So let's pick up on this question about what the sanctions we've seen imposed on Russia might mean for the world monetary order.
Neil you wrote a terrific piece for Bloomberg I must say addressing this question and the possibility that it may change
the world order the way prior conflicts and disasters have affected world order. How do you see it this time.
Well wars and plagues change the monetary system it's not as if the monetary system is something that's the same over the
centuries. When the war broke out ten weeks ago a number of theories did the rounds of both. Both of the major theories were
wrong. No one was. Well the Russians are gonna get run sanctions using crypto currency. And the other theory was while we've just
done sanctions against the Russian central bank everybody is going to want to get out of dollars to be protected from future
U.S. sanctions. Well in fact it turned out that there was really no way in any significant scale that the Russians could evade
sanctions with crypto currency. Probably aid to Ukraine in the form of crypto mattered more. But even that's really quite
trivial compared with the aid that the Ukrainians have got from the United States and its allies. As for the dollar well I
hardly need to tell you David that it's actually been extraordinarily strengthened in the last 10 weeks particularly
against some currencies like the Japanese yen. But that doesn't really have a whole lot to do with the war. I mean to some
extent it does in the sense that in risk of situations people turn to the dollar. But I think more importantly the Fed is
tightening and not all other central banks are keeping up with it. So I think there were a couple of wrong theories. I think
the really interesting question to ask is not so much is the dollar one day going to be replaced by another fiat currency. I
mean that debate has been going on throughout my entire lifetime. It was happening in the late nineteen sixties. And I
think it's the wrong question. As long as there isn't a comparably large and liquid attractive currency at this point
the only potential contender would be the euro in terms of scale. But I don't really see that that challenge as being a
successful one. So the dollar as the dominant fiat currency in the existing monetary system. The question is does technological
change and the advent of new forms of electronic payment creates an opportunity for alternative payment rails to the ones that
are dominated by the dollar. I think that's an interesting question. And that brings us back to China because it's China
that's really been pioneering new forms of electronic payment including of course its own central bank digital currency. And
Larry I wonder if there's a connection between what Neal just said the possibility of electronic payment system and something
that we're hearing a lot of from countries other than ISE states which is a real concern not only with the general scope of the
sanctions against Russia but specifically denying Russia access to dollar reserves located abroad. We hear reports that China
they think is someone in their banks to say how can we protect our reserves from that sort of thing. Could that have longer
ranging effects on the way we keep our reserves the way we transfer our funds.
Let me start by trying a historical generalization on Neil. Countries don't lose their power because their currencies
deteriorate as central they lose the central city of their currencies because they lose their power. And that's then the
least and the currency is then the least of their problems. If I take your native land and the British pound the British didn't
lose their central city because of what happened to the pound. What happened to the pound. Because of their loss of Centralia.
And I think that's how it always is. Would you agree with that. I think that's right. The critical thing with the pound was that
there was an alternative that was better. Britain's decline was was paralleled by the rise of the United States. And so once
Britain was really overstretched which was already true in the 1920s and 1930s in imperial terms and in fiscal terms there was
this alternative that was new could in turn the US dollar. Whereas today although you can see the US is in some ways
overstretched and has a fiscal problem there isn't really an alternative that you could immediately see as preferable. And
this is a point that you've made I think quite rightly in your famous line you know the dollar is number one. What are the
alternatives. When. Let me get this right. Europe's museum. Japan's an elderly care home. China's a jail and bitcoins and
experiment. One of your best lines Larry. Well thank you for that.
Thank you. Thank you for that for that one. Neil I'm glad you appreciated it. Look I don't think we're going
to see a shift totally away from real world currency to metaverse currency anytime in the foreseeable future because I
think there's still going to need to be a bridge between the two and that bridge is going to be the dollar. I also think that
it's hard to imagine that in a world where money becomes less legally governed and more political. There's going to be
increasing trust in Chinese money. And so for those reasons I think you're going to see the dollar remains central until you
have seen other big surprises that are actually more important to the future of the world than whatever it is that's happening
to the dollar. So I I think of the dollar as much more symptom and much less cause than I think a lot of the discussion would
have about. So point taken Larry. It's basically the strength of the economy and the country involved with anything else. But
let's talk about the digital payments system that Neil talked about Neil specifically. It looks to me at least like central
bank digital currencies are coming whether it's China or whether it's Europe or whether it's the United States when they come.
Does that increase the down as the dollar take away from it or is it just irrelevant. Neil.
Well I think we have to be a bit careful here. The central bank digital currency the ECM and why that the People's Bank of China
rather hastily rolled out in 2020 2021 is primarily designed to make sure that just about every transaction in China is under
the direct surveillance of the Chinese Communist Party. I don't see why we would want to copy a system like that and I don't
think that we should. Rather I think it would be preferable if the United States allowed all the innovation that's going on in
decentralized finance and what's sometimes called crypto currency to happen here in the United States. It's clear that
the Internet needs some kind of native payment system. Typing in your credit card number on random websites is not the way to go.
And I think we're evolving that payment system. But as Larry rightly said it's not an alternative to the dollar. We're still
going to be paying our our taxes. And I guess most of our wages and salaries and dollars it's complementary to it. It's not
either or. So I don't think the US should unhesitatingly copy and paste central bank digital currency especially not on the
Chinese model. I think the question for the central bank for the Federal Reserve is how do we manage things so that all the
innovation that's going on in decentralized finance is beneficial to the United States economy contributes to economic
growth and doesn't destabilize the monetary system. And that that's a very different question from should we have a central
bank digital currency.