university in london has published three books on charles dickens. the most recent titled a very short introduction by oxford press. we asked professor hartley to tell about the life and accomplishments including the two trips to the united states in 1842 and in 1867. good morning. i'm the director of the hudson center on monetary policy at the brookings institution. i'm very pleased to welcome mark to the virtual stage today. extraordinary is an overused word but the career qualifies and if you look at the resume you would think he must be 96-years-old. born in the territory in canada

which i mentioned only because the google search turned out that the official motto is perseverance. an undergrad degree from oxford and 13 years at goldman sachs and in the canadian government the central bank of canada during the global financial crisisn and because that wasn't challenging enough hehe became governor of the bank of england from 2013 to 2020 during that whole mess. he's an advisor to the british prime minister on climate finance, the special envoy for climate action and finance, vice chair of asset management mentioned as a future potential candidate for the prime minister should of canada and is only 56 and i'm not going to deal with his collegiate career. he must have decided he would write only one book in his life so his new one called value building a better world for all

his several books in one. a history of money, discussion of what markets can and can't do well, a primer on climate change, lessons on leadership and then some. i am one of the few people that read all paragraphs of the communiqué that came out over the weekend and i think that the book has a background briefing on those chapters so we are happy to have you with us and if you want to ask a question you can type it in and i will try to get to some but i thought we would start with the very provocative and interesting title which is values. you talk about the tension between the value and i wonder

if you can talk about what you were trying to do by putting those two together. >> thank you for putting on this event and all the great work you do. i've been a huge consumer. you and i led the communiqué and many people would be affected by in that and i'm sure we will get to that. thank you for going straight to the title because the presidency what i'm trying to get across in the book is the causality between both directions so on the one hand the circumstance that i'm simplifying but in the

run-up to the crisis some of the values that support the good market functioning and this goes back to adam smith and most politicalti philosophers. in the end most would recognize that there is a rule for the regulation and also other institutions in the sense of the customs and rules that support good functioning that we lost some of that and the balance went out and that's one of the factors to the financial crisis. the next relationship is the marketization so the effort to bring in the certain elements of activity whether it's charitable

activity volunteering, i can go on but bringing them into the system and in that process there canro be a corrosion so it endsp counterproductive but it's an observation that i needed for completeness. the third aspect is when the value and what i am getting at is the example in terms of climate change so as we moved move out of the trade-off to a hierarchy of certain objectives which become a focal point and i arguee we are moving to that wih sustainability then the market properly informed with the right

tools would be the driver of delivering those solutions so there is a lot in the book but it tries to capture those elements and using the experience of the crisis that i lived through and others of course on this that have been active participants in the last ten to 15 years. >> do you think we are too far from the market or towards the moral imperative at the moment or is that not so simple? >> we were definitely too far in the market. it was an era i don't think it's overstatement to say fundamentalism. the cognitive capture if you will as well for the market to the failure was to create a new

market and again since this is brookings i can use this as a shorthand to say that it was a different world we had incomplete markets and soan the answer there's a lot of fundamental assumptions that go into that which most of which don't exist. to listen and learner and find e lessons of the market and so there was the clean not lean approach and central banking and there were other light touch approaches and very little.

it wasn't going to happen as opposed to what happens if it does happen what would we have done in that event so i think in that case we definitely had the pendulum wrong. i think in the case of something like sustainability, i'm not sure the issues with climate change were the product of the tragedy of common market failure can m be fixed through the externality of other factors. i try to argue there's a tragedy in the horizon that we are discounting the future quite heavily and by the time it is a clear and present danger it's too late to take into account but in the end that is a

question does the society value and until we get to that moment the market isn't going to be in value nor are the regulators and i would take the opportunity to say this which is that what we very clearly did six years ago in setting up -- >> a standard to the recommendations to disclose not just of the current carbon footprint but what is the risk going forward and what might they do about it it was because some people thought it was an

issue and some thought the governments would ultimately act and this wouldn't ultimately end up in the price or it would have a reasonable horizon. that shift as you go forward to today not to the same degree in every country but in many countries and there's a lot of them mentioned around this and they say no, we are going to move it's a legislative objective we are having a carbon price i'm sitting here in canada going 170 by 2030 so that's focusing the mind and brings forward the future so we see that shift. but the long way of answering in terms ofon the values in the end of those are determined by society. ifin you do and i will finish he this is where i spend a lot of

time with people who are very focused on the environment, they tend to discount the market and underestimate the power ofma the marketar finding solutions. >> i want to talk about the nature of money first and particularly your thoughts on the fixation a lot of people have with crypto currency and what the potential risks are. i noticed they seem to be warming up to the idea and down on any rash until we get a better regulatory thing.

in this moment of crypto currency where do you think it is going and what should we do to make sure it has more positives than negative aspects? >> i thought that was eye-catching as well in the aspects. let's take a step back. we are at a time competing currencies. facebook currency is a stable client as most people know but the idea is that it's a crypto instrument i back to 1-1 by the underlining assets and this is a key point ideally it isn't just treasury but liabilities that match the maturity of monies which is instantaneous. i can think of one called the

federal reserve but i can't think of anywhere else so by definition you've got some mismatch and on that topic history shows the bank of amsterdam being an example in the book where the temptation is a bigger and bigger mismatch which in the end is what the bank of amsterdam was and is just too great and ultimately how credible is that commitment. ultimately they end up lending to the dutch east india company and people realize that they have risk associated when they were previously backed 1-1. there is concern with the claims but that's one of them that in the end they will stretch a

money for nothing type of approach and in the end why wouldn't you have your own the stable coin which would be the currency in other forms that i suspect is where this will go. the context is basically a series of assets of varying degrees most of them are not used as means of payment but the interesting ones are those that are solving specific gaps in the payment system so some of them are wholesale finance getting

inefficiencies in a way that serves a role so it's legitimate questions or legitimate possibilities those will continue to play a role. some are trying to play that on cross border payments and i think in the end they get to a position they solve that issue but we will see. we have seen the examples in recent weeks there is a gap in then payment system. it's called around somewhere, it literally is one of the gaps. certainly one we want to close. you get the point, these are questions m we need something resilient and transparent and it also needs an a adjustment mechanism so that fairly shares

burdens so the gold standard was ultimately felt by too much labor in the end that's always been one of the risks. so where do i think it's headed i think that we will have more likely account base to than token-based and i think likely there will be some inefficiencies in terms of cross-border linkages. most people will see the wallet from a company that will be there interaction. there will still be inside money by the private financial institutions which will be

indistinguishable but there probably will be in parallel some private monies or native currencies for the specific applications in the system used by a subset of users and the interoperability will have to be established. >> an account-based digital currency the bank will have a centrally a digital account. >> and it won't just be the banks that have those accounts. byho the way i'm more confident this will happen in the uk and other places maybe i shouldn't try to speak for the fed but it could be instagram wallet or other companies and they need to havehe that account up top as wl

so that there's just across the account of the financial institutions and in this case the bank of england. >> and the advantage of that is efficiency. >> its efficiency, competition and also potentially programmable for smart contracts and other applications that are potentially contingent although like much of this area it's pretty basic. >> do you see a current sealless society in a decade or two? >> you are suggesting i'm younger than i am. i am 56 but i know a lot of

people who will always carry cash. i always said when i was governor in the uk we will continue to produce banknotes as long as people want them and i think we have a few decades before it will be residual. >> let's turn to climate and i think your basic argument is if we are serious about resisting climate change and you think we are increasingly serious about it there's a growing consensus that doing nothing or doing as little as we've done so far would be a huge mistake and a disservice to our children and grandchildren and your basic argument if i get it right you want to bring climate risk and resiliency into the heart of the financial decision-making so tell me how that happens, how do you get companies and banks and insurance companies and

consumers to fully internalize the cost of the behavior? >> one of the key principles for this is net zero. what's happened with climate change and this has always been understood that we can't stabilize the temperature whether it's one and a half degrees or 3 degrees we can destabilize it until we get to net zero greenhouse emissions. >> can you describe what net zero means? ..

>> so the organizing principle now is 130 countries and counting of which words our objective. it is a net zero cost to me trying to do that and the us

is trying to state its commitment to get a few other emerging economies in there but 70-cent possible mission so then that boils down to a financial institution the question is can operate in these jurisdictions? >> you can have a plan but there are three options and i don't have a plan or if this will actually happen for whatever reason. with the stakeholders and employees and then mine in the sunset industry. and then to look at it with

these activities over 15 orst 20 years and then a third option with most major companies i am committing by 2050 and by 2030 at this point so now moving into a financial system which is getting that information that is related to this so with the financial system you have this information you are judging companies in terms do they have a plan? are they likely to succeed? are they going to be competitors in the world of internet zero with those federal environmental regulation more and more competition that is a decision point and not just in the extremes of renewables of coals and heavy oil but into

the system and that's what happening now. and for those who may not follow closely at the president bidens summit in april which is the core of the financial system with a $70 trillion of assets. but then to have these plans for their own assets. so if i may to build this out scenarios and other ways to make this tangible, but what is critical to build the system so the incentives are there so that i will invest in

a company whose emissions today may go up in the next two years but then those emissions will come down over time and what you want to avoid on the surface very satisfying with a binary approach just get rid of the brown and no to the green and that's where we need to go because we need to make san diego investments we need the automakers so that the core of the system. >> i noted on twitter i would be talking to you to suggest

that a company like brookfield you are involved in a lot of investing is also investing in the infrastructure pipeline. so what is the big institutional investor? you are suggesting on investing is a mistake because it doesn't give the resource to make the transition? >> so brookfield is one of those as part of the 70 trillion we got into the 70 trillion level. we are developing the carbonization plans and have a

specific strategy to very much participate to help accelerate the transition for companies that we are addressing the overall footprint of the 600 billion of assets. but also the biggest renewable power generators in the world is over 40 gigawatts of power and another in production and london and paris y or chicago or new york in terms of the scale of generation is a huge amount. and here is the key thing. pipelinen infrastructure for example the judgment is what isow the terminal value? how long will there be natural gas going toip these pipelines

is there anon option value to be converted to hydrogen or a hydrogen blend and then the value judgment. so that the market has been in the mainstream quite quickly which will enhance the value of certain infrastructure assets. but because there are longer lives and in jurisdictions either it's a lowest carbon solution for a period of time or it can be extended for other reasons, but that's thinking about the transition. so the simplistic thing which is what we try to avoid for the system as a whole is that is hypocritical. now it is not.

it is an energy transition you have to make a judgment. others make different judgments of what works where. you could be wrong about some of them it could happen sooner but we are grown up. we get more right than wrong and will deal with it accordingly. >> you are speaking us today from ottawa and mentioning that putting a price on carbon the us hasn't and it doesn't seem to be imminent won't that create some issues and the difficult for canadians to feel that this is great. we are doing our part in the us gets a free ride quick. >> yes. the issue of carbon leakages growing in tradede policy and as your question suggests in politics it can be and often

expressed the us or canada and us and china. maybe i will answer in terms of how we think trade policy might go around this issue. first, it's relatively small group of products for which this is a big issue where it is a big component but steel would be aou classic example. the second two what is open the talked about with the mechanisms the president has mentioned it the europeans launch initiatives. one of the challenges to the wto compliant the easiest way

to do it is based on a carbon price because you can look i have this price you have a price half of mine. but when us doesn't have a carbon price then you move into a world of shadow carbon pricing which is harder to map. that is the equivalent of the emissions standard for the price of carbon. so there's that. the other is around product standards to have carbon components for steel. it has to be a certain quality in my personal view cutting it short is over the next several years is more likely to land on the product standards i'd. not exclusively because of this or the least because there isn't a carbon price

doesn't seem likely to have one in the foreseeable future despite all the economic benefits. >> but steel was made in a way that with aluminum and carbon emissions? >> yes. that's not just the assertion. again as part of the disclosure with the ability not just in the steelmaking process but the powers provided and delivering steel to the port. >> what about china and india? we cannot fix the problem without them. they say you used up all the carbon capacity and industrialized now you want to restrain our growth. they talk a good game but they

have no plans. india has issues. when you talk to them how do you explain or how do you read them? are they serious and how do they play in this world? >> it's easier to answer the second. incredibly important and decisive there are a few cost us the un meeting 195 countries we are all equal that some are more equal than others. eu and canada clearly. [laughter] how do i read them? i would say that the chinese the couple of things about the chinese is they have pretty explicitly taken the view that being low carbon and low-carb and industries that enable low carbon is the fundamental driver of competitiveness.

there is a big economic motivation for their push to net zero. then the pointha that has not been lost another major economic powers thatno this is we enforcing the market in some respects with the competitive juices of the industries of the future. second, the chinese just started to ship so president xi said at the bidens summit in 2025 and then begin to manage down. it's all very fuzzy to be clear but it is that impression on coal in the latter half of this decade. the objective is advanced

economies by 2030 and 2040 and emerging economies so tond the extent it does work there is an elementme of growth. the chinese are very again solar biggest andnd electric field calls in a series of others we collectively have a strategic issue those that are essential for these applications so the development of alternatives is criticalio. critical as part of a solution but as part of the expensive solutions we need to think that through. but on balance china is the largest emitter but also is central to the solution. i think it is more straightforward it is a complicated place to govern

but whether formalized into a net zero commitment remains to be seen bads as scale of ambition is enormous one of the most attractive growth opportunities. i think i'm pretty upbeat on india in terms of what will actually happen on the ground at least in the art economics have shifted. so we have left this issue very late. so the scale of what needs to be done is enormous. we have hugeha changes that have to happen here and eschew for virtually every country.

>> sometimes there is a question of the role of central banks. yountin pointed out in the uk te bank of england has brought supervisory responsibilities including insurance companies that the federal reserve doesn't have christine the guard of the said may be they should be greening their portfolio when they do quantitative easing that seems to give people at the federal reserve the shivers. so how do you describe the central bank as a financial supervisor in this area is straightforward. institutions are taking risk that they don't fully understand the role of the supervisors to point that out. that's the easy part but creating bond portfolios, is that a step too far but we

just have to use every tool we have quick. >> yes. you have summarized it well. and fordo those who don't follow on a daily basis, the bank of england, my successors received three letters a couple months ago which said the policy committee which is the macro credential stability committee in the prudential supervisory committee take climate change into account with what you do that are consistent with the legal framework and what the bank of england is doing now last week and i would recommend if people are interested to search on the website the last two weeks they have come out with a discussion paper on how they made tilt the bond

purchase program to take climate change into account. x percent of the uk corporate bond market that can set a de facto standard so it's not just the current government's policy but it is legislative. it's so integral to the policy to have to take into account. now go to the us were at the current government policy it is not legislative or mechanic of regular letters from the treasury secretary to the fed chair. and the principal in general when i was a central banker is of market neutrality.

but you try to buy across the curve that you are getting a portfolio balance on quantitative easing where you land collateral and have a credit standard butee then once you meet that you put that collateral back in so this puts another layer on top of that which my personal view is you need that grounding the bank of england has are the ecb has and then the requirement for them to take into account the policies. i forget the language but it's pretty well-rounded i can assure you places of full of lawyers and in the constitutional court will look at it. [laughter] that is incorporated mine with the brookings institute my

read that doesn't exist for the fed see you and up with you and up with different central banks doing different things they are all correct. it's the nature of the institution. >> by the way i do think some people around this is quite clearly informed like the ecb has responsibilities but it's the opposite and't the bank of england it cannot be clear. >> somebody from canada asked how do we operationalize your recommendations to put deeper values in the economic decision-making? so when society decides to do something then the market is a way to make it happen.

but society has to decide if the values are important enough and the question is asking how do we make sure policymakers do that? >> that's a reason why the book is so long. if youpt go chapter 16 with country policy but it is in the leadership chapter but these are examples of how you do it. so what's important for market function with some sense of senior managers and financial institutions not just to themselves but for their institution. it takes compensation holding

back bonuses and if those are clawback it something like the senior manager regime that i'm not responsible for everything that people work for me do but i am responsible to make sure to train them they know the rules and have the tools and if i don't do that in the uk i'm on the hook for that. in terms of sustainability that is setting up objectives stress testing and supervisory requirements. negative thinking as a senior manager and the board member. >> what does my portfolio look like if the country does what it says it is supposed to do? might want to take that risk that they need to be informed. nobody knew the answer a few

years ago. and then i will stop here but what is emphasized and to be honest i but that with humility which is another important value which may be this is more for public officials but getting into the habit of planning for failure. don't spend a whole time telling yourself we will get through but what do you do in the event of a large stomach bank is frozen for a period of time? because of a successful cyberattack how you keep it functioning in that case? but that is the role to build resilience. these are examples of how you embed and if you're not

sitting around holding hands to say let's just be better people the book is anything but that. and just to be clear in the end these are values about longer-term economic prosperity. i am an economist after all. >> from the veteran central banker there was some concern around the world, particularly here that we had a very aggressive response to the pandemic that worked out extraordinarily well. looked at the forecast of march 2020 and where we are today and i was shocked. not only here but now there is a growing angst it's a little too much and we are pushing

inflation above our objectives and i wonder how you look at theul world particularly given with fiscal and monetary policy. >> i think the prospect that is very short-term with the transitory factors and then focus on the horizon for policy. think there aree signs that inflation will be above target from here so if you are dropped on —- running the fomc next week looking forward, there are signs in

the labor market, signs with supply shortages that is a little more than short-term but reasonable reason to expect to sustain momentum it's not a black swan because it's in front of our face but with the uncertainties of covid variance. but the prospect of inflation to be above target for longer than the makeup of the past issue the balances headed in that direction at this stage. >> so a lapse into the central bank. if you decide to add the federal reserve i will put you on the optic side of the spectrum. that mark, one of the things

that struck me that i read in the book is actually very comforting because you describe and you did this earlier, ways we could that values in our economic decision-making in ways that don't require us all to give up electricity. you describe how to get from here to there and you made a point it will be hard because we waited too long. but when you look at the political system in the united states and the polarization and what the uk has been through and the populist in france and germany and the israeli democracy how do you

reconcile your up be view that is thoughtful policymakers can get us to a better place but the political system is determined to prevent that from happening? >> maybe a couple of suggestions on a specific issue. it does put a premium on measures that have immediate payback in terms of jobs and growth it is an obvious point that does bear repeating one of the simplest things to do in the uk and the work they are is you go to the houses known disrespect to those in the uk but i guess you are

keeping a call then in washington but there is a desire and then need but the material contributor to the reductions. of course you will play a massive amount of people for the country that has all those benefits there is a series of those industries on the renewable side for example with very high multipliers that they were left to manage. . . . .

is for the investment today if it is credible and predictable. again i sound like a central banker but it's something that i've worked on with janet yellen before she found something better to do than that. ..

>> upheld that part of our

again. so i'm just wondering do you have no doubts about the zoning of our democracy to do this? >> i definitely do. i was trying to give you a path that so that is a pretty big can afford to be legislative with policy. so even more so to give people

what they really want which is jobs and progress that your job australia has been in that position on climate. so it doesn't matter. i guess the way i would put it to bring it back in the book is that there is a value of dynamism which is market returns and growth and then to deliver alongside sustainability. and then bring it back to central banking one thing we always caution with the bank of england is in our financial stability will is the stability of the graveyard. don't pile capital so high in the banks so that the

liquidity is so high there is no lending. and then we take that seriously so the is to have the sustainability that is sustainable in all sense it is flatlining growth. >> can you and don some conclusions from your chapter in leadership what are the most important lesson is that you have learned in your time? >> i mentioned it earlier meant to be a central banker look at the glass half empty and with brexit my job was to think about what could go wrong care for it so that

aspect of humility is a more positive aspect they had a lot of good fortune to end up in so then to the member that responsibility and to leave it better. and then it is increasingly understood and that you are catalyzing action and then for them to be fully engaged in how to solve the issue. is not just about just the inclusive process so they are part of making decisions and

feel that they have been heard. and the decision doesn't go their way and they understand to get behind it. that is a learned skill maybe that's inherent for some people that they learn over time but it's really important to be able to do that and it does take more time than top-down leadership but it's far more effective and far more satisfying. >> thank you it has been a fascinating hour. i appreciate your time. we were meeting in person i would hold up your book. it is on my amazon kindle that as i said it's like encyclopedia with individual chapters i would go back and read when these things are in the news that makes it a very

conflict" into the search box at the top of the page. >> it's my distinct pleasure to welcome you all to the official launch of my colleague jonathan levy new book "ages of american capitalism: a history of the united states." you can see several her. just out with penguin random house in new york. spanning for centuries it offers child's perspective on american political economy. "ages of american capitalism" teaches us to see familiar landmarks of american history in new ways. imperial settlements, american revolution, industrialization, the great depression, then you