Episode Info
- Season10
Hosted by Christina Ruffini and Sir Richard Dearlove
Guest
Alpesh Paleja
Alpesh Paleja is a leading British economist explaining the bond market turmoil and assessing the UK's financial health amid inflation and fuel shortages.
Episode Summary
The British pound sterling plummeted this week after Prime Minister Liz Truss unveiled her budget containing a divisive 45-billion tax cut, spooking markets and leading to warnings from the IMF to the White House. The Bank of England took emergency measures to keep the economy afloat, promising to buy bonds at "whatever scale is necessary." Can the UK economy avoid catastrophe as it faces threats from inflation and fuel shortages? Leading British economist Alpesh Paleja explains what exactly happened to bond markets, giving us a sobering assessment of the country's financial health and whether we have seen the worst of the storm.
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Transcript
INTRODUCTION
Lockwood: You're listening to a special episode of One Decision. Despite the ups and downs of Brexit and its turbulent politics, the UK has long been seen by investors as a safe haven. For decades, the pound sterling has been considered one of the strongest and most stable currencies in the world and is among the most traded among developed nations. But things can change in an instant as we are increasingly seeing in this volatile day and age. The world's attention turned to the UK as the government unveiled a controversial economic plan last week, which sent shockwaves across the market, spooking investors and causing the pound to plummet against the dollar, barely above parity. The new prime minister Liz Truss is now feeling the heat for her bold, perhaps reckless plan to try and kick start growth with tax cuts for the rich funded by more borrowing. A lot of this is complicated economics and if you, like me, have been reading and listening to the news and have ended up with way more questions than have been answered, hopefully, we can help with that. We're joined today by one of the UK's top economists. Alpesh Paleja is the chief economist at the CBI, the Confederation of British Industry. He sat down with us to walk us through all of this week's earthquakes, what it means for the British consumer, and the health of one of the most significant economies in the developed world. So all of this began when Kwasi Kwarteng, the chancellor, unveiled his mini budget last Friday, which unleashed quite a lot of havoc spooking the markets, the value of the pound plummeting against the dollar, compelling the Bank of England to step in with that £65,000,000,000 intervention. And all of this was happening, leading the world to sit up and take notice. We saw quite incredible statements from the IMF, the United Nations financial institution, and the White House, and the US Commerce Secretary. We saw high street banks withdraw more than 1,600 mortgages from the market over concerns that borrowers would face a huge rise in their interest payments when their existing deals expire. But the game changer this week was that Bank of England intervention announcing that it was taking emergency action on Wednesday to try and avoid a meltdown in the UK pension sector. That £65,000,000,000 figure I mentioned relates to a bond buying programme, which they use to try and calm the waters and plug the demand in the government bond markets. Now, the central bank was warning of a quote, material risk to UK financial stability due to the turmoil in the UK government bonds market, which was sparked by that announcement, the mini budget last week, the tax cuts and the borrowing plan. Walk us through exactly what happened there. The chancellor announced those tax cuts without a forecast, without the Office for Budget Responsibility giving its independent assessment. A lot of people thought that makes it look pretty dodgy. So people decided to start selling off UK bonds, which are priced in pounds, which was of course the currency flatlining against the dollar. So what did that have to do with people's pension pots, the investment funds that people's pensions are tied into?
INTERVIEW
Paleja: So yeah, I mean you're completely right, it has been quite a week and just before we kind of get on to talking about pensions, it's probably worth just mentioning that you know while the market reaction happened after the fiscal announcements in the budget that took place at the end of last week, actually, those weren't the only fiscal announcements that the government had made. Shortly before that, the government had announced a big intervention to support households and businesses with energy bills given the scale of the cost of living crisis that the UK was facing. And those similarly were you know very welcome but were you know huge interventions where we were talking about sort of borrowing potentially on a very big scale. So even before we were going into the budget markets were cognizant of the fact that there was a lot of borrowing in the pipeline. And the concern as you rightly mentioned was the fact that this was coming against a backdrop of an economy that already has a high rate of inflation and a low unemployment rate. And yet there wasn't really much sort of attempt to show how the plan would be sustainable from a medium term perspective. And that's what sort of led to the big market reaction both in currency markets in sterling, but also with government debt. We saw yields on UK government bonds really pick up to multi decade highs and that's what sort of led the Bank of England to step in. The issue with sort of pension funds is a slightly sort of complicated one to understand. What basically happened there was obviously pension funds are big holders of UK government bonds and particularly long dated government bonds, those that have sort of a long maturity. And the big sell off in government debt was pushing down the price of government debt and those pension funds hold those government debt as part of strategies to hedge against sort of inflation and interest rate movements known as sort of liability driven investment strategies. And so gilts that were sort of used as collateral were actually lowering in value and it meant that sort of pension funds were having to stump up more cash to sort of plug the gap in pension schemes in order to meet their liabilities. So that's when the Bank of England stepped in. You know the pension funds were largely sort of getting to a point where many of them were at risk of insolvency. So the Bank of England stepped in as a buyer of those gilts to sort of calm markets and say look you know we're here we'll do whatever is necessary. Those losses were fully indemnified by the Treasury and it's important to note that the Bank of England's intervention was time limited. So it's temporary and it's intended to tackle a very specific problem in the government bond market.
Lockwood: So it seems like that may be what is happening now in terms of more detail being available. We're seeing a lot of growing cause for stability and the moves that will calm the markets. One of the things that caused concern about the tax cuts is that they were funded by debt. Is debt funded tax cuts the right way in your opinion to grow an economy in the current climate?
Paleja: It's a very interesting question. And I think it really just depends on the context in which you are operating in. So it really depends on what's going on in the economy at that point in time and hence you know what is the right thing to do from a stimulus perspective. So I think in terms of the economic context we're at at the moment, you know it's clear that the economy is on the cusp of a downturn, perhaps not a major downturn, but one that will be quite definitive nonetheless. But like most of the world we're actually facing quite strong inflation. You know inflation in the UK is close to 10% which is you know near a forty year high. And that's a very tricky juncture for setting economic policy because on the one hand you don't want to sort of choke off growth and you want to sort of support the economy during a downturn. But on the other hand you have to be mindful of the additional price pressure that generates. And I think one of the things that markets took some issue with was the fact that some of the measures being, and it's important to note that there were some encouraging things in the budget. There were measures that by all means would support vulnerable households you know both the energy price announcements that I talked about earlier and also some measures in the budget last week. But certainly there is a case for saying that perhaps it could have been a bit more targeted. If they were funded by borrowing fair enough but like you say what was missing there was sort of an independent credible robust assessment of economic prospects. Economic prospects have moved on quite considerably since March, which is when the OBR published its last forecast.
Lockwood: You mentioned the current economic climate is one which is tackling rising inflation, which is a challenge that many governments around the world are currently facing. Now, the raising of interest rates is often described as the bitter medicine you need to take for rising inflation. And so by central banks raising the interest rate that people will find that they start paying more interest on their mortgages, on their credit card bills, and any other loans that they might have. And it is a way of slowing down the economy by forcing people to spend less and dampening demand in that sense. So, it then has the effect of lowering inflation and lowering rising prices, because products and goods and services are then forced to lower their prices in order to stimulate that demand back. So, my question is on that process, and it is a difficult balancing act that central bankers, analysts and the economists informing them like yourself, that difficult balancing act that they have to consider is, can you end up raising interest rates into a recession?
Paleja: I mean this is really the place that central banks don't want to be in, in what is effectively a stagflation kind of environment because you are having to balance two very opposing objectives. And I think in answer to that question, can you raise interest rates into recession, I think the simple answer is well yes you can if you want to. You know as I say whether we're going to see a recession or not we are going to see some form of sluggishness in economic growth at least over the next year or so. And the Bank of England at the moment do seem to be prioritizing their inflation objective and you know we've seen that over this year so far. The Bank of England have raised interest rates at every meeting since December, reversing sort of unprecedented cuts that we saw since the financial crisis in February. And actually you know one could argue that that's probably the right thing to do because monetary policy is almost the first line of defense against inflation if you like. But also the further fall that we've seen in the pound of course will add to price pressures because the UK is a net importer and it will particularly sort of hit the price of things like sort of fuel, energy, petrol because obviously that's denominated in dollars. So in actual fact the inflationary pressures have increased which means that actually monetary policy, you know if fiscal policy remains as it is, policy will need to be tightened even further to bring inflation back to the Bank of England's 2% target. So you're sort of seeing monetary and fiscal policy work in different directions.
Lockwood: So just going back to the ways in which a central bank can react to those inflationary pressures, I'm so fascinated by that sort of perennial struggle, and the very fine line that central bankers have to tread in order not to tip the scale too much. Essentially, that chain of events that they're trying to spark, starting with the raising of interests, and then ending with the lowering of prices and inflation to try and persuade people who have tightened their belts to then spend more. What happens if in the situation we see ourselves in today, where prices are rising, not due to a frenzy of demand, but international issues and issues with the global supply chain. I mean, everything from the Chinese factories being put on lockdown, to the global shortage of shipping containers and Putin's war in Ukraine. I mean, this week in Brussels, actually military officials from more than 40 countries gathered in the NATO headquarters to discuss how to ramp up arms to Ukraine. And a lot of people are taking that as a sign that the West is expecting to hunker down and that the war in Ukraine is going to last years, not months. So is inflation unavoidable at this particular moment in time? And also does the Bank of England really need to raise interest rates anyway to put the brakes on the economy when we are seeing energy price rises and a whole lot of other things which are inevitably going to cause a lot of us to tighten our belts and spend less?
Paleja: That's a very important point when we think about what's been driving inflation. A very big chunk of it in the UK and indeed across many economies has been externally related. It has been related to the acute supply chain pressures that we've seen over the course of the last one and a half years exacerbated by the very tragic conflict going on in Ukraine and the impact that that has had on global commodity prices particularly energy but also China's ongoing pursuit of a zero Covid strategy and what that is doing in exacerbating the supply chain pressures that we're seeing across the world. The Bank of England will naturally, and indeed not just the Bank of England other central banks across the world, will take a view about how much of the inflation that's coming through they can actually control. And actually in the past we have seen occasions where the Bank of England has sort of looked through pressures which are externally generated you know particularly those coming through via the exchange rates and you know particularly if the expectation was they would be temporary, they wouldn't sort of embed themselves in inflation expectations and domestic price and wage setting. But that last point is quite key in terms of why the Bank of England have been raising interest rates. It's not so much the fact that inflation has been driven by global factors and that's not something they control, but they're worried about the fact that actually people will just expect inflation to remain high over the medium term and that will become embedded in how they behave, in how they spend and in how sort of businesses set prices. Yeah, that's called inflation expectations being baked in which is something I keep hearing but people don't really tend to explain that. So that explains a lot in that. Yeah, exactly and you know that's a very key consideration for central banks because the minute that, you know if there are signs of that happening that's when you really need to act to recalibrate people's expectations to prevent sort of price and wage setting behavior sort of reinforcing itself if you like. And when we look at the drivers of inflation more, there are signs that it's starting to shift. Actually the global pressures are starting to come off a bit, you know particularly when we look at goods prices which are indicative of supply chain pressure and when we look at energy prices where sort of you know intervention has been taken domestically to take some of the pressure off. When we look at services inflation that's a whole sort of mishmash of stuff you know and that tends to be a bit more domestically focused and that has been picking up, you know wage growth is slowly picking up. So there are signs of inflation becoming more domestically driven and that's what the Bank of England are reacting to effectively. You know they're reacting to signs that inflation expectations are picking up as well. Against that backdrop, you know, it is necessary for the Bank of England to tighten monetary policy to bring inflation back to its target. And that will happen over the course of about eighteen months to two years.
Lockwood: That is interesting and worrying, particularly for those of us who have mortgage renegotiations coming up, but we will get to that happy subject later. People have been saying that the Bank of England really should have raised interest rates earlier, that we shouldn't have continued to have the kind of historically low rates that we have had for so long. We shouldn't have continued to have that during COVID when we started to see things like spikes in sales of hot tubs or gardening tools, other things that people bored, stuck at home, not spending their cash on restaurants and parties, people were spending strongly. And then there was also that boom in property in 2020, when the chancellor abolished stamp duty. I mean, we were looking for a house back then and the market was utterly bonkers, anecdotally speaking in London. Estate agents everywhere were telling us that they had never been quite so busy in their lives during the pandemic, which was really, really interesting. I mean, what do you think? Is this action from the Bank of England in raising interest rates and they're likely to do it again in November, is it action that's long overdue?
Paleja: So there has been a lot that's happened since the pandemic which has in itself been unprecedented, which has sort of driven up price pressure. And we have to bear in mind that even if the Bank of England could have predicted this all perfectly, it would have meant raising interest rates during what was a historically deep downturn, right in the middle of 2020 when we had just got into lockdown. And that would have done far more damage to economic activity over the near term. So you know it always comes back to trade offs and the trade off just would have been too great. What I think is probably perhaps a bit more justified in saying is you know over the course of last year of 2021 the Bank of England had obviously continued with quantitative easing with purchases of assets primarily government bonds and that's been a sort of another monetary policy tool that has been used periodically since the financial crisis in 2009. Actually there probably was a case for saying that you know maybe that could have been stopped a bit earlier when it was clear that inflation was becoming a problem and that would have been a very important signalling mechanism to markets that actually look we are on top of it when it comes to inflation. But like I say it always comes down to trade offs, it comes down to the fact that actually you know we are in this very tricky juncture in setting economic policy where we're looking at a downturn but inflation is also picking up as well, which one do you prioritize?
Lockwood: So it's tricky at the best of times but particularly so at the moment. Interesting, okay that makes a lot more sense to me now. I have a question that is going to take us sort of from inflation and into the pound sterling crisis, and it involves the view from the US. Now, the Federal Reserve is hell bent focused on pushing down inflation, and it's been aggressively raising its interest rates recently. It started doing it a lot later than a lot of countries, but has been doing it a lot faster and a lot sharper. But the problem is that this runaway dollar is wreaking absolute havoc overseas because it's pushing down the value of other countries' currencies, the pound being just one. This dynamic where the Fed is essentially exporting its inflation to other countries is putting central banks around the world under real pressure. Walk us through that process, and what does it mean for the months ahead? What can central banks and governments do?
Paleja: Yeah, I mean, well, it's important to remember that the dollar has a huge presence in the global economy. It is essentially the world's reserve currency. So, actions by institutions in the US both the Fed and otherwise do have implications you know everywhere across the world. But I think where you have seen the impact most has been in exchange rates, has been in currencies you know even before all of the events of the past week the pound had been falling considerably against the US dollar so had the euro. Naturally in the case of the UK there are now other sort of UK specific factors which have been weighing on the pound as well. So actually the actions over the next few weeks will be very interesting to watch in terms of their impact on the currency.
Lockwood: Right, and you hinted something there which some people who've been maybe not quite defending Liz Truss, but sort of giving it maybe an alternate view of the week's events with regards to the pound shooting down was that it was falling against the dollar because we aren't putting our interest rates up as high as the US. So as interest rates are raised in some countries, you find that institutional investors start buying their debt because they have a higher rate of interest return on that debt. So you start to see money going out of countries with low interest rates, let's say the UK into those with higher interest rates, let's say the US. Can you explain to me the benefits of that for a government? If there is more demand from institutional investors in buying their bonds, their gilts as they're also known. How does that benefit a government's coffers? Does it help deficits go down? Does it mean more cash for public spending?
Paleja: Well, I suppose the simplest benefit of that is that there is a market for their debt you know if they sort of need to borrow it and particularly if they need to borrow a very substantial amount it means that actually you know people do want to purchase that debt which in itself is a good thing, it's good for the government, it's good for the government's sort of plans for the economy and for you know the public finances. But I think also what it means is that the market functioning is much smoother as well and it keeps borrowing costs quite low. So certainly, it helps to sort of plug gaps in financing and plug gaps particularly in financing with the rest of the world as well.
Lockwood: Right, so the reason I asked you that ostensibly simple question is because I've got another follow on from that, is in terms of raising more funds for the government, is that when existing government bonds are bought and sold, or is that when new bonds are created, new debt is created for investors to buy on the market?
Paleja: It's sort of a bit of both to be honest. You know, I think issuing new debt is what's known as kind of, you know trading in the primary market, so that's you know sort of fresh bonds being issued by government and you know if the government is sort of you know in a hypothetical scenario if the government is going to follow through with all the announcements last week and it's going to do so via borrowing then almost certainly it will need to issue a lot of bonds in the primary market to kind of get that to happen. But it's also in terms of thinking about the secondary market, it's important to note that there are a lot of sort of institutional holders of government bonds over sort of very long periods of maturity and pension funds are a very good example of that you know but they will buy government bonds with maturity of sort of thirty, forty, fifty years even higher. And you know actually as part, in taking the example of pension funds, you know as part of their own sort of financial management strategies they will be sort of buying and selling those bonds periodically as well. So that in itself is also a very important influence on the overall stock of government debt. And again, like I was saying earlier, particularly on the financing of that debt, what it does to yields as well.
Lockwood: It's really, really interesting. So you took us through why this process is good for governments because it allows more cash to fund a lot of their policies. Can the selling of government debt, how important is that in terms of a government's coffers revenue compared to let's say tax revenue from its citizens? What's the sort of distribution between the two?
Paleja: There's no one answer to that to be honest because it really just depends on government to government. I think if we look back at the history of the UK over the last sort of twelve to fifteen years or so you know when we look at the period of so called austerity which took place over the 2010s there was a very concerted effort there to bring down UK borrowing and debt. And you know much of that was happening not via sort of tax rises but it was happening by cuts to government spending. That was sort of the very dominant theme of at least sort of the early years of austerity if you like. Whereas you know the consensus there now has shifted sort of very much so, whereas we are sort of in an environment where it looks like you know one way or the other we are going to have to borrow more. So actually you know much in terms of sort of the composition of the government's finances whether it's sort of taxes, it's spending, whether it's the balance between the two and obviously borrowing, it really just depends on the government of their day, what their plan is for the economy, at what point of the economic cycle we're in as well and you know what is the overall strategy for the public finances as a result?
Lockwood: The IMF made an extraordinary intervention this week giving a statement that it was closely monitoring the recent economic developments in the UK. It said that we do not recommend large and untargeted fiscal packages at this juncture, as it is important that fiscal policy does not work at cross purposes to monetary policy. Bloomberg described the Bank of England intervention this week as moves which injected some desperately needed confidence into the nation's bond market, which showed signs of collapsing. The US commerce secretary said the policy of cutting taxes and simultaneously increasing spending isn't one that is going to fight inflation in the short term or put you in good stead for long term economic growth. If I had told you a month ago that the IMF, that the US government would be making these kinds of comments about a G7 economy, would you have believed me? And how significant have those interventions been? I mean, essentially all of these bodies were saying that there are concerns about the implications of the global economy by the UK, not so much shooting itself in the foot as shooting itself in the face?
Paleja: I mean, the last few years have really taught me not to discount anything to be very honest. I think, look, I mean, the IMF was only doing its job, it was sort of coming out and I suppose to me the IMF at that point wasn't telling us anything that we didn't already know when you know you only had to look at what was going on in financial markets to sort of understand that you know this is something that kind of needed correcting quite quickly. I think what's important is to focus on what happens now you know the Bank of England's actions have gone a long way to stemming the volatility in financial markets. Markets will now be looking for, you know the IMF did talk about sort of unfunded tax cuts. You know markets are now going to be looking at more detail on how those tax cuts are going to be funded. So that sort of fiscal statement on the November 23 is something that will need to be watched quite closely. It is important to remember that actually there was, it sort of got lost in the coverage but there was some very encouraging announcements in the budget on sort of supply side reform and you know some very encouraging announcements on planning and you know it's stuff like that that's really important for shoring up the economy's long run potential growth. You know sort of boosting the supply side of the economy is very important for growth over the longer run. It means the economy can sustain higher demand without pushing up inflation, it means people can be paid more sustainably without driving up costs for businesses and thus it means higher living standards for everyone and sort of a better quality of life.
Lockwood: So the sticky wicket where the growth is concerned is the new worries about mortgages. We saw this week, banks and building societies pulling hundreds of mortgages off the market for new borrowers, as their business models came under new pressure from all this turbulence. I find the UK property market really quite fascinating. It's such a bellwether for the health of the economy. It paints a demographic picture of our electorate. Traditionally, homeowners have tended to vote blue. Let's see how long that lasts. And for many of us, we're not a nation of savers, but many of us with assets tend to have those assets in property. I read that the UK has the highest amount of outstanding residential mortgage lending in all of Europe, followed by Germany and then followed by France. Which means I think we are particularly sensitive to changes in interest rates for that reason, because there's so many more of us affected by that. The changes in the markets and the interest rates, what's been put in motion so far, is it likely to remain the case for months or possibly years? I believe that more than 2,000,000 borrowers with fixed term products will need to remortgage between now and the end of 2024, which is according to the Bank of England. For those of us who have a few months before their fixed term products end, is there hope that this instability might have straightened out in the months ahead into next year? And how much does this depend on either the Tories kneecapping their prime minister and her policies or Putin losing his war in Ukraine and the energy prices coming down or the Chinese getting a handle on their zero COVID policy and their manufacturing output cranking back up and their property market stabilizing?
Paleja: That's a very big question but I'll do my best to try and answer it as succinctly as I can. I mean look, let's kind of look at the fundamentals first. Interest rates are going to have to rise a little bit further to bring inflation under control. You know like I said it really just comes back to trade offs. I think some of the near term impact is blunted by the fact that actually fixed rate mortgages account for the majority of outstanding loans but as you quite rightly point out you know many of those people will be sort of coming off those fixes this year and I think particularly next year, I think that's particularly the case for 2023 as well. And obviously that is coming at a time when there will be more pressure on people's incomes. When we think of higher inflation we're probably going to see the peak in inflation this year but nonetheless you know even if it comes down over the course of next year it will do so sort of relatively gradually. It will mean sort of more pain on people's incomes. I think we forget sometimes that you just sort of have to let the market work if you like. Actually one of the things that we expect over next year is you know yes we will see a downturn in some form but actually that in itself sort of takes some of the heat out of inflation, you know, out of price rises. You know, actually the economy is never a static being. It's a very dynamic beast. So, you know, to the extent that sort of weaker demand takes the edge off price pressures, that then takes the pressure off interest rates as well. And this isn't just a UK phenomenon. You know, most of the advanced world is going to see a downturn in some shape or form and that inevitably will feed back to the UK because we're a fairly open economy. So actually you will see some of that inflationary pressure just come off by default if you like. The key question is how is that sort of balanced across you know the inflationary pressures that we spoke about earlier, you know will there be more volatility from global energy prices, will China sort of continue to pursue a zero Covid policy, what will that mean for supply chain pressure, will those pressures be as potent at a time when global demand is weaker as well, you know that's another question. But the crux is you know we're in a high inflationary environment, it's clear that the Bank of England are going to need to raise interest rates a little bit more to bring inflation under control. But certainly the pressure on mortgage holders and the housing market will be a very key consideration for the bank in doing so.
Lockwood: Right, I have one final question to you and you mentioned earlier, you alluded to the role that psychology sort of plays, a psychological impact of a lot of these judgements and evaluations and decisions being made. So, I have quite an abstract question for you. Imagine that your job as an economist is more or less to sort of understand and predict the way markets think and how they shape economies, and we tend to dehumanize markets and refer to them like they are these abstract, non sentient things, but what they actually are surely are just the evaluations of many, many people, traders, investors, about what makes a good bet. I know there's lots of algorithms involved in it, but a lot of it is still down to human judgment. It's perhaps more of a herd mentality than a sort of abstract being. And so when we talk about optics, the optics and the politics, it has an economic impact, really the psychology of a lot of these things. It's important when you talk about the feelings and impressions we get about a chancellor, who thinks it's okay to play fast and loose with his mouth, and talk about more unfunded tax cuts in an off the cuff speech over the weekend, for example, it has an economic impact. We've heard a lot of people talk about economics as a kind of ideology. There are different ways to skin a cat. There are different schools of economic thought. Is economics, is your job, is it closer to philosophy or sociology and trying to get around how people are thinking and predict what they're going to do? Or is it more along those sorts of schools of thought than straight mathematics where sums and formulae are not really up for interpretation, they're pretty black and white?
Paleja: It's a very interesting question and I think years of being an economist and then you know prior to that having studied economics have taught me that economics is essentially, it bleeds across so many different disciplines. You know when we think of what economics is, economics is essentially the study of how people behave subject to the constraints placed upon them. There's a huge psychological element there and you know what models try and do, what economic models try and do is almost sort of predict that psychology. It sort of predicts how people will behave when you do certain things like raise interest rates or cut taxes for instance. You know there's a huge sociological element there as well you know particularly when we think about well-being, we think about welfare, we think about the labor market, you know, at the moment supporting the most vulnerable in society with high energy prices. And actually the philosophical element, you know, is a very interesting one and one that's become apparent you know very recently to me personally. You know what do we as humans place value on? What do we value? You know I think the pandemic kind of very much brought that question to the forefront and you know depending on what we value you know that very much influences how we will behave and how we will you know do things like spend money for instance which then comes back to economics. And I think what the mathematics side of economics seeks to do is sort of, the mathematics side is almost a tool to kind of quantify all of those things and to kind of you know predict all of those things as well. I think you know a lot of people see maths and economics as synonymous and I think it can be as mathsy as you want it to be but really to me the maths, the statistics and the econometrics are really a tool for you to kind of gain new insights into behavior if you like. So I mean it really is a wonderful discipline because it spans so much and kind of really broadens your perspective on the world certainly.
Lockwood: That's fascinating. I certainly would have put maths and economics as synonymous in my earlier years. And if I had known a bit more about it, if I have heard you answer that question, perhaps I would have taken more of an interest in it growing up and through my education. It's been really fascinating talking to you, Alpesh. Thank you so much for your time. And yeah, I expect you're going to be very, very busy in the weeks ahead. I hope we can check in with you again soon when things have moved on a bit more. Absolutely.
Paleja: Let's hope. Thank you Julia, it was lovely talking to you. It's great having you, thank you so much.
Lockwood: This was a special episode of One Decision, speaking to Alpesh Paleja, the chief economist of Britain's Confederation of British Industry, a leading organization representing nearly 200,000 companies and around 7,000,000 people. If you liked this episode, why not rate us and leave a review? We drop new episodes every Thursday with me and my co-host, Sir Richard Dearlove. From me and the team, thanks for listening, and see you next time.
