don't even know either whether the fed could go negative and we don't know whether the bank of england could go negative either so this is really where we're going the worry is that to put it technically we're all screwed sorry good question more questions foreign um a oh i missed that sorry i'm going fishing do i get to respond can i respond yes sir um obviously care of our homes are an important one um i i think a good illustration is the debate about your idea of not taking care of a home in a sense it's how desperate people have come let's just give a couple of things so the brexit party that actually did very well in the european elections last week had no manifesto had no policies whatsoever didn't have a manifesto they believe got elected because they said we want to leave the european union okay so yesterday they were top of the polls but they literally have no policies no i mean they don't have a matter it's not like i disagree with it they just don't have any right and then the craziness so the part the the politicians are all fighting about um what who can be most like no deal bret hard brexit and i just want to sort of illustrate a couple of things to you um it turns out that the uk the uk national the minister of the health service has become the world's biggest buyer of freezes and fridges why because when the border closes on halloween medicines from italy medicines from spain medicines from france can't cross the border so they have to stockpile and the only way that the national health service can stockpile is by all the world's fridges freezes and to stockpile the medicines great but i have a better one which i will finish on it turns out that um no no deal brexit means basically that the borders will close and it means there's going to be 30 mile lines of trucks sitting at the borders particularly at dover and i think this illustrates your example very well it turns out that the uk has not just become the world's biggest buyer of fridges you i want to see what the italian translation for this is it's also become the world's biggest buyer of porta potties portable toilets porta potties what do you call what's the italian for porta potty okay you've got to see me you've got to listen to me this is how stupid you know a portable toilet and the reason is that if you have a 30 mile line according to the laws in europe and and the laws in europe which is that if the if of drivers are sitting in trucks for two days in a line to go across to dover you have to have a porter potty every 250 yards along the freeway so what no brexit means is lots of porta potties how did i do perfect take care of your home stupid right thank you very much thank you up there thank you you