“Monetary Policy Cannot Be the Only Game in Town”

Published on
November 5th, 2019
41 minutes

“Monetary Policy Cannot Be the Only Game in Town”

The Interview ·
Featuring Lucrezia Reichlin

Published on: November 5th, 2019 • Duration: 41 minutes

Lucrezia Reichlin, professor of economics at the London Business School and chairman of Now-Casting Economics Limited, joins Real Vision to discuss the political and economic jitters roiling in the Eurozone. Drawing upon her experience as a central banker, Reichlin argues that the continent's trio of low inflation, low growth, and record-low interest rates indicates the need for widespread fiscal stimulus consisting of large investments in infrastructure, technology, and green energy. Reichlin also addresses debt mutualization, integration costs, and the likelihood and timescale of a European recession. Filmed Friday October 18, 2019 in New York.



  • TW
    Thomas W.
    7 November 2019 @ 01:36
    Keynesian, globalist, central banker, chicken little climate alarmist nonsense. Some commentators here say it's good to hear how the entrenched 'elite" think. I KNOW how they think. I hear it in their official diktats. I see it being played out in their insane actions day after day. It's no mystery. To give a platform to this kind of claptrap is to become what you sought to displace in the media marketplace. VERY disappointing.
    • JM
      Joseph M.
      16 November 2019 @ 22:39
      Thomas.... I agree wholeheartedly... I paid a lot of money to Real Vision in order to get insight and understanding. This whole interview was, to use your word, CLAPTRAP. Moreover, as I understand the situation, Lucrezia is affiliated with the ECB... which is scary. I would not trust her judgement in anything related to money or politics. By the way, Italy is truly a "failed state", which is proven by the current inundation of Venice... a very rich city... which cannot muster the will or the funds to build the proposed sea-wall.... Why? The answer is corruption... and folks like Ms. Reichlin.
    • KR
      Kevin R.
      2 February 2020 @ 23:15
      Personally I enjoy realvision because of their willingness to present opposing views
  • DN
    Dave N.
    26 November 2019 @ 23:57
    I found this interesting, but that is because like Japan, everything in Europe (and I lived there for 5 years) bores me to freaking tears and I am thinking about big picture issues as we head into 2020 and I keep hearing about how Europe is stabilizing, but the structural/political dissonance never ceases. What we need in Europe is much more dynamism and vibrancy. That is extremely hard, if not impossible to accomplish, although there are some segments (broadband, airlines, telecom) that are superior to the US in terms of service/price. Even if German expands fiscally, how much would they do and what long term competitive advantage would it create for the EZ overall? So, the medium term question isn’t whether the US and Europe will ultimately converge, but in which direction and over what time frame.
  • wo
    wellies o.
    11 November 2019 @ 17:22
    climate change....new religion
  • ST
    Slawomir T.
    7 November 2019 @ 19:46
    Typical few of established academic professor who never lived life in real world. Lower intrest rate helps if you of course, didn't work your entire life with hope, that one day you retire and your savings support your life. She is sitting on Cadillac pension so screwed everybody else. It's really funny how those people think. As long as system is in place millions baby boomers can just sell their assets and peacefully die.
    • WM
      Will M.
      10 November 2019 @ 16:29
      Slawomir, remember us baby boomers have to sell our assets to someone and we all want a good price. But who is going to pay? Many boomers are in for a shock as they find out no one can afford the assets at full price (unless inflation can make up the nominal difference). Raoul's point on the retirement crisis is well founded. The system is not going to last and the speed with which it collapses may come as a shock to all.
  • WM
    Will M.
    10 November 2019 @ 16:25
    It was not as bad an interview as I thought it would be from the comments below, however the last 10 minutes turned me off somewhat. Ms Reichlin obviously does not see much of an issue with negative interest rates nor is concerned with the Lawyer Lagarde taking over the ECB. If a fiscally trained professional like Draghi can get it wrong (total FAIL regarding interest rate management) how on earth do they expect Lagarde with her lack of business understanding and poor judgement (the influence "bribery" case she was found guilty on in France) to be a better option. My big beef was Reichlins comment near the start about her positive view on the future of the EU. I fear this was just a platitude to folks using her company since the EU is clearly in a crisis which is going to get worse. The Brexit issue plus the ill fated Euro fragility combined with Deutchebank problem (close to collapse) and several EU members grossly over promised social benefits systems means that in the coming EU recession government expenditures will soar along with debts and further worsen the EU position. It appears to me that there is no way out and indeed UNLESS the Germans substantially boost fiscal spending soon there will be a crisis to match 2011/12 almost immediately. Only this time avoiding another GFC may be a less than 50/50 option as the Fed Reserve in the US is already grossly more overextended than in 2008. I can see no case for optimism here, unless you are an ostrich....
  • TS
    Theodoros S.
    8 November 2019 @ 21:12
    So true in the part they talks about how to change the bank Balkanisation regime. Europe should develop its capital market, companies should invest and also Europeans have to spend, if European economy is to be saved.
  • FA
    Frank A.
    5 November 2019 @ 15:59
    Nothing more than bankrupt Keynesian drivel. Constantly pulling forward demand with debt is a losing proposition and a road to poverty. We've already pulled near 40 years of future demand forward......the game is ending from its own dynamics. I don't care where your degree is from that's just plain insane....
    • SS
      Shanthi S.
      7 November 2019 @ 07:48
      Well said.
  • SS
    Shanthi S.
    7 November 2019 @ 07:46
    I like her accent more than her politics.
  • M.
    Milton .. | Founder
    5 November 2019 @ 18:10
    Guys and gals, let's keep it civil in here. Let's debate and post mature comments like we did when we had Bannon or Farage on. We can do better than what I just read.
    • BS
      Bernie S.
      5 November 2019 @ 18:39
      Milton, unless you deleted the "uncivil" comments, the posts I read here are not just mature, but Spot On.
    • JW
      Joel W.
      5 November 2019 @ 18:44
      Milton, I tend to agree with Bernie here. I found some of the comments a bit harsh in tone, but not uncivil. Seems like the negative comments were about policy/politics/ideas, but not personal.
    • KS
      Karen S.
      5 November 2019 @ 19:07
      they delete comments. they've deleted some of mine before.
    • SM
      Stephane M.
      6 November 2019 @ 00:47
      Can't we disagree with this global warming propaganda Milton?!?!? https://www.youtube.com/watch?time_continue=2&v=oYhCQv5tNsQ
    • MS
      Michael S.
      6 November 2019 @ 03:18
      That's YOUR crowd, Milton! Speaking of Bannon and Farage, when are you going to have Marc Faber on again? Ha!
    • TR
      Theodore R.
      6 November 2019 @ 17:46
      Dear Milton, I thought my subscription money was about learning the Truth in Finance ... isn't this how we used to call it in the early RV days? I'm making a herculean effort here to find the civil words to use. I can't, hence I will not comment. Who brought her on? WHY? I even tried to go back earlier and read the transcript thinking that I may have not had enough coffee when playing the video early in the morning. Milton, I tell you, after reading the first few paragraphs, I decided to write this comment and COMPLAIN... Thank you. PS - Make it up to me ... please get Nigel Farage to watch this and then write a comment !!
    • AK
      Arthur K.
      7 November 2019 @ 00:06
      Civility should rule, 100 % agree. But I am horrified to hear that there is censorship of the comments !
  • JR
    Jay R.
    6 November 2019 @ 00:23
    I have to be honest, I have now swayed to the comments section to catch the synopsis when the polling numbers on thumbs up or down are pretty much split. It certainly helps manage my time to see if I want to invest 40 minutes listening to drivel or elucidate my mind with different perspectives. Time is after all the most precious resource that we be own. I have come to value the RV subscribers comments as much as the content in some cases.
    • RM
      Robert M.
      6 November 2019 @ 03:44
      You will have missed a good interview on this one. People are voting down based on politics and her analysis of what European politicians may do in the future - i.e. fiscal spending around environment. Hearing comments from someone where you may not agree with her analysis is keeping your mind in a closed box and makes you a bad investor.
    • JA
      John A.
      6 November 2019 @ 13:14
      Though I agree with the sentiment, many commentators are pointing out the fact that the swamp is still worth listening to, just because their ideas will probably hold sway going into an ugly future. I listen to, and read Ken Rogoff for exactly that reason. His last book was an apologia for negative interest rates, and a cashless society. I don’t agree with his prescriptions at all. As a matter of fact, I was fuming through the whole book. But I know when TSHTF, his ideas are going to be very influential on the decision makers, sadly. Knowing where we are headed makes the job of investing much easier.
    • RM
      Robert M.
      6 November 2019 @ 16:57
      John A, agree with your comments. Governments are implementing some crazy policies to keep the balls in the air. Many of us disagree with them but that doesn't change the fact that they may get implemented and impact the investment world. We have to stay on top of these different views on policy.
  • DD
    Dmitry D.
    6 November 2019 @ 14:57
    I used to cringe when someone said "ivory tower", but this phrase was stuck in my mind while I kept listening to this lady. The patient is pretty much on life support, but sure, medicine will definitely work if only you give him enough of it. Central bankers' lack of self-awareness is truly stupefying.
    • RT
      Rex T.
      6 November 2019 @ 16:17
      She was more an economist at the CB than a central banker. Today Amazon has 200+ PhDs doing what she does much faster and proprietary datasets.
  • RT
    Rex T.
    6 November 2019 @ 15:17
    This is actually the only person I’ve seen who can interview people on RV based on 4/5 I’ve watched. Apologies if I’m probably being unfair to others I’ve not seen yet.
  • VS
    Victor S. | Contributor
    5 November 2019 @ 19:31
    For someone that has so many strong credentials i found virtually nothing i agreed with her on . May i suggest the real vision ask people who promote global warming aka climate change that they tell you WHAT PERCENT OF THE ATMOSPHERIC GASES ARE CO2 AND METHANE ? IT IS A TRACE ⁉️ CONCLUSION CLIMATE CHANGE IS A CREATED POLITICAL ISSUE TO RAISE TAXES ie THE BIG LIE.
    • SM
      Stephane M.
      6 November 2019 @ 00:42
      Hi Victor, I'm surprise that your comment (that is spot on by the way) is not deleted like mine was this morning... I hope RV will not take a turn to the LEFT like everyone else!!
    • MS
      Michael S.
      6 November 2019 @ 02:54
      Does it take POUNDS of cyanide to kill someone? How much asbestos has to enter your lungs to cause a 100% lethal mesothelioma?
    • JL
      James L.
      6 November 2019 @ 13:20
      exactly. water vapour anyone? climate change promoters can jam it. every time they talk they show how stupid they really are.
  • AM
    Alastair M.
    6 November 2019 @ 13:10
    useful perspective
  • BJ
    Bob J.
    6 November 2019 @ 10:41
    "No problems with the Euro"... "Government, especially German one, must spend more in a Keynesian spirit"... "We must sink the economy to placate climate alarmists"... etc Basically: Everything is fine, just throw more of the same and ignore the warnings.
  • RN
    Robert N.
    6 November 2019 @ 10:01
    Reichlin refers to her model indicating "trending down". Viewers might be interested to compare with Dr Tim Morgan's Surplus Energy Economics Model. His article published yesterday just happens to be titled "Trending Down". https://surplusenergyeconomics.wordpress.com/ He points at some European countries and uses the example of Ireland. "According to official statistics, the Irish economy has grown by an implausible 62% since 2008, adding €124bn to GDP, and, incidentally, giving the average Irish citizen a per capita GDP of €66,300, far higher than that of France (€36,360), Germany (€40,340) or the Netherlands (€45,050)." Reichlin refers to Italian GDP but for Ireland Morgan states the "53% overstatement of economic output has dramatic implications for risk, driving Ireland’s debt/GDP ratio up from 297% to 454%, and increasing an already-ludicrous ratio of financial assets to output up from 1900% to a mind-boggling 2890%." It would be great if Realvision could arrange an interview with Dr Morgan.
  • PJ
    Peter J.
    6 November 2019 @ 09:25
    Excellent interview by Ed. Good to get an insider’s perspective on the eurozone, although Lucrezia’s views seem to be almost wholly aligned to the Euro Establishment. I don’t understand where her optimism comes from re the eurozone, as they have had 10 years to get the banking tools she talks about in place and they are no nearer implementation now than then. The assumption that fiscal will replace the failed monetary policy seems somewhat dubious when you see what happened to the CDU and SPD in last weeks Thuringia elections. There is a significant political risk to the eurozone consensus even without Germany attempting bail out of the eurozone via fiscal, if it does undertake fiscal I only see that political risk increasing from the German quarter. This is all without accounting for politics in Italy, France and the Brexit sideshow. It seems to be openly accepted that Lagarde is a politician not a banker and that she is a necessary change to Draghi. Really, is a politician actually going to run a CB any better!! I don’t see it. All that said to reiterate I do want more of these alternative view points , good interview.
  • RT
    Rex T.
    6 November 2019 @ 09:19
    This is a very thoughtful, highly respected, and rigorous economist so you won’t get a sensationalist interview out of her. Old school for some. Better to be taken seriously by the serious and ignored by the ignorant than the other way round. This interviewer unlike many others here actually does some background research before showing up... unlike many others we’ve seen. He’s not quite fully grasped the concepts but he’s able to just ask questions and get on with it and I commend him for that.
  • JW
    James W.
    6 November 2019 @ 05:01
    I thought this was a good review of basic policy issues in the Euro zone, and an excellent job by Ed in bringing those forward.
  • RM
    Robert M.
    6 November 2019 @ 03:47
    Puzzled by the negative reaction to this video. It is important to hear views from all sides and many of her comments, which many here appear to feel are to liberal or government supported, are her analysis of what politicians may do policy wise in Europe in the future. It is important to hear these views though one may disagree with the proposed policies as they may be implemented and impact markets in the future. Taking the US as an example, I am having to learn to divorce my feelings about the Federal Reserve and their misguided policies with rates and accept they may keep driving them to zero and adjust my investments appropriately.
  • AP
    Ash P.
    6 November 2019 @ 02:09
    I should keep an open mind and watch this, but I'll never get those 41 minutes back. And what could someone who has been at the heart of the very monetary policy that has set us up for a monumental fall have to say about a solution? The problem is that we even have Monetary policy or Trade Policy and that Fiscal policy is such a dominant component of investment.
  • SM
    Stephane M.
    6 November 2019 @ 00:38
    Waist of time...
  • GR
    Garey R.
    5 November 2019 @ 20:31
    Appears to be a huge incongruity between her optimistic outlook and the underlying conditions of Europe which she later outlined in the discussion. Hinging optimism on the presence of social backstops greater than other external nations does not appear to be a sound economic absolute but rather a subjective social comparative. In the later discussion, the portrayal of monumental potential structural changes in EU fiscal policy governance in return for greater member risk is a massive understatement and misrepresentation. Member countries have already expressed high resistance to further mandated EU control of sovereign policy & governance. In example, Germany will not go willingly in handing over fiscal policy management to a body equally controlled by non fiscally responsible members...Italy in particular. This is one of the catalysts that led to Merkel's ousting. Posing these proposed changes as easily achievable is disingenuous at a minimum. Lastly, the globalist overtone of force the "savers" to "spend more & take more risk" is the equivalent to Draghi's "do whatever it takes" statement to try and save a broken or failing system. Without it sounding overly harsh, the outspoken advocates of "whatever it takes" are the same cohorts that constructed the current model.
  • TC
    Thomas C.
    5 November 2019 @ 19:59
    Absoloute rubbish and poor interviewing as well. Ms Reichlin could be representing the ECB and or Italy with her socialist (just increase NIRP, increase tax) and get Germany to bail out the excesses of Italy. Hopefully her approach to macro is a thing of the past, destroying normal peoples wealth to compensate for her lack. She also divulged nothing about her reasearch, her methods - just a smug approach to increase neg rates, increase taxes and let share out the Italian debt ! - dream on
  • HM
    Harold M.
    5 November 2019 @ 19:14
    Thought provoking discussion but the fact the interview was almost 3 weeks ago killed any value for me. It appears RV is posting more outdated material of late. Please be mindful of this as many of us viewers respect the investment value of RV.
  • JS
    Juraj S.
    5 November 2019 @ 18:58
    Thought we buried Keynesians some decades ago :) Imagine being a hedge fund manager and hiring her services.
  • WG
    Wade G.
    5 November 2019 @ 18:45
    There's a lot to chew on in this interview. I'm struck by a former central banker twice remarking that there's more than just GDP; I think she remarked about income distribution, safety net, gini coefficients. There's a hot mess of dissonance on display there, coming from this former European bureaucrat. Central bankers/planners have managed over the decades to transform their roles from lender of last resort to planners of the economy, and managing GDP, goosing that aggregate demand, is their reason for being. Unless after 10 years of failed intervention the metric doesn't look so good, and I guess in that case, you can stretch credibility to claim some other virtues. I'd like to have her explain those virtues to some Greeks or Cypriots or average, and especially young, citizens from any of the PIIGS. Mish Shedlock often comments on the Atlanta and NY Feds' nowcast GDP models and their predictions. He loves to show their volatility and errors in prediction. Ms. Reichlin has developed her own. Now you can't even get something like that off the ground without being expert in the relevant predictive variables, statistics, modeling, etc., and especially without judging precisely how to address "under-specification" in the model, or the imperfectness of prediction of each and all of your variables. What goes in, how's it weighted, and how do scale the resulting prediction? How do you deal with regression to the mean, or address the priors, if you prefer? So this former central banker isn't just a bureaucrat, she deeply understands the limits of her craft--the complexity of the domain. Yet a central planner she apparently remains. It helps me sometimes when listening to any unapologetic central bankers to remember that such people are first and foremost, bankers. Their game is fractional reserve lending. They loan money into existence, at interest. Fractional reserve banking is fundamentally fraudulent and fundamentally unstable. Central bankers once existed as a backstop to accidents from this fraud. Now, whether planned or not, they exist to perpetuate all sorts of other frauds too. Ms. Reichlin was careful to note that the support of citizens was required for various fiscal schemes and debt mutualization. (I think this was when she acknowledged the ole 2% inflation canard was wearing thin-- not that any honest scholar hasn't known that that central bank game is fraudulent too). I wonder if it ever occurs to her that citizens real political voice, one that could stop a wayward government, or central bank for that matter, in its tracks, could be restored with sound money and prohibition of fractional reserve lending. The virtuous Buffet, Howard, wrote a great piece on the principle 70 years ago. I thought the interview was good, despite my distaste for some of the views expressed and implied. Thanks RV.
  • wj
    wiktor j.
    5 November 2019 @ 18:42
    Lets set power to 100 euro pr kw and we can create debt to pay for it. Solars windmills are a joke. Germany spent 40b euro power prices have gone up and thier co2 em are flat. Looks to me the germans are lying about green energy agian.
  • SJ
    Stephen J.
    5 November 2019 @ 18:22
    Government is the answer for everything. Sadly she is lost in socialism and big government. Total waste of time.
  • EY
    Edward Y.
    5 November 2019 @ 17:39
    Ms. Reichlin's brass mug stand should be shifted about 6 inches towards the center in order to be achieve the level of symmetry I've come to expect from Real Vision.
  • wj
    wiktor j.
    5 November 2019 @ 16:45
    Remember gdp growth in eu includes estimated prostitution and drugs sales. Enough said
  • AT
    Andrea T.
    5 November 2019 @ 15:11
    Let's spend more and do more fiscal intervention and make government omnipresent in the economy, because it's worked so well so far. Also, people trust a lot the EU and the euro so much, just look at how big Brexit, jillet jaunes, Catalonian independentists, AfD and Salvini are losing elections.
  • MP
    M P.
    5 November 2019 @ 13:40
    Nice insight into the keynesian cargo-cult way of thinking. I'm sure the "climate change fiscal policy stimulus" will be amazing for the economy, it will totally not compound more inefficiency in the market at the cost of pedestrian savers. Good job, comrades.
  • MT
    Mike T.
    5 November 2019 @ 13:12
    Some points that stood out for me, in particular she said "the likelihood ... of a European recession.." Likelihood, as in it could/might happen??? A European recession is with us right now, it smacks you in the face everwhere you look ...... and then we get "...there is a case for more public intervention..." ".....If we want to push the economy, then we need more public guarantees....." Rant over, I now need to go sit down in a quiet corner, try to relax for the rest of day and forget I ever read this transcript.
  • dd
    david d.
    5 November 2019 @ 09:54
    people like her are destroying the EU economy
  • SP
    Steve P.
    5 November 2019 @ 08:38
    This mans the political risk expert!