Adam Tooze: evaluation

Transcript context

…And oil prices. And oil prices, and the degree of foreign ownership of their sovereign debt, even if it’s denominated in their local currency, and the degree of their dependence on foreign borrowing in dollars, and potential macroprudential hazards, the balance sheets of really big quasi-state-owned companies. Pemex will be the absolutely classic one in Mexico; Petrobras in Brazil; Eskom, the electricity utility in South Africa, where you could see a kind of doom-loop spiral between the credibility of sovereign debt and the imbalance in the private balance sheet. If you use all of those different criteria, you can pick out a series of relatively vulnerable countries. South Africa, I think, is top of most people’s lists — terrible health risks because of the large 7 million-plus people living with HIV, who, we imagine, are probably extremely vulnerable to COVID-19; long-standing huge unemployment problem; growth below population growth for a long time; just been down-rated to junk for its sovereign bonds. Rand has suffered a huge collapse, which, in due course, might generate export growth. But anyway, that’s a candidate. Algeria I worry about as a European — 85 percent dependent on oil and gas exports, very fragile socially and politically. Turkey is high on most people’s lists, not because it’s a desperately poor country but because of the political risk. Erdoğan has made clear that he won’t avail himself of IMF support despite the fact that the credit default swaps on Turkish debt have blown out to the same extent as South Africa’s have. That will be a portfolio of high-risk places. And I think North Americans should be profoundly concerned about the situation in Mexico, which has suffered a huge shock to the exchange rate. Pemex is an accident waiting to happen. It’s hugely politically salient for the current administration because they have bold ambitions for national oil. We’ve seen how hard the Mexicans negotiated over OPEC. And it’s our neighbor. And tens of millions of people living in the United States — obviously, their lives are directly entangled with Mexico. I think that would be very high on my list if somebody in Treasury is monitoring that situation very closely. I’ll just tell our listeners we’re having this chat on April 16th, but let’s go back in time. Was Keynes right about the Treaty of Versailles? Was it as bad as Keynes said?…

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