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>> host: will come to after words with me today is 89 who was born in london kwasi kwarteng he is here to discuss his book "war and gold" a 500-year history of empires, adventures, and debt". it has received rave reviews already and entertaining history through a narrative frolicking is not usually the description. [laughter]

but why did you write it? >> also have a doctorate along with my major look at 2008 with loads of books with the very short-term perspective looking and hedge funds and credit derivatives but to look back with the global financial stability like the gold and the sterling to remind people for 400 years we had a gold backed currency but it and tell richard nixon did famously stop that window.

>> it is the dry subject but tell me about 1971. >> at the moment of any history is the key moment when people step back to say oh my god this is happening it was august 15th on us and they very much one of those moments when nixon appeared on national television to a great cowboy show and interrupted the show to say we will not allow the dollar to be converted into gold anymore. and it was a very decisive moment and they shut the gold window that was the term. to go into fort knox

metaphorically and this is the consequence of the problems of the american federal government from the vietnam war and also the great society from the trade deficit and people were changing the dollars into gold interestingly enough the federal chairman at the time of the reserved was very skeptical and was old school and conservative in wanted to decouple the dollar from the cold. >> host: but in 1914 that was the big year. >> but the 100 years before the first world war it is difficult to imagine that

now but the whole victorian era. very stable interest rates very stable fiscal policy and what happened in the first world war? to all of that went to pieces. and the british parliament and this is an extraordinary thing. but national debt went up 10 times and the house of commons to get through it to defeat germany. >> the title is this bush

poll defect. >> i will tell you it is represented by the gold standard you can see how much it is worth and linked to the external value. but when you have paper money in just keep printing money. which is a that was a mistake to give back to the gold standard but mrs. not polemic. they're not trying to explain how we got to where we are but it is more than

just the ability to print money. but it in 1981 that did your experiment just like ron paul term 2008 and 2012 do you think we should? >> it is how we talk about that initially. it is for the chinese essentially that id = x amount of gold. but they run the export model which is a strong currency which is the absolute reverse of the export but they want to keep the value of there one low.

that would be a complete reversal but introducing the gold standard they have the reserves so if you would get the 19th century was britain to guarantee it and there were the manufacture of the world they love the global markets and the reserves that britain acquired from that goal standard but to have that much gold everyone relied on that export strength of britain much of that united states it is unbelievable to think that but then the u.s. was exporting more than

importing sri have built up the reserves and they guaranteed the gold standard after the first world war that was our notes of gold and as they were talking about earlier given a they have come from in the last 25 years. >> and over 20 years it went as low as 8.5.(

in to drive the exports you are right to it is a complete reversal of building the economy to the export growth and i think it is impractical but i think it is very vulnerable in the way that i explain and i talk about that quite fully many common -- economists predicted to print money will get a vulnerable and unstable system. >> what about the effects of for? your argument from 9/11?

>> it wasn't that complicated the was on the floor then. but i was a banker. obviously the ftse 100 index. and it went down and the response is lower interest rates. in my argument is the consequence of the interest rates to be so low it is the search for youth peeling and treasury at 2% from some banker in the midwest that i need to give more than 2%

but to buy treasurys 1/2 to get interest rates. with that some prime lending to expand credit with these huge loans they could not afford to pay. i found exactly the same thing that have been digging clinton the 1820s. said after the napoleonic court with the defeat of napoleon but after that there is a consequence of a

very low interest-rate environment. you pay the government debt really get more interest-rate so there was the search for yield those bonds paying 7% with those argentinian stocks and it blew up. >> so how do we stabilize it? >> the main thing that is missing and this is what people in the markets feel generally that there should be more leadership and international coordination. look at bretton woods, two years of preparation before that but 50 countries who came to bretton woods and

decided what the international architecture would be a was a very responsible and very effective. in his current crisis we have not been able to reach the national corporation and a lack of leadership perhaps feeling less confident less of an idea of what can be done with that is the last four or five years. added time of global leadership, the u.s. itself a and we can talk about that later and is burned by foreign affairs.

>> for the u.s. to provide that leadership. >> but i am always in favor says a very robust defender as london is that the center of international finance. it is still the leading international since in the idea that a british politicians should try to close down the city of london is in saying. that is a great strength by historical record. >> a fascinating chapter.

that it was a balanced budget. it was almost a fetish and too much of an extent they talk about fiscal responsibility. >> reagan had unparalleled kids of communication. people could relate to them and his idea he was very much rhetoric -- rhetorical about government spending. his father was an alcoholic. he always says we have been on a binge we have a terrible hangover that was rhetoric and metaphors that he used delicate his record then yes you are right to read did cut defense

spending and the deficit at the time of the argument here in america knows fact -- focused on tax cuts regardless of expenditure but my argument is through the '60s u.s. conservatives were at the balanced budget people and truman as a democratic president it would have fort to cover incoming and raise taxes above the expenditure sullivan went to congress and raise taxes to pay for the balanced budget. that is the old school conservative approach with eisenhower and german and in a way the conservative

movement in america with the endless tax cuts to increase revenue but they did not really focus on the expenditure side and to reduce taxes you have to reduce expenditure but this supply-side argument like jack kemp focused on tax cuts but you have to address expenditure. it is the ideal world for the two together. >> bush attacks from the left and from the right because of his fiscal

consequence. lifted that period 2001 when the u.s. started to run deficits and they were compounded by the eight wars from the bush piperine and people logged the left and of right said what happened? you were supposed to be budget balanced and talks on expenditure and to reduce its impact on spending. >> but it got out of control. it was the guys from the heritage foundation and the think tanks even at that time were criticizing bush for spending too much money spigot that is what led to the tea party. >> that's right. i think that was a legitimate protest of the

expenditure. and people forget it america it was balanced but to say the 30 year bond would be abolished because government was not bar wing and a more money. i think the bush administration had a part to play. >> so what about that clinton era? >> data about 2016 but will get the numbers. the budget was a responsible time. they're not as fast as they put these subsequently with

the economy increasing but it was largely balanced but to say about of the problems were seated in did not address social security and that sort of thing but year over year the budget was very balanced and greenspan when he came to congress if you read what he was saying it is extraordinary that we would abolish the national debt. [laughter] that was the environment. this is the four 9/11 -- before 9/11 and expenditure was not going up very fast and they had very, very optimistic efforts that was not shared by everyone at the time but the fact that

they speak before 9/11 that summer was extraordinary that 15 years ago people thought they would abolish the national debt. >> so what is the view of alan greenspan? >> guest: i and a historian so i looked at people through their personalities. he loved jazz music. and played the saxophone in the 40's. and with the very much of a jazz player approach and was very savvy and responded

very quickly in the most important thing was very early on tuesday chairman of the federal reserve in his own mind saved a the western world there was the big wall street crash. that was tricky at that time. it to pump huge amounts of liquidity into the system. so once you do that early on in your career if you were successful the definition is keep repeating it which is what he did. by what i would argue by dozens by policy with the

search for the yield with a high risk product to get back that yield. >> two except that interventionist? >> yes. that was the start. but once thing to remember the people running the federal reserve they are obsessed there was a they have learned from 1929. to be obsessed with that idea the authority did not do enough in 1929. with that the liquidity was their response. >> that was the right response. >> guest: but to do it as they did a little risky but

i think perhaps they had learned some of the wrong lessons. and then with those bailouts and to comprehend to alienate a fast section of middle america to give fuel of this endless bailouts and printing of money. and still see the ramifications of that now. >> talk about that reagan and thatcher area and the household budget to put

things in a simple manner. they thought perhaps from the balanced budget but now we have a system with currency that is not tethered. >> and it doesn't begin to comprehend. so how do a kickback to something people can understand? >> from all sides of the political spectrum we have to balance the budget at some point. in my country the argument is not if we balance the budget but how quickly we get to with. endless deficits are sustainable and there is more of a consensus than

people realize but how you balance the budget and what time frame is the political discussion for a title minutes and all of that is important but certainly if we will get back to stability of the next 20 years of balanced budget approaches something people are beginning to focus on even though metric surveys suggest otherwise which they have in dallas debates. but the reserve is suggesting we run deficits from now to kingdom come. >> host: but like paul ryan or anybody? >> they should. with the reviews it is important as it tries to bring back the idea of the balanced budget into the political mainstream and i try to show that is what

made britain and america very powerful countries. so it is timely and important. i tend to be more hawkish but this is something that is talked about. >> but use these simplistic terms is that a useful way? >> it is a new argument in the context of 500 years than in the '60s it was johnson and jfk to the end of his brief and tragic tenure they said we should not worry about balancing the budget because if we've

run the deficit we would get more growth and we could balance the budget. [laughter] so i have the deficit so let me run them more to get more money to pay off the deficit that is the argument. >> host: right. >> guest: you did not hear it until the early '60s the point i made in the book they talk about cannes the he realized it was exceptional as deficit spending you can spend more money but he'd never dreamt the people running deficits year in and year out to nettle they came in the '60s >> it is a slightly crazy argument.

but it is not the keynesian argument he himself corrupt in the victorian era and it was conditioned by the balanced budget framework. he said in exceptional times you can borrow money. but he did not envision that all the time and the analogy i use is if you have kids the victorian approach you cannot watch television ever. but cadence view was you can watch two hours when you need to. so both ways in order to get growth it is is wrong you have to understand in a historical context and it is

outlined in the book "war and gold" that is the u. k government to balance the budget law that is the key function of government and that was agreed by both sides and the conservatives. >> talk about china earlier to describe america's banker? and you talk about the rhetoric from politicians and mitt romney in shaming from china that never happened also economic nationalism. >> guest: it has always been of seem like pat buchanan talk about this. but look at the 19th century as a protectionist

country you can argue if it is the right thing or the wrong thing but for someone to describe to me the american industrial base was built in that was what happened so the argument on the right has been the economic nationalism. and it is not just about economic nationalism but a level playing field if i could china and have to pay 15% to get my goods into china but to export you get a 50 percent subsidy so that trade argument is about equalizing. again it is always more complicated the way he is portrayed by he saved hall

the davidson in the early '80s people would remember. and harley-davidson was going bust. he slashed the tires from the japanese motorbikes and saved the industry. >> what is the effect. >> the problem is the demand for the chinese goods you could stop terrorists with the naming and shaming. and with that industrial base if you like it would not help the u.s. arguments silicon where china started from.

and it is the currency jumped in with the dollar than it jumped 8.5 it was not an accident or that just happened. in the strength of the chinese they have a very long-term view they were accusing the chinese and the early '90s to say that you drive your currency down. of course, it is a new president and a new cycle. that is what i tried to outline in the book is very easy to forget the late '80s

, a tight end was running a trade deficit they were importing more than exporting. and to say they have a trade deficit you could argue that it was the trade surplus which where it has remained. >> you have a sophisticated knowledge. >> yes i spent a year in boston and cambridge massachusetts third 1987 so i got to live through that period and it was an interesting time even my classmates are people my age we're going street to wall street. and anna they went into that

so with consumption and high living so it was the wild west period and it came to a grinding halt after 9/11 when the tech bubble burst and people forget that. >> host: also that historical knowledge what strikes the differences of economic and political debates? >> people are much more conscience of the public spending idea. i used to cover the debates and the newspapers in britain.

before going into politics and finance but what amazes me about the congressional debates is that they were arguing about $300 million that sounds like a lot of money but talk about 1. 3 trillion but a very passionate debate and that bubble of budget does not quite exist and the whole language and culture and visa are the terms of the use junior up. >> so you could learn some of it. >> yes. you could argue the debate was irrelevant because they keep spending money so you could argue that intense scrutiny but having a

aving ance approach to the conscience approach to the phrase tax dollars. never heard the phrase tax year rose. people here have a more fundamental sense taxation comes from the people and the people's work spent by the government but it is in europe there is a more casual exceptions of government spending. they didn't really make the connection. >> host: there is a real sense here it is our monday. >> guest: absolutely right. we the people and the government extracts the money through taxation and fritters it away that is part of the tea party view but in europe the europeans and british have us lately benign view of government and that means the government spending is more

for us without that sense that this is my money. >> host: but this is the joke from reagin i am from the government and i am here to help to run right. and the urgency they faced was a revolt against the government. taxation without representation. that is more deep-seated in the american consciousness than it is in europe. >> host: talk about the tea party that is a political story of the independence party or we in this system we did that have before? >> with the european elections that is the first

time in 108 years that the two main parties have one. is very significant that we don't know where this leads that but a ostensibly trying to get britain away from europe trying to be the eu. it is more than a cultural revoked they feel they're out of touch and a fetus to and it is a bubble very much drawn from the same type of person those parties are all the same. and very anti-establishment that's in america people are very familiar with. >> clearly there are parallels.

and westminster is much smaller than washington but you have the resonance that people wear fancy suits come to speak a language we don't understand and completely cut off their constituents and they essentially regard who was in power and the responsibility and a bunch of guys to say we have had enough with this social aspect but he can suspect there is these people are out of touch biggest time the people's army.

it is truth and. >> and over the hill is coming spring q stink there are coming into the country. [laughter] services the country but they have to have some accommodation at some point it is difficult to see with the majority people argue about this but at what we thought we were saying with

the primaries is the tea party challenges losing. and about is of the establishment in to the tea party but they are fighting it is this separate party that made the engineer and head to head and if that was the case because essentially

follows representative. >> that was a similar restoration in but he built. >> read text about. >> taliban have you been? >> for years. there is different and estimate accuracy there would and that was always the great strength but it was the of hat grant in a way it's but except eighth

but there is the share culture to read pfizer the sensation bremer is essentially. look at politicians and civic chafing fair and three hits. they are exactly the same age. us in.

>> can you say i am not like these guys i work as a commodity trader. and that may be false he has been a politician for as long as i can remember but there is a grain of truth and to and you will always hedge he eric m. originally

back home by parents are from gotta. so have been unusual relationship. i came to britain in the '60s but to go from the colonial empire. >> and with that to a lohan and it is jerry a importuned from the political class

that in night means you have to decide is enough, i know that progress has not been tweet since 2010. [laughter] but that was like winston in churchill if you build the house having a floors in

what is the external structure to an economic boom sore bedrooms before you worry about the others. >> absolutely. wake up with structure or how your sofa will appear. work because once you go to structure. >> then you will pick it up and approach it. it took about six years and seeking about it before. >> i have done quite a bit here to be involved so the

spots has been evolving for quite awhile and from that african continent there is always that interest and looking in politics and all of that came together they took a gradual approach in the book. how did you do that? but actually it takes much longer time. >> for certain moments in the week saturday afternoons are good. then i try to pay a bit of time every day. then you just go as you go. and you can actually get there.

keep to the structure with the constituency they bumped into the constituents it is a hobby is not something that i see working. but that historical perspective and then the think that is very true this is not the politicians book

i did not think it particularly i didn't write it to resolve the understanding history is more of a medium or long term thing but to clearly set out your believes and that will help a political career. but and unsure about the united states but also a big connection between history and politics. and politicians from history we have read reams and reams

of history throat my career. i have no idea how he managed to do that. i found secretary william hague wrote biographies about politicians and is quite connected with this history of politics that is quite healthy actually. >> host: the politicians don't have the luxury to express doubt. you used the word nuanced. are there things that surprised you? >> via. so with the extent that we're living in an turgor

territory. to a challenge sid years every have to balance the budget? >> we're running deficits. it is quite new. >> that more than 10 years syria and? and then there received the appraises but to the extent

that today's fed arrow to they in in workers struck me >> i thank you were floated across the review - - the room. but then to say that is not something one would necessarily aspire. we have to get through the election. >> but health the 10,000 majority?

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