Robert B. Menschel Economics Symposium: Lessons From 1929

FROMAN: It’s great to have you all here, albeit virtually, for this once-in-a-decade storm in the northeast, Snowmageddon. We’ve got about 500 members and guests who are participating virtually and we really appreciate you all tuning in.

This is the Robert B. Menschel Economics Symposium. The symposium was launched at CFR in 2014, thanks to a gift from Robert Menschel, who was then a senior director at Goldman Sachs, and we’ve continued it since his passing in 2022 in his honor.

He was the author of Markets, Mobs, and Mayhem: A Modern Look at the Madness of Crowds. You have to wonder what he would think about prediction markets today and their role in trying to assess the likelihood of geopolitical outcomes in Ukraine or China, Taiwan, or what’s going on in Iran this week.

But leaving the geopolitical markets aside, it’s hardly—it can hardly be a better time to sit down and talk about what’s going on in the global economy, given that fundamental aspects of the international economic system are now being reopened for debate.

And with that, we are delighted to have a great lineup for you today. First, a conversation with Andrew Ross Sorkin, our keynote, which is being moderated by Gillian Tett, followed by a plenary session on “Looking Ahead: Forecasting the Global Economic Climate” with Jared Bernstein, Peter Fisher, Carmen Reinhart, moderated by Catherine Rampell.

This symposium is on the record. You will have a chance to ask questions about halfway through this session, and I have a privilege of introducing Andrew Ross Sorkin, columnist and editor-at-large for the New York Times, founder of DealBook and, of course, co-anchor of CNBC’s Squawk Box.

It’s a great pleasure for me in particular to be in a position to ask him questions for a change rather than the other way around. He’s the author of 1929: Inside the Great Crash in Wall Street History—the Greatest Crash in Wall Street History and How It Shattered a Nation.

And we thought this was an appropriate topic for today but also as part of CFR’s America at 250 program. During the course of the year, we’ll be putting on a series of programming and publications, articles, et cetera, special projects, celebrating, remarking on the 250th anniversary of the Declaration of Independence and this is very much part of that as well.

So with that, let me turn it over to Gillian Tett, columnist and member of the editorial board of the Financial Times and also the rector of King’s College, University of Cambridge. Thank you for joining us today.

Gillian, over to you. And you’re on mute, I believe.

TETT: Great. OK.

Well, thank you very much indeed, Mike, and it’s absolutely great to be here in New York on this crazily snowy day. I’ve actually just been cross-country skiing up the East River, which is something you don’t often get to do. That’s once a decade.

But we’re talking about history today. I oversee King’s College, Cambridge, so I’m used to thinking about 600 years of history. But today we’re going to be talking about the last hundred years of history or hundred and fifty years of history with Andrew Ross Sorkin and, in particular, about his amazing bestselling book, 1929, and both what it tells us about what was happening in America a hundred years ago, and also what it means about where we are now and whether we are about to see a replay of 1929 or not.

So, Andrew, great to have you here. I think we’ve been chatting for about twenty years now about the nature of finance, probably mostly around 2008.

SORKIN: And I’ve been learning from you much more probably than you’ve ever learned from me. So it’s an honor to do this with you.

TETT: Well, I think that I’ve learned a lot from you, and your book is absolutely fantastic. So start off by telling us what made you write it, because one of the things that’s amazing about this is that this has been a kind of secret project of yours for many, many years, hasn’t it? Or a secret passion that’s messed up many of your holidays.

SORKIN: Yes. I mean, it was really a labor of love, and you’re right, I didn’t tell anybody I was working on it, in large part because I didn’t know if I’d ever finish it and I didn’t know if it would ever be any good.

You know, I had written Too Big to Fail after the financial crisis in 2008 and people used to ask me all the time about how 2008 compared to 1929, and the truth is I never had a great answer for them because I didn’t know much more than having read John Galbraith’s great book about the Great Crash and a couple of other books over the years.

But I never really studied the period, and I decided I should really know more about this, and so I spent a whole bunch of time, probably now over a decade ago, really just reading about it and becoming completely intrigued but also feeling that there was a white space.

You know, my favorite books are the sort of inside-the-room TikTok narrative where you really get to feel like you’re there, you get to feel the people and understand their emotions and their incentives, and why they thought what they thought and why they missed what seemed like obvious signs, for example, of, you know, things to come and either wore blinders or didn’t understand.

And for whatever reason, the books that were written about that period didn’t really capture the—almost the human emotion of it. A lot of them were written—there were some—there was a couple books written in the late ’30s, ’40s. The Galbraith book was in the 1950s. And so there really wasn’t the kind of writing, you know, the barbarians at the gate den of thieves style, Michael Lewis style book, or even what I thought was too big to fail.

So I thought, I want to try this and, of course, the hard part about this, unlike too big to fail, was there’s nobody to call. Everybody was dead. So I couldn’t—I couldn’t actually, you know, get that information that way and thought, well, is there another way to do this? And it really was, therefore, this eight-year journey of collecting memos and notes and letters and diaries and depositions and transcripts and all sorts of materials so that every little scene and every moment where you’re with them is real. I mean, it should, hopefully, feel like a novel but it’s absolutely real and that’s what I was going for.

But the reason I never told anybody I was doing it was because I wasn’t sure I was actually going to get there.

TETT: Wow. Well, that’s pretty impressive. I mean, I can’t imagine how you fitted this in with your six other jobs that you’re doing all at once, apart from this.

But, you know, to get the sort of inside-the-room feeling and the personality insights you really went on a detective chase, didn’t you? And you ended up getting things like memos from the feds or the minutes from Fed meetings that no one had ever seen before.

Tell us a bit about how you actually got the material, because it’s quite an astonishing piece of sleuthing.

SORKIN: Well, so one of the big breakthroughs actually was the Fed. So the New York Fed’s minutes had never been released publicly for whatever reason. By the way, their minutes today are available on their website. You can go look.

But minutes from a hundred years ago during the crash were never made public and I, effectively, filed the equivalent of a FOIA—Freedom of Information Act. I don’t think they’re necessarily susceptible to a true FOIA. But we went back and forth and back and forth. They ultimately decided to—they lawyered up their—the documents and ended up sending me a redacted version—(laughter)—which then we battled it out a little bit longer for maybe another six months and they ultimately sent me the real thing.

And that turned into a treasure map for so much of the book, in part because it said times and dates and you got to actually see really where they were at any given moment. And then the other thing was so many of the characters—you know, there are certain characters in the book that had archives. They donated their archives to libraries; their families had done that.

By the way, some of those archives were embargoed. I never realized this but sometimes when you—when a family donates their materials to a library they say, you know what, this can become public fifty years after the death of so and so.

So there was sort of a whole bunch of new material in some regards that just had never been seen before and no one had really gone looking in the past fifty years for it. But the other sort of hard part or just challenge which was so interesting, selfishly, for me was, you know, Charlie Mitchell, who’s the main character of the book, he had no real archive. His bank—his bank called National City becomes Citigroup—they never really had so much material about him.

So what you would have to do is say to yourself, OK, well, Charlie was, for example, on the board of the New York Fed. The meeting was over at 3:00. Who would have he talked to after that meeting? Who would have he corresponded with?

And then go find their archives or maybe even sort of a third archive and you’d see letters between that other people had kept, for example, from him and then from them. And so you were able to sort of take that and then place them back in the room.

Sometimes I’d get pictures of the room itself. So, you know, when you see Charlie talking to his wife in their living room, that’s because I had pictures—some of the architecture diagrams.

And then depositions—there were a lot of lawsuits after the crash, as you might imagine, where the lawyer would say, Mr. Mitchell, what did you do this afternoon? He said, well, I went to the living room and I told my—I talked to my wife.

What did you tell your wife? And he would say it, and then they’d interview his wife and his wife would say, yeah, then you—and that’s how you try to put the whole story together.

TETT: So “Sunshine Charlie”—Charlie Mitchell, who’s one of the absolute key characters in the book—sort of indicates a way that the whole environment of Wall Street of New York got caught up in this absolute crazy mania for a while.

But one of the key messages of the book is that when the mania finally started to evaporate, it didn’t just go bang in one sudden moment, did it? Because people think about 1929 as being this period of extreme exuberance that suddenly collapsed. But that wasn’t quite how it played out, was it?

SORKIN: So I think that’s one of the reasons I wanted to write the book because I think there’s such a misunderstanding or impression. I think most Americans have this sort of vague notion something terrible happened in 1929, the stock market fell, and then all of a sudden we landed in a great depression, and that’s not really what happened at all.

There was a terrible, terrible crash, effectively, between October and November of 1929. The stock market fell about 50 percent during that period. Interestingly, by the end of 1929—this goes unremarked upon typically—the market was only down 17 percent and the reason why so many people were taken down with it, however, was because they were all investing on margin, meaning they were all taking these remarkable loans. So—

TETT: (Inaudible)—basically—

SORKIN: So they couldn’t hang—they couldn’t hang on long enough to even get back to 17 percent. They were mortgaging their homes and selling their homes and everything else before that.

But it wasn’t that the crash unto itself all of a sudden happens and then you land in the Great Depression. It was really the first domino in a series of dominoes, with the other dominoes being policy choices made, largely, by the Federal Reserve and the president, President Hoover, and Washington, that really walked you into what turns out to be 25 percent unemployment in 1932 and, effectively, some 9,000 banks ultimately failing by 1935.

Now, and those—I think understanding those policy choices and those just dominoes is really what, to me, sort of enlivened the whole story and really made me understand what had happened. So I wasn’t just telling the story of 1929 on Wall Street. I was trying to also tell the story of what was happening in Washington throughout that period, and then as you walk into and all the way through, effectively, the end—the middle of 1933.

TETT: So I’m going to comment in a moment and ask you about a parallel for today. But, I mean, this book can be read essentially as a handbook about what not to do both on the way up and on the way down. So just talk about on the way up. I mean, what actually sparked the bubble?

I mean, it seems to me that it wasn’t just wild tech exuberance, although there was tech exuberance about new technologies coming down the tracks. But it was also the ability of different financiers to leverage up, to employ margin, and do so at a scale that no one had ever seen before. Is that a fair assessment?

SORKIN: Yes, and I think to add to that, there’s the real view that this was—I mean, look, the 1920s were in very many ways actually similar to now insofar as you’re going through this technological boom. In that case, it was things like radio, airplanes, cars, all of that. I mean, it was just an amazing period of time.

But the other major piece that really shifted the balance was this was a time when people talked about this idea of democratizing finance and letting the ordinary investor participate in all of this, typically through the use of debt, typically through the use of borrowing money, and that’s what changed the dynamic.

And so you—and, interestingly, you had a Federal Reserve, by the way, during this period of time that if you go and read the diaries and notes of some of these board members, they were scared out of their minds about the speculation. They wanted to stop it.

But they were very worried that actually if they raised interest rates—and there was a massive debate going on inside the Fed about should we raise interest rates to try to stamp it out—that they would be called on the carpet for, effectively, tipping over the economy.

You know, we talk right now a lot about Fed independence and the political interference. It wasn’t that Hoover was telling them not to do this, but the Fed was still such a new institution. In fact, they used to call it an experiment.

And so it was born in 1913. So many of those board members really thought that had—if they made a mistake trying to shut this whole situation down that they would not just get called in front of Congress but that the experiment would end, that there would be the end of the Fed.

So that’s what was happening sort of the front end of the crisis and the crash. And then, of course, there were all sorts of policy choices about what do you do about it on the other end, which failed miserably.

TETT: So what was—so you had on the way up you had an excess of leverage, an excess of hype, overexcitement about new technologies, and essentially a Fed that was scared of pricking the bubble for being blamed and getting political attack.

SORKIN: Blamed—by the way, there were some international issues in terms of gold standard, in terms of the relationship with the U.K. There was reparations that were taking place—reparations agreements taking place. There was lots of sort of—there were a whole bunch of other sort of international cross currents as well that were weighing on folks.

TETT: So that was on the way up.

SORKIN: Right.

TETT: And on the way down, why did the initial crash that happened in October ’29 and then, as you said, the market then actually rebounded, which people have forgotten—

SORKIN: Yes.

TETT: —although lots of people got wiped out because they were so heavily leveraged. What did they do after that—by “they,” I mean both the White House and the Fed—that was so disastrous and turned what was initially just a market correction into a full-blown depression?

SORKIN: Well, often the—probably the biggest mistake was they often did nothing at all when they probably needed to step in, and we can talk about what stepping in would have meant.

But, you know, President Hoover—I think a lot of folks, including him, missed some of these signs, in part because they saw the market coming back. They would hear from bankers saying things were getting better so they didn’t—they didn’t act as quickly as they should have.

You know, the idea of printing money or, effectively, throwing money at the problem was considered anathema back then and so you did not have the government wanting to do it; you did not have the Fed necessarily wanting to do it.

You had Hoover talking about at some point raising taxes—not the best time to be doing that—and then if you really want to mirror what’s happening now, he had run in 1928 on the idea that he was going to implement tariffs, in part because he was trying to attract farmers around the country to vote for him.

And so 1930 comes around and he says, look, I got to make good on the pledge to all the farmers that I had made during the election, and every economist, every banker, is going down to Washington on their knees saying, please, Mr. President, don’t do this. It’s going to upend everything. And he says, no, no, no, I have to do it, and he does, and literally trade dropped by about 60 percent over the course of twelve months.

So I think you add all of that together—now, by the way, we were on the gold standard so it’s complicated to get—you couldn’t have printed money. I mean, that was sort of—and there was a big debate about getting off the gold standard. So I think there was a lot of those issues.

And then, in terms of moral hazard, there was huge questions—do we guarantee banks, for example. You were starting to see these bank runs, and Hoover’s view was he didn’t want to do it. By the way, Roosevelt, interestingly, didn’t want to do it either.

TETT: (Laughs.) Yeah.

SORKIN: So, you know, there were a lot of things that could have been done along the way and for a whole bunch of reasons, which we can get into, just didn’t, and that’s really what led us down this sort of tragic path.

TETT: Right. Well, I’m sure that some of the audience is going to ask you—want to ask more questions about the history of this. But as I said, one of the reasons you wrote this book was to try and understand 2008 better by comparison but also because you want to tease out the key messages, you know, so we can all learn from it.

And, in fact, as I understand it—we were chatting earlier—you’re about to produce a version of this book for schools or high schools to teach them history lessons.

SORKIN: Right. Yeah.

TETT: So if anyone’s watching that’s got a high school they want to educate, be aware that Andrew’s book is coming down in a high school form very soon.

But as we look today to the financial markets, I mean, do you think we’re living through a replay? Are we about to see another version of the 1929 crash all over again? Because stocks are sky high. We’ve got wild exuberance about tech again, this time around AI—

SORKIN: Right.

TETT: —rather than the radio or cars. We’ve got, you know, not as much leverage as we’ve sometimes had in the past in 2008 but there’s still a lot of leverage in the system, and we’ve also got, of course, the president yelling at the Fed telling him to cut rates.

Is this a, you know, combination that’s going to spark a replay of 1929 or do you think we’re any wiser?

SORKIN: So I think you could have a meaningful correction and you could see a 30 percent, 40 percent downdraft in terms of where the market goes. I think that’s not impossible to happen because I do think we are in this moment. We are talking about democratizing finance.

There are all of these issues, whether it be in private credit or other spaces, and the valuations, I think, are sky high. I think there’s no question about that.

Again, though, it doesn’t mean unto itself that you have to land yourself in 25 percent unemployment in a sort of true Great Depression style scenario because I think one of the things is we have learned a whole number of policy choices. I think Ben Bernanke showed us the way.

You know, he did his thesis on the Great Depression at Princeton and, ultimately, the lesson of all this—it’s a very Keynesian lesson—is you need to throw money at the problem despite how politically unpopular that is to do.

Now, and I think we did that in 2008, by the way, we did—after the pandemic. So I think we think we know what the playbook is. The thing that I worry about now actually about that playbook is if we all say to ourselves, OK, if there’s a crash or a crisis, there’s this put that’s on the market and the Fed is going to come to the rescue, or the government is going to come to the rescue.

That means that the next time we have a crisis somebody is going to say, OK, let’s write a check for $5 trillion, let’s say, and that’s the kind of numbers I think you’d ultimately be talking about next time we do have a crash.

However, back in 1929, you know, we had a budget surplus. Now we have $38 trillion of debt, and so if you believe that there’s some invisible line that becomes a red line, there is a question mark, truly, about you break out the playbook that you think works and, in fact, it doesn’t work because it puts you into some kind of true austerity cycle.

And that is probably—if you were to say how do you get to 1929, that’s how it would happen. I’m just hoping that that’s not the case.

TETT: Well, I’m hoping, too, and I say I love the reference of John Maynard Keynes because Keynes was at King’s College in Cambridge and, of course, he was so horrified by the bad policy choices made after 1919 that he went into a kind of depression, if you like, and then that’s one reason why he formulated his vision of Bretton Woods afterwards and Keynesian economics.

But I’m curious, though, I mean, do you think that the biggest danger today is actually not the equity market but, perhaps, the bond market if, given this $38 trillion of debt and given the fact that they’re going to have to print more money if they are going to be facing another drawdown and trying to stop, you know, market crash from turning into something nastier?

SORKIN: Look, the lesson for me at least of writing about 2008, about writing about 1929, about every financial crisis, is ultimately a function of one thing, credit—too much debt in the system. That is the underlying tinder that you need.

You could—by the way, you could have all the bad actors on stage doing all the bad things, having all sorts of overvaluations, and I’m not saying it wouldn’t matter. But to create a true systemic crisis, it’s a function of too much debt in the system.

That is sort of the underlying piece that you need before you need all the other pieces, and so I do worry that we are now at a moment but, by the way, I thought we were at this moment we were at $35 trillion, $32 trillion, $30 trillion. But, you know, you covered it. You know, Greece was a good example.

I think there are moments and times where these things get very complicated, and that’s not to say that the United States is not going to continue to have folks who would loan us money. I think they would. It’s just what will happen is the bond market will say, OK, we like you guys, we’ll loan you money, but you’re going to pay two, three times what you were paying before. Then all of a sudden all the budgets, everything, just changes overnight.

TETT: Yeah, what about—the thing that worries me personally is about a third of the overseas demand for Treasuries right now is coming from the Cayman Islands, which is hedge funds, who are notoriously flighty.

But in terms of, you know, the private credit markets, which you mentioned before, I mean, what you’re seeing there is, once again, as in 1929 a push to democratize private credit and put a lot of, you know, ordinary pensioners and savers into some form of private credit via ETFs and other vehicles.

Does that worry you? I mean, is private credit going to be the next big shoe to drop, or could—I mean, given we’ve had things like, you know, Blue Owl and, you know, the—(inaudible)—happening, is that going to be a bit like July 2007 with the hedge funds before the great financial crisis or 1929?

SORKIN: So I—you know, the private credit market is somewhere between 2 (trillion dollars) and $4 trillion, depending on who you believe. I worry about the private credit market. There’s no question that I worry about it because I do think the disclosures and the transparency just don’t exist the way they do in other places.

I think if you were to ask Jay Powell, you know, what he really understands about that market, most people don’t. You don’t really know, you know, who’s holding the bag in certain instances.

But I don’t know if it’s big enough unto itself to full-on crater things. I don’t love the idea of these things in 401(k) plans, at least structured the way they are today, because they’re set up almost as—they’re called semi-liquid instruments. They look like a stock on the face of it, which you can buy on any given day, but it’s not clear you can sell it on any given day and we’ve seen that now with Blue Owl.

I’d feel a lot more comfortable if these instruments were part of, for example, what they call target dated mutual funds where, you know, they’re dated. You know, you’re a certain age, you’re thirty years old, and you’re going to own some fund. So you’re, you know, sixty-five years old or seventy years old, and by the time you’re in your fifties, that piece of the puzzle will not be in the fund because if a problem arises you won’t have access to it.

Should you have access to or access to invest in those things in your twenties, thirties, forties? Maybe, but I think we probably need to have a larger conversation about how these instruments should be—should be marketed and should be sold because I don’t think people fully appreciate what’s happening here.

TETT: Right. I mean, you mentioned that—you know, we’re talking about private credit. One of the things about private credit is, unlike publicly listed markets, when you get people starting to panic it’s not usually as visible in private credit because, of course, it’s private and you don’t see the marks.

So it often seems to me and, in fact, everyone’s waiting for a bubble to go pop. It may be more a case of a hiss and the air comes out of the gigantic balloon rather slowly, which creates this sort of mood of gnawing anxiety rather than a kind of 1929 style dramatic pop in the equity markets.

Do you think a chance of a hiss rather than a pop is the greater risk now and what does that mean for the economy?

SORKIN: Well, I think it probably is a hiss rather than a pop. By the way, some people would say that’s a feature, not a bug, in a way.

TETT: Yeah.

SORKIN: It just means that the pain gets prolonged but maybe isn’t as severe.

I mean, it becomes a very interesting question. Would you like to take the pain immediately? That’s what sort of the mark-to-market world would tell you, and the sort of mark-to-make-believe world would tell you it’s better to take your time with these things.

I don’t know. I do think that right now, given the valuations in the public markets and everything else that I think the valuations in the private markets almost across the board are not accurate.

I mean, I think that is the biggest piece of this, and we are in a moment, putting aside private credit, there’s an effort to put private equity and venture capital and all sorts of private investments now into the public markets.

I mean, that’s the other thing, either through these different semi-liquid instruments or other types of instruments or people tokenizing private companies. I mean, I think that those are the things that worry me and that is very 1929-ish insofar as just this idea we want to democratize finance and everybody wants, you know, an opportunity to get their chance with the lottery ticket.

TETT: Absolutely. Well, we’re going to turn to questions in just a moment so do start thinking of your questions.

I mean, we’re seeing all this kind of froth in lots of ways, whether it’s synthetic risk transfers or all kinds of funky things to do with private credit and lots of financial gains happening right now in that sphere.

But before we turn to questions, one last big question for me is, it’s kind of ironic talking about 1929 with the gold standard because, of course, back then people were mesmerized by gold. We’re now back in that situation again where the world is dashing into gold.

What do you make of that? I mean, is that a sign that fiat currencies are now in a bubble and that’s going to burst, too? How do you pass the dash into gold?

SORKIN: I mean, my parse on gold, my parse on bitcoin—though they’ve completely now gone almost at odds, so it’s very hard to even think about bitcoin as sort of a digital gold; I know people used to talk about it that way—is, you know, people go to gold when they get nervous, and they get nervous about cash, and they get nervous about our dollar. And I do think there’s a larger question about the dollar.

But we’ve been talking about the potential for some kind of, you know, real recrimination as it relates to the dollar for the last twenty-five years and we haven’t gotten there.

So the question is what is that thing that tips it over, and I just don’t know. I think it’s going to be very hard to tip it over. But I do think it speaks to just the emotional. I mean, to me, people are buying gold almost emotionally. As Warren Buffett would tell you, gold does not kind of produce just about anything except maybe for a little bit of jewelry and some gold in your—hopefully, you don’t have any cavities.

TETT: (Laughs.) Well, it’s certainly produced remarkable returns in the last few years.

But, right. Well, we are at the point of questions from any members who are watching. I believe you can send them through to Olivia. And I’m not sure, Olivia, are you going to send out some questions to me now or should we get—

OPERATOR: Yes.

(Gives queuing instructions.)

 We’ll take our first question from Adam Flatto.

Q: Hey, Andrew, thanks for doing this.

SORKIN: Thanks.

Q: One of the things that I was really fascinated about was the description of Churchill’s involvement or, you know, exposure to what was going on, which I really didn’t know much about at the time.

How much did that exposure impact his view of the States as, you know, getting into the Second World War? And was that sort of a formative experience for him that, you know, said America’s, you know, going to be the way to go, or you know, was it otherwise?

TETT: Can I just say, by the way, I don’t think most Brits know about—I’m both American and British—I don’t think most Brits know about the Churchill aspect of this either in relation to 1929. So that’s quite a revelation.

SORKIN: So that was one of the great surprises for me, selfishly, as a writer, to sort of really just land on just the role that Churchill was playing and the role was really he just happened to be in America. He was actually—by the way, he was out of money.

For those who are on the call who haven’t read the book, he was out of money, needed money. So he came over here to speak, and he just happens to be here in the fall of 1929, and he was beloved by all sorts of financiers. People thought he was a fascinating character and so he sort of had a front row seat to all of this.

But what was so interesting to me about his disposition, he gets involved, wrapped up in this. He’s investing himself and making and then losing money. Oh, by the way, almost gets killed by a taxi on Park Avenue in New York.

But the thing that’s so intriguing to me is the attitude of Brits in that period was—and maybe even more broadly—you can speak to this better than I can, Gillian—was almost to look down to some degree on what some in the U.S. were doing. But he looked up to it. He really did.

Even when things were going terribly and he was losing money, he sort of loved the spirit of the U.S. and he didn’t look at failure as a negative in this case, and he—and so I do think it was informative of maybe how he approached other things. But I don’t want to take it too far. I’m not a Churchill expert.

But it really was—you know, to see him with all those people, and then to see some of his writing, literally contemporaneously at the time where he was not critical of what was happening. In fact, he was praising it all even as the market was crashing.

TETT: Yeah, and I’d say this from my own point of view. I think it was the risk-taking hustle, the bold ambition, which, you know, frankly, is often so un-British—I mean, you know, counterpoint to what the establishment world in Britain was like then, and he absolutely admired that and it gave him wings to then go forth and be bold and risk taking and a bit of a hustler, going forward. So that’s my own view anyway.

Olivia, do we have any more questions?

OPERATOR: Yes. We’ll take the next question from Khalid Azim.

Q: Yeah. Hi, Andrew. This is Khalid Azim from the Atlantic Council.

My question is about are there any lessons we can learn from the amount of debt that Japan—the government of Japan has in terms of your point about, you know, a tipping point for our own fiscal balances?

Any thoughts on—

SORKIN: You mean going back twenty years in the sort of zombie-like scenario that that country experienced or are you talking about the amount of debt they have right now?

Q: Both, actually. Both. Both.

SORKIN: I mean, I think it’s just represent—I mean, if you go back twenty years ago, I think that’s part—I mean, they had a demographics problem. By the way, you know, if you take immigration out of the United States you start to have a demographics problem in terms of if you believe demographics are destiny. And they had a debt problem.

But, you know, they were not a reserve currency so I don’t know if that is the real answer. I think that—I’ve been playing with this just because a number of economists and I have been talking about it. But is there like an—what is the actual ideal, you know, debt to GDP number? Is there one in terms of the belief in it and everything else?

And I think every time you think that there—you’ve come across—you pass some invisible line, for whatever reason we haven’t had a problem yet—I mean, a meaningful problem yet. And so I just—the nervousness is, of course, just that it will pass the line and we won’t know it, and maybe we’ve passed the line already and we don’t know it.

TETT: Can I follow up on that, though?

SORKIN: Please.

TETT: Because, I mean, Japan is the only country which has had a debt to GDP ratio above 130 percent and not had a crisis, which is remarkable if you look back at the last thirty years of data, and that’s partly because debt servicing costs are so low because interest rates are so low.

But I think it’s also because there’s such a strong cohesion of such a strong tradition of pain sharing collectively and social cohesion.

Andrew, do you think if we do have any kind of Treasury market crunch—

SORKIN: Right.

TETT: —do you think America would be as good at demonstrating collective sharing like the Japanese?

SORKIN: I mean, I think that—by the way, our politics were polarized in 1929. Our politics today are so much more polarized. I am not an expert in Japanese politics but I don’t believe that they’re nearly as polarized as we are and I think this idea of sharing pain is very interesting.

You know, we are—at least now we are not in the camp of sharing pain. Interestingly, by the way, you know, after 2008 there was a lot of finger pointing. Everyone thought it wasn’t their fault when 2008 happened. If you go back to 1929 and read a lot of the letters and diaries that people kept—these are just ordinary investors who lost their shirts—for the first two or three years, they actually didn’t blame everybody else. They blamed themselves. It’s a very interesting sort of cultural thing to see.

It wasn’t until the economy really started to spiral out of control in ’32 and ’33 that people started to really start to blame everybody else. But the—at least initially most folks didn’t say, oh, these Wall Street manipulators did this to me. They said, oh, I shouldn’t have done this. I made a mistake.

TETT: Yeah. Well, you can’t imagine that being the dominant theme today, you know.

SORKIN: No.

TETT: Or even just the collective pain-sharing vibe dominating. I say that as someone who lived in Japan for years and I’m fascinated by how Japan has coped with that debt problem.

Olivia, should we have the next question?

OPERATOR: Yes, thank you. We’ll take the next question from Joe Gasparro.

Q: Hey, Andrew. Joe Gasparro, Royal Bank of Canada.

In 1929, you know, information traveled by newspaper and radio. Today, it is in milliseconds. So does the speed of information make modern crises shorter and sharper or more destabilizing?

SORKIN: Oh, this is a great question and I wrestle with it all the time. By way of just background, there’s one piece of history that I think is interesting that relates to this.

When you see pictures, those famous black and white pictures of the thousands of people in the streets outside of the New York Stock Exchange in 1929, you might say to yourself—I don’t know if you ever stopped and said, what are they all doing there?

The reason all those people are there is because they don’t have the information. They had actually gone down there to try to find out what happened to their money because they couldn’t look at their telephones.

Frankly, they couldn’t even go to a brokerage which was uptown because the numbers even on the floor were oftentimes three or four hours out of date or out of time and out of sync, and at a brokerage it would be worse and on a steamboat somewhere, forget about it.

So there’s part of me that says, yes, the technology of all this should make things so much better, so much more efficient. We shouldn’t get into those problems. And by the way, because of that technological delay back then, that undermined an extraordinary amount of confidence and so people started selling willy nilly because they thought it’s better just to get out of this if we don’t really understand what’s happening.

The flipside, of course, is the ability to spark a crisis, and I think we saw this with Silicon Valley Bank, and I’m not talking about a bad rumor. I’m talking about a real—a true rumor, if you will, or something true that happens, which is a number of people say, I’m taking my money out of the bank, and then that just spreads and it happens to be accurate. You could take down lots of businesses and maybe an entire economy that way.

So I think it cuts both ways. I’m not sure I know what the right answer is. I think the technology, by the way, should be helpful to stamp out bad news or bad rumors insofar as, you know, in the old days—when I started writing at the New York Times in 1995 before the internet was here, if you wrote a story and you had something that was wrong in the article, you had to wait twenty-four hours to put a correction in the paper.

Now if you made a mistake, God forbid, you could fix the mistake in ten seconds and probably, by the way, someone five seconds earlier would have fixed the mistake on X or one of these social media platforms. So that part, I think, makes it more efficient to prevent against things.

But I think for something that’s real and true that’s bad, boy, that could spread much quicker.

TETT: Does it make you think about how you talk about finance on air? Are you concerned—

SORKIN: On television? I’m always—I’m always concerned that somehow you could—you know, there have been times where I’ve talked about certain deals or other things, and you literally watch the stock move by billions of dollars. It’s wild.

So I think I’m always trying to be super careful. I think in a crisis it becomes even more nerve wracking—the stakes are just so much higher. And this was a—this was an issue in 2008. You know, there were people about, you know, how—when do you report? How much do you report? And that’s a very interesting question.

So let’s say all these people leaving Silicon Valley Bank, are you supposed to report it? Are you supposed to not report it? I mean, if you believe in transparency, if you believe in sort of a mark-to-market economy and that kind of world, you should want the transparency. You should want the reporting. But the reporting is ultimately going to bear in a very negative way.

I have, as I said—

TETT: And if you don’t report it then you end up leaving the insiders alone having that information.

SORKIN: Right. So what do you think? It’s always—but I have very mixed emotions about it. I do.

TETT: Well, ditto. I mean, you know, the question is when do you use the word crisis. Generally, try not to use the word crisis. But if you don’t report it, then it’s just the privileged insiders who hear the story first and get out.

SORKIN: Right.

TETT: Now you can just report it via this, you know, credit default swap price and stuff that indicates a level of panic or not.

But, anyway, any more questions, Olivia?

OPERATOR: Yes. We’ll take the next question from Robert Hormats.

TETT: Andrew and I are going to sit here in our mutual self-recrimination session.

SORKIN: We could.

TETT: Bob?

OPERATOR: Looks like we might be experiencing some technical difficulties. We’ll take the next question from Henry Davison.

Q: Hi, Andrew. You wrote about my great grandfather, Henry P. Davison, in the early part of the book as an architect of the Federal Reserve.

SORKIN: Yeah.

Q: And—(inaudible)—his archives that his goal was never to eliminate recessions, but to try and reduce their frequency and their debt. So, in that context, would you say it was a successful experiment?

And the question I know he would ask, because he was rather modest about his accomplishments, is what do we need to do to build on this successful experiment?

SORKIN: Well, the experiment being the Fed, I think is clearly—look, I think it’s clearly better to have a Fed than not to have a Fed, and I agree with his assessment that the goal is not to eliminate, you know, all crashes or all bubbles. I think that’s almost an impossibility.

I think it’s to try to keep them from getting too far out of control on either end and that makes sense. It’s very—it’s very interesting. After 2008, there was a lot of debate about could we end the idea of too big to fail, this idea that we’d ever have to save any institution, that no institution should be too big to fail.

And you had people like Hank Paulson and Tim Geithner and others, you know, get asked this question in front of Congress and they’d say, you know, Dodd-Frank is going to help eliminate this and all of that, and I think that if you talk to a lot of those individuals today they’d say we have not ended too big to fail.

Too big to fail exists and I think that is, you know, indicative of this idea that you’re never really going to end bubbles and that it’s part and parcel of maybe even a healthy economy to some degree. It’s just how healthy and how crazy does it get and does it become unhealthy as a result.

And I don’t know how you—I don’t know how you fix it. I think we’ve gotten—I think the experiment’s working, though. In its own way I think it’s working. I don’t think the public would always think it’s working as well as it should but I think it is.

TETT: Well, thank you. Great—

SORKIN: Gillian, what do you think?

TETT: Great link with the past—you know, the history side.

SORKIN: Yes, I love that.

TETT: Yeah. Olivia, do we have another one?

OPERATOR: Yes. We’ll take the next question from Bob Diamond.

Q: Thank you both for doing this today.

SORKIN: Oh, my goodness. A character from the book Too Big to Fail, a real life—in real life.

TETT: This is when your material bounces back and the book becomes a verb, not a noun, because it’s interactive.

Q: In this book, though. Switching books, Andrew, you profiled a number of people, I would say, not to lead, but Charles Mitchell being the poster child for someone who is intelligent, well-connected, saw the problems with leverage, but probably by trying to fix them made them worse.

SORKIN: Right.

Q: So do you see any parallels to that today, people that are trying to fix this problem and kind of the solutions are making—

SORKIN: Well, look, look—

TETT: Do you—do you see any parallels, Bob? Anyone you think looks like Sunshine—

Q: I knew you’d do that, and I’d have to say I asked the question of Andrew first, and you’re second.

SORKIN: OK. So I’m going to say two things. One is we did try to solve the problem through Dodd-Frank and actually to the extent that you believe, and I don’t know if you believe it, that there’s a private credit problem today or could become one, that was a function of regulation more than anything else.

I don’t know if there’s an individual in that regard. You know, I think of Charlie Mitchell as a combination of three people, oddly enough. One, I think of him as a Jamie Dimon like character, just in terms of his sort of pure fame, the respect that he commanded in that moment contemporaneously in terms of he was on the cover of every magazine, and people believed in him in that kind of way.

He was a little bit like Michael Milken in terms of developing the idea of credit for the ordinary investor and making it accessible, which is, obviously, what Milken did to the corporate bond market in the late ’70s and ’80s, and there’s an element to which I would say he was a little bit like Dick Fuld from Lehman Brothers who was willing to take extraordinary risk and didn’t totally appreciate it at all times sort of how all that risk would play itself out.

So those are my three historical characters. But I don’t know, you’re saying is there a modern one today? I don’t know. Where do you land there?

TETT: Bob, do you want to come back? I would—while we’re trying to see if we can get Bob back—I think you’re on mute, Bob—I’d say what about Sam Altman?

Q: The beauty is they put me on mute after I asked the answer, which is the best position. So I’m just going to claim I’m on mute.

TETT: (Laughs.) What about Sam Altman? Is Sam Altman the equivalent of Sunshine Charlie today?

Q: You know, I think—I guess the example I would say, but it’s not systemic, is you can argue private credit stuff. But as you said, Andrew, at 1 (trillion dollars) to 2 (trillion dollars), even if it had real problems it’s just not going to be systemic.

So I don’t think the regulators worry about private credit from a systemic point of view, which is really what too big to fail in 1929, you know, culminated. So I think it has aspects of that but not the systemic nature.

SORKIN: Do you think that the—I mean, the thing that I do worry about—and it’s not just private credit, it’s across the board—is just the entire artificial intelligence complex which is, by the way, being funded, largely, by debt in just different ways.

I mean, some of it’s, obviously, being funded by the Microsofts and Googles of the world, which obviously have huge cash flows. But so much of it is not just the data center itself but the energy complex that surrounds it, the construction complex that’s building it.

I mean, there’s so many component parts to it that if for whatever reason it doesn’t work, meaning either there’s some kind of technological breakthrough and we don’t need as many of these things, there’s some kind of bust and the economics don’t work for some period of time. And so there’s, like, a logjam in terms of the just—the sort of order of payments that get made, meaning an OpenAI or whomever can’t—you know, can’t afford to pay for these things, that that could really sort of turn in a negative way.

And then the flipside, of course, is great success there’s a whole question about just what employment is, but that’s a whole different question on another end. Simply to say—

TETT: (Inaudible.)

Q: Yeah. I think the—I think the third is the overhang of government debt.

SORKIN: Right.

Q: But I think that doesn’t have the aspect of being a current issue today. But if you play it out over—you know, over a number of years, as you said, when you get to, you know, in the 30 trillions (dollars) and the ratios are something that we’ve never seen be successful before.

SORKIN: Agreed.

TETT: Are you concerned though, Andrew? You said that the private credit sector is only 2 (trillion dollars) to 4 trillion (dollars), depending on who you believe or—

SORKIN: Right.

TETT: But, of course, the regulated banks are heavily exposed to that as well.

SORKIN: Well, that’s a real question. By the way, maybe Bob wants to jump in, too. His mute—he’s on mute.

But yes, I mean, a lot of the banks—everybody says that private credit is somehow separate from the banking system and to some degree they’re right in terms of the maturities are matched rather than people just be able to walk into the bank and take your money out, even though the money has been loaned out already.

The question is whether you think that there’s liquidity lines and other kinds of relationships with the banks and I think there are and so, you know, could that create a bigger problem?

I imagine it could. That’s one of the reasons I think it could be systemic. But, again, I don’t know how systemic. I don’t know how—I don’t know how much of it could take out an entire, you know, economy.

TETT: Well, hopefully not.

Bob, anything more to say on that or should we go to the next question?

Q: Next. Thank you.

TETT: Wait. Can we bring back Bob Hormats? Is Bob Hormats on the line at all, Olivia?

OPERATOR: Yes. We’ll take the next question from Bob Hormats.

Q: OK. Can you hear me now?

TETT: We can.

OPERATOR: Yes.

TETT: You’ve got a lot to say about China, Bob, at the moment but—

Q: Thank you. Yes, let’s talk about China.

But my question now for the moment goes back to a combination of Churchill and gold, and that is the London Monetary Conference of 1933. It strikes me as the—that if you’re looking at the period after 1929, the failure of that conference—in fact, the bombshell that Roosevelt threw into it, which meant that the conference collapsed—demonstrated a lack, A, of American willingness to work with these other countries and a system that was already fragmented became even more fragmented and the notion of working together was, in effect, destroyed at that point.

So what I would like to do is ask you to describe that to a greater degree, dig in a little bit. And then, Andrew, it goes to what we talked about a couple of weeks ago and that is in the current environment of a fractured global economic and geopolitical system where cooperation that we saw in 2028, which was actually pretty good, now may be very hard to replicate with differences with China, U.S. fragmentation with Europe and NATO.

SORKIN: Right.

Q: So I wonder if you could take—

SORKIN: Well, I—Bob, I think you’re a better—you’re a bigger expert on this than I am. The question that I would ask you is do you think that 1933, ’34, ’35 is similar to now? Is that what you’re suggesting?

Q: Yes. Yes, I think it has—you have a portion in your book that we tend to forget, that we have a notion that we don’t remember the past, and what I’m saying now is 2008, there was cooperation between the People’s Bank of China and the Fed and the Treasury and the ministry of finance.

SORKIN: Right.

Q: The U.S., Canada, Europe, all got together. We had a G-20 meeting. The emerging economies worked together. And now we have—what do we have? A global monetary—a global financial system that’s more fragmented. The geopolitical system that we have now is much more fragmented. We can’t even get along with Canada, and vice versa.

So can you get the notion of collaboration that you had then and which helped then back?

SORKIN: Right.

Q: And my worry is that there’s so little trust of the United States in so many of these countries, and mutual mistrust, that it’ll be a lot harder to do. And I—

SORKIN: I don’t disagree. But I think, you know, so from 1933 to call it 1937, it seemed like things were going OK and then, of course, things were not going OK. And then things—and then we—and then we started to move into the war, and the war, obviously, was oddly this—you know, from an economic perspective quite helpful to the United States back then. So—

TETT: Economically.

SORKIN: Economically.

Q: I’m not arguing for war to pull us together.

SORKIN: Right, right. (Laughs.)

Q: I’m saying can we get together on our own. And my worry is that it’s a lot harder now than it was in the ’20s.

SORKIN: Right. I imagine you are correct.

TETT: And I would add to that, Bob, of course, if you go back to John Maynard Keynes, you know, he was desolate in 1919 by the fragmentation and got more and more depressed about the lack of coordination in the 1930s, and, of course, out of that came this determination to help create Bretton Woods.

So sometimes people do learn lessons and try and do better. But, of course, now we’re busy unlearning those lessons as fast as we can, tragically.

Q: That’s a great point. Keynes was certainly concerned and wrote about it.

TETT: Yeah. Yeah, Economic Consequences of the Peace should be mandatory reading right now.

Q: Yes.

TETT: But, right, we’ve got time for a couple more questions, perhaps.

Olivia, do we have any more questions coming through?

OPERATOR: Yes. We’ll take the next question from Philip Ellison.

TETT: Philip?

Q: Hey, good afternoon. I’m glad to be here and thank you for having this forum.

My question, Andrew, is could you talk about or if—you know, the relationship with these financers and this crash as it relates to the government, i.e., either Hoover, the governor, or, you know, even if—local electeds. What was the kind of relationship—

SORKIN: That the government had with the business community you mean?

Q: With the business community at that—this time.

SORKIN: Oh, my goodness. I mean, everyone thinks that it’s crazy to see all of these CEOs in the Oval Office with the president today. They were all in the Oval Office with Hoover, I mean, the whole time. It was unbelievable.

By the way, similarly with Roosevelt. People think that Roosevelt somehow hated all the businesspeople. Not true. He was constantly talking to these business executives and CEOs, and they were all constantly trying to tell him what to do.

Of course, Hoover and Roosevelt basically did almost the opposite of what the business executives wanted him to do. But the relationship back then was, I think, would surprise people given just how close they really were throughout this. That actually was actually a big surprise to me just how many notes and letters I’d find where you’d see them all, you know, going back and forth throughout all of this.

TETT: Right. Right. Well, we have one other question I believe, Olivia, you want to pull up, do you?

OPERATOR: We have no more questions at this time.

TETT: OK. All right, great.

Well, listen, I guess my last question I’d like to ask you, Andrew, is this, that if you were to start writing this book again now—

SORKIN: Yes.

TETT: —as opposed to in 2000—I think you started writing it or researching it in, like, 2011 or something. It was a very long time ago.

SORKIN: Long time ago.

TETT: Yeah. Would you do it the same way?

SORKIN: Oh, my goodness. Now you’re getting—so AI—I was too late for AI. But today, well, so most of the work was not digitized. You know, part of it was having to find the physical documents.

I think—yes, I think today you probably would take all the documents and put them into, you know, some AI machine to at least sort for you and help. Half of it I couldn’t even read or OCR it for you. Oh, I think it could change the entire dynamic so that you—it would speed it up and probably find different connections. It might remind you of different things.

I don’t think it would write the book for you, per se, but I think it would really maybe be very helpful in terms of almost like a thought partner, I would imagine. I don’t know. I mean, I think we’re just sort of getting that—

TETT: You could always have the kind of Sunshine Charlie bot, couldn’t you? Or a Sunshine Charlie—

SORKIN: Oh, my goodness. I mean, it’s funny, because I think of John Raskob as Elon Musk and I think it would be fabulous to talk to John Raskob.

John Raskob, by the way, created modern credit at General Motors. He ultimately gets involved in politics trying to undermine Hoover—he would have loved owning Twitter and X—and then ultimately builds the equivalent of, you know, a spaceship or SpaceX by building the Empire State Building and did it all with his own money. Did it all with his own money.

So yes, I would love the bot that I could talk to each of the characters with. That would be—that would be something.

TETT: And the other question I had, though, was, of course, one of the things that came out of 1929 was an explosion of the deadly three Ps of protectionism, populism, and extreme patriotism, otherwise known as nationalism, which then put the world on a path towards war.

People like Ray Dalio have been warning repeatedly about this cycle playing out again. What do you think? I mean, are you concerned that if we do get a crash or if we get, you know, this continued, you know, polarization we’re going to see the kind of society ripping itself apart? Or do you think people will be wise enough to pull themselves back from the brink?

SORKIN: So no, what I genuinely worry about is a true crash that turns into austerity. I mean, people talk about what inequality can do and I think inequality at its most acute in its sort of true crash austerity piece where you really get significant unemployment—by the way, talking about AI, you also layer on AI and all that onto this—yeah, I think you could actually have real, real, I mean, significant, significant problems in this country and I don’t—I don’t think—I hate to say it—that we are as connected as we used to be.

I think part of it’s digital but I think it’s partially the society is not—you know, the idea that we would rally together I think is very, very hard to believe. I wish I was—I wish it were otherwise. I really do.

Here, we’ve just depressed everybody in an hour.

TETT: No, I’m going to cheer you up in a moment. I’m going to say one more thing. But have you sold the movie rights yet?

SORKIN: We’re talking to a couple of people who are back and forth about what to do. So we’ll see. I think there will be—hopefully, there will be some something either in the TV space or in the movie space.

TETT: Well, Sunshine Charlie is certainly made for that. But anyway, well, I believe that we are just about out of time, sadly.

There’s going to be, of course, a second session in fifty minutes time. You should all have the signposting to that, talking about “Looking Ahead—Forecasting the Global Economic Climate.”

I mean, it’s been absolutely fascinating talking to you, Andrew, particularly at this moment. I take away a number of key points, or three key points. One is that the history of 1929 isn’t quite as simple as most of us tend to think, which is a reason to read your book.

It wasn’t just a case of, you know, wild exuberant ending suddenly one day. In fact, it was the policy choices that were made after it which were as important.

Secondly, there are really big parallels here, and whether it’s about the democratization of finance or the pressure on the Fed to cut rates, I mean, all of this starts to look rather unnervingly familiar, also around the hyping up of tech and the use of innovative financial instruments.

But I guess the third point, which is really why you wrote the book, is that we do actually have the chance to learn from this—

SORKIN: I hope.

TETT: —and make different policy choices. So have you had a chance to talk about this book to anyone in the White House or the Fed, Andrew?

SORKIN: I have. I’ve talked to—I’ve talked about this book with all—with both—not White House. I’ve talked to Bessent about it. You know, I think he and others have a view that we are not—I mean, they do not believe that we are going to have a crash yet. But they also believed that the Supreme Court was going to rule in their favor over tariffs, so we’ll see.

TETT: Well, on that cliffhanger, we will, indeed, see. So just remains we thank you all very much, indeed, for listening and for the great questions. And thank you most of all to Andrew for writing—

SORKIN: Thank you.

TETT: —such a provocative and well-timed book. Thank you.

SORKIN: Thank you, Gillian.

(END)

This is an uncorrected transcript.