In this episode of PFI Talks, host Jiří Zatloukal sits down with Charles Goodhart, Emeritus Professor at the London School of Economics' Financial Markets Group, former Bank of England official, originator of Goodhart's Law, and co-author of The Unanchored Central Banker, for a conversation on debt, ageing, and where the next crisis may come from.
Goodhart argues that the disinflationary tailwind of 1990-2007, driven by the opening of China and Eastern Europe, cheap labour, and falling goods prices, is over. With trade fragmenting and populations ageing, he warns that central banks face a much harder job ahead.
Heavy public debt leaves them trapped: raising rates worsens deficits and only pushes inflationary pressure into the future. Goodhart frames this as a political rather than an economic problem, "a crisis of democracy," with young people bearing the cost through housing, jobs, and taxes.
Looking back at 2008, he explains why post-crisis reforms fell short, as capital rules loosen once the memory of the last crisis fades, and makes the case for bankers personally bearing the downside of failure. Other topics include why China's export surplus may become unsustainable within 10 to 20 years, and why Goodhart opposes breaking up the euro, arguing that Europe's real shortfall is a lack of unification.
A conversation about debt, demographics, and why the financial system is "tinderbox dry."