tv The David Rubenstein Show Peer to Peer Conversations Bloomberg November 27, 2021 9:00am-9:30am EST
david: this is my kitchen table and also my filing system. over much of the past three decades, i have been an investor, t -- investor. the highest calling of mankind, i have often thought, is private equity. [laughter] and then i started interviewing. i watched your interviews so i know how to do some interviews. [laughter] i learned from doing my interviews how leaders make it to the top. >> i asked him how much he wanted. he said $250,000. i said fine. i did not negotiate with him and i did no due diligence. david: i have something i would like to sell. [laughter] and how they stay there. you don't feel inadequate being being only the second wealthiest man in the world, is that right?
[laughter] when angela merkel was looking for someone new to head the european central bank, she recruited christine lagarde, then the head of the european monetary fund. as the head of the european central bank, she has had enormous impact as the head of the european central bank, and enormous impact on the way the -- bank, she has had an enormous impact on the way the european and global economy moves forward. i had a conversation with her about how europe is recovering from the global pandemic and the slowdown in the economy. as we now look at the post-covid environment, what would you say is a situation in europe? is europe recovering more rapidly are not as rapidly as you thought from the covid pandemic? ms. lagarde: actually, david, europe is recovering more rapidly than we had anticipated, and we have, as a result, significantly upgraded our projections. our projection for this year is plus 5%. that is a significant upgrade. plus 4.6% next year.
and the back to sort of a pre-covid type of frequency. this is certainly going faster than we have thought, to the point where we will have recovered to pre-covid-19 levels before the end of the year 2021. we had anticipated it would be early 2022 at best. it is now going to be 2021. david: are you worried about the delta variant impacting what you just said or the so-called mu variant, something on the horizon? ms. lagarde: it is related. we used to say the best economy policy is a vaccination rollout. we are still in a situation where vaccination matters enormously. on that front, europe has done quite well. we have more than 70% of the adult population that is
completely vaccinated in the euro area, and some countries are in excess of 80%. -- some countries are doing better than that, in excess of 80%. that has been a significant boost for growth and has helped governments not go back to the stringent containment measures that we had seen previously. david: during covid, were you working remotely? i mean where you running the bank from one of your homes or from a home somewhere, or were you going into the office? ms. lagarde: i spent quite a few weeks stuck in my frankfurt apartment during the first wave of covid. actually, the package we put together for monetary policy purposes was engineered around my kitchen table. subsequently when funding was more flexible, and we could move out, i went to the office a bit.
the by default motivation -- solution is remote working still today, and probably until the end of january, and then we will see. david: well, you should take that kitchen table and move it to your office. it was very productive, right? ms. lagarde: [laughter] david: let me ask, post-covid, do you expect europeans will go back to work at the same levels before in terms of going to work five days a week, or will people work four days a week, one day remotely, or just four days of work? david, first of all, we should acknowledge there are people that do not have the luxury of choice. that have to go to work because the physical presence is required. you think about hospital staff, construction workers, some people working in shops. they don't have the choice. they have to be on site and showing up. in offices, i think we are heading towards the hybrid
movement, where part of the week will be spent in the office so that people can meet, can see each other, can hold regular meetings, and have face-to-face contact. but the rest of the week will likely be working from home. whether it is 50%-50%, 40%-60%, it is up for debate, and it will be handled at company levels, i suppose, because most of the legal constraints have been lifted at this point. but people have learned during the pandemic, and those learnings will be bundled in and used for the future way of working. david: around the kitchen table we just made famous, you put together a package that was designed to make europe -- solve their economic problems as it dealt with covid. the united states had a similar package. in hindsight, would you say the package worked as well as you thought, not as well, or better than you thought? ms. lagarde: when we put it
together, we were hopeful it would work, but, you know, the truth of the pudding is in the eating. it was a matter of days before we really appreciated the message was received. fiscal authorities began to act in tandem and in good coordination. i think the impact of next-generation eu, when all the europeans decided to go on board together jointly, this entire package actually responded well and fast and big to the unbelievable crisis situation we faced. so, all in all, i think it works well, and it certainly -- we responded better and faster than we had in 2008 and 2011 in the european sovereign debt crisis. david: in the united states -- not to cite the united states all the time, but it is the country i am most familiar with
-- we had challenges during covid that people who were minorities, often women, people of low income strata, they could not get access to broadband, they did not have that, and they had childcare problems and so forth. and it was thought that they fell further and further behind. did you find the same phenomenon in europe? ms. lagarde: this has been the case in europe as well where inequalities, in terms of opportunities, in terms of facilities, have been aggravated and probably exacerbated by covid-19 for the reasons you mentioned. those people worst hit by the pandemic were women, young people, people on fixed term and temp contracts, and those, you know, were more remote from work than the others. and if you look at those who lost their jobs, it is predominantly those women and young people, in particular, in disproportionate amounts, relative to the others. ♪
david: so as you look at the european economy today, what would you say its single biggest challenge is and its single biggest opportunity is? ms. lagarde: the single biggest challenge is to implement. implementation sometimes is hard. i think the second difficult area that will need to be tackled is this issue of inequality, because covid-19 has aggravated inequalities.
the third one is climate change, where we will have to transition probably faster than we think, which will imply transition costs, which will imply a change in the overall structure of our economies. i would say those three -- implementation, inequality, and climate change. david: and what has been the impact on the european central bank or the european economy, if any, on brexit? has it been as bad as some predicted or better than people thought? what would you say? ms. lagarde: i think the conclusion varies depending on which side of the channel you are on. from our perspective, it is a sad development, and we have lost the benefit of excellent cooperation with the bank of finland. we try to continue to maintain a good relationship because, you know, we have lots of links between us. but in terms of trade, it has
been certainly a loss for the u.k., more so than for europe. and we will see how it goes. all i can say is that, at this point in time, europe is coming out of the crisis not with flying colors yet, because a lot of work needs to be done, but more strongly than we had expected. i think the u.k. is having a more difficult time at the moment. david: a part of the way you helped deal with the situation in europe during covid was that you had the package that you referred to, a very large package, financial stability package, but that package really involves countries borrowing money against their own abilities to pay it back. you are, in effect, not a guarantor, but you are making certain that they probably will not default. are you worried about too much debt among european countries, too much debt in france, or germany, or italy, or is that
not a big problem right now? ms. lagarde: you know, i think all countries around the world increased and had to increase their debt relative to gdp. when you have this high debt increase and a big fall in gdp, of course, you end up with those ratios that look higher and are higher than what they experienced before, but there was no option and no choice but to do that. had it not happened, i think the story of the pandemic would have been a lot worse than we have seen. now it is a question of directing the financing to the right investment, making sure we economies are going to bounce back in the right shape with the right structural reforms that will improve the productivity of those economies that would position them to be more digital and to be greener. and i believe this next-generation eu, which was
voted a year ago now, is going to help with making countries better converge and reduce the gap that existed between some of the southern european countries and the northern european countries. that is certainly the intention. david: recently, you said you would like to have a goal, a target, of 2% inflation. why has it been so difficult to get to that level for the past five or six years in europe and how confident are you that you can get to 2%? ms. lagarde: i thing there are multiple reasons for that, david, but certainly what we decided to do was to have a target which was simple, which was easy to understand, that was symmetric and was focused on the medium-term. those were the three attributes. so instead of having that complicate late -- complicated
close to or below 2%, which was uncertain and fuzzy and included, somehow, an implied bias, we decided we would go for something straightforward, simple 2%. 2% symmetric. so deviations up or down from 2% are equally undesirable. that is the definition we agreed upon. and we are also, on this medium-term, which matters most because we are concerned about this inflation expectations. i think that decision, plus the forward guidance cited a few weeks after the strategy review of the european central bank was released was convincing enough so that markets and analysts and observers have appreciated that we are serious. we mean business. we want 2%. and, i mean, you know, there are a lot of sovereignties around the 2% and the lower bound which leads to us having a more full
response in some instances, but yes, we mean business. we mean 2% ,for sure. -- and we mean 2%, for sure. david: for hundreds of years governments and central banks have issued currency used to buy things, sell things, and so forth, and to price assets. now, some people have come along invented various things called cryptocurrencies. central banks are trying to adjust to what that means for them. do you think cryptocurrencies are a plus for the global economy or is it too early to tell? ms. lagarde: cryptos are not currencies, full stop. cryptos are highly speculative assets. they claim their fame of currency but they are not. they are not. i think we have to distinguish between cryptos that are highly speculative, suspicious
occasionally, and high intensity in terms of energy consumption. but they are not a currency. on the other hand, you have the stable coins that are beginning to proliferate, which some big techs are trying to promote and push along the way, which are a different animal and need to be regulated where there has to be oversight that corresponds to the business they are conducting, irrespective of how they name themselves. and in all that, you have the central banks who are prompted by demand of customers to produce something that will make the central bank and central bank currencies fit for the century we are in, which is why we are now looking at cbdc, central bank digital currencies. so instead of having banknotes and cash in our pockets, we can have exactly the same thing but
in a digital form. so all of us are working on this, and certainly, we are looking to push the cbdc issue on our agenda. i believe we have to stand ready for that. david: if the ecb were to have a digital currency, would that be to the exclusion of paper currencies, or would it be side-by-side? ms. lagarde: side-by-side, because we want customers to have their preference. if they still want to hold those banknotes in cash, fine, and it should continue to be global and around. david: at this point in your life, do you feel discrimination against you in your professional life as a woman? ms. lagarde: it is difficult to hold open discrimination against me, let's face it. but i am aware of discriminations against many women in all parts of the world. ♪
david: in recent years, the central bank has been worried about something called climate change. yjr federal reserve is making comments about it and you are as well. why should central makers be worried about climate change? that something that is within your purview? ms. lagarde: to me, it is a no-brainer consideration. climate change is part of our -- think about it. drought. famine. pandemic. floods. massive fires. all of that is going to have an impact on prices, hence on inflation, hence on price stability. if you look at risks, not only do we talk about stranded
assets, but we have to talk also about the transition costs that many companies are going to face in order to move from the business they conduct today to how they should conduct their business tomorrow, let alone the new products they will have to come up with. david: historically, ceos have just worried about their shareholders. increasingly, some ceos are dealing with public policy issues. those things that you think ceo should be doing, talking about climate change or gender discrimination, or should they stick to worrying about stockholder returns? ms. lagarde: i think they should worry about all the matters you discussed. corporate's are not bodies. they do not have a soul. they are not physical persons, but they are acting in people's lives and in the environment. they should appeal to the masses, yes. and more and more of them do, which is good. ♪
david: you served two terms as head of the imf, and you could have served another term if you wanted to do so. how do you compare the pleasure of running the imf with the pleasure of running the european central bank? is one more enjoyable than the other or one less enjoyable, or they are basically both great jobs and you are happy you had both of them? ms. lagarde: i am extremely privileged to have had the roles i have had with head of the imf. we saw each other quite often in those days, and you know how much i put my heart, brain, and my whole energy into the job, and have enjoyed it tremendously. i am doing the same thing with the ecb. and i am doing the same thing on the european scene. you know, in times where you see geopolitical opposition, in times when you see energy withdrawn behind borders, it is important to have this desire to unite and bring consensus to the table and to convince people
that what we are doing together united is going to be stronger than what we will do individually in our little corners. so, i am enjoying what i do. it is hard, it is hard. let's face it. but i enjoy it. david: when you were the head of the imf, you were the first woman to hold that position. now, you are the first woman to hold the position of the head of the european central bank. you have obviously broken through in many cases. you were also the first woman to head your law firm, a large international law firm. at this point in your life, do you feel discrimination against you in your professional life as a woman, or do you think discrimination generally has receded against women in the professional workplace? ms. lagarde: i think discrimination has not receded, david. and i don't want to take my personal situation, because when you have traveled the journey i traveled, it is difficult to hold open discrimination against me, let's face it.
but i am very much aware of discriminations against many women, many young women, many women in all parts of the world, and i am particularly, i am sorry to say, thinking of the afghan women at the moment, who clearly are suffering the worst possible nightmare and setback in their history and their lives. it is a constant struggle. it should be a constant fight of all of us to make sure that everybody has a chance to accomplish their talent and develop their activity in the way they want. this is certainly not the case yet. look, when i sit at my governing council table and i look around, i see 23 men and one woman, in addition to me. two to 23 is not a very good ratio, and in the finance world, i do not know whether you would call it discrimination, but
there is certainly a disparity between men and women. if you look at the venture capital world, it is the same. if you look at ceos of large international banks, it is the same. if you look at parliament, you have a much lower representation of women. -- women then there are women in society, so something is not working. david: central bankers are famous for not talking in language that the average person can understand, generally. sometimes they have done that on purpose. you talk in a language that everybody seems to understand. it is very simple. and so forth. is that a conscious policy you have, making what you are doing understandable for the average person? ms. lagarde: yes, david. it is extremely important that people understand what we are doing. a lot has to do with trust. if somebody talks to you in a completely obscure language, how are you going to trust that person? to me, it was critically
important to agree with the governing council members that we will communicate in a more understandable, in a clearer and simpler way. so, just to give you an example, after each governing council, we issue a monetary policy statement where we are committed to keep sentences short, have one idea per sentence, to have the words we use understandable to you of course, a normal person as well -- you, of course, but a normal person as well. we measure that and try to stick to those principles, and we will be held accountable. david: do you think your ability to do that and the federal reserve chairman, jay powell, is interested in that as well. both of you are trained as lawyers. do you think lawyers -- i am trained as a lawyer too, do you think there is a greater future for central bankers to be lawyers and there is some
hope for me to be a central banker someday or not really? [laughter] ms. lagarde: i strongly believe in diversity, david. as you know. diversity has not all to do a gender, with minority, or with sexual orientation or whatever. it also has to do with the background, with the training, with the culture you carry with you. and to bring it all together around the table with diversity, in my view, improves the quality of the decisions we make. and i learned a lot from my colleagues, brilliant economists. i hope they can be patient with us lawyers. david: two final questions. one, i would like to know, what is the pleasure of being the head of the central bank? you obviously have to work seven days a week. you did that for many years in your career. at the imf as well. what is the pleasure you get out of heading the european central bank?
ms. lagarde: it is the same kind of pleasure i take in leading other organizations, is making sure that people around me are doing the best they can for the organization, or delivering on their mission, and that we form a team heading in the same direction. so, that, to me, means an awful lot. david: my final question is this. you, in your youth, were a synchronized swimmer, where you have to work closely with teammates and get everything working together quite nicely. is it the case that, when you do are doing the central banking role, you have to have the same kind of skill set? you have all these central bankers of each country that you have to get to work together. do you think your synchronized swimming skills come to help you as the head of the european central bank? ms. lagarde: yes they do actually. what you learn in sync and eyes swimming is, if each individual is brilliant, it is great.
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