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00:00AND A FORMER ECONOMIST AT THE U.S. TREASURY. LET ME ASK ABOUT THE CENTRAL BANK. BEFORE I GET TO IMMIGRATION WHICH MUST HAVE HAD A MASSIVE ROLE IN THIS. CENTRAL BANKS REALLY BOOSTED INCOME INEQUALITY. SOME PEOPLE PROFITED GREATLY FROM WHAT THE CENTRAL BANKS HAVE DONE, SOME PEOPLE NOT SO MUCH. DAVID: THERE HAS BEEN THAT DEVELOPMENT AS WELL, BUT IF YOU GO BACK TO 2008, 2011, PARTICULARLY RELATED TO EXIT, THE CENTRAL BANK RAISED INTEREST RATES IN 2008 AND RAISE THEM AGAIN TO RICE IN 2011 FOR THE EURO ZONE ECONOMY WAS NOT COMPLETELY HEALED. IMAGINE AN ALTERNATIVE WORLD WHERE THE ECB DID NOT RAISE RATES TWICE AND STARTED QE SOONER. THE CONTINENT WOULD HAVE HAD A HEART RISK OR GROWTH RATE AND THAT WOULD HAVE MAYBE CHALLENGES OF IMMIGRATION, EU REGULATION, SOVEREIGNTY ISSUES MUCH MORE BEARABLE. JUST LIKE WHEN A PERSON IS SICK OF A COLD OR MINOR CUT BECOMES A MORE SERIOUS CONCERN. HAVING A REALLY SICK ECONOMY FOR THE PAST SEVEN YEARS EXACERBATED THE EXTENT OF THESE ISSUES. JOE: YOU MAKE A GOOD ARGUMENT THAT THE ECB TIGHTENED INAPPROPRIATELY, BUT THE U.K. IS NOT ON THE EUROZONE. IT CONTINUED ASSET PURCHASES FOR A LONG TIME. HOW DOES THAT ASK LANE THE BREXIT VOTE? WHY SHOULD THE ACTIONS OF THE ECB AND PREMATURE HIKING HAVE ANY OF THE ACT ON THE U.K.? DAVID: IT'S A BIG TRADING PARTNER AND IT SETS THE TONE FOR EUROPE. HAD EUROPE BEEN DOING MUCH BETTER, THE CRITICS COULD NOT HAVE LOOKED TO THE EUROPEAN UNION AND POINTED VENDORS AND SAID POLICYMAKERS HAVE FAILED US. IT SPEAKS TO A BIGGER POLICY FAILURE AND THAT IS INFLATION TARGETING. THAT'S A GOOD THING AND PROVIDES A SPEED LIMIT. THE ECB, BANK OF ENGLAND AND THE HEAD, THEY ARE CONSTRAINED BY INFLATION TARGETING. WHAT WE SHOULD HAVE SEEN AS A CATCH UP TIME OF GROWTH AND IN PATIENT TARGETING PREVENTED THAT FROM HAPPENING. IT SERVED US WELL COMING OUT OF THE 80'S BUT GOING FORWARD, WE NEED TO LOOK AT SOMETHING DIFFERENT. SEVEN YEARS OF SLUGGISH ROSE ON THE CONTINENT DOES TEND TO CHANGE ONE'S MOOD AND MAKE MINOR IRRITATIONS MUCH MORE IN TOLERABLE. JOE: IN TERMS OF THE GLOBAL FALLOUT, YOU HAVE IN THIS VOTE REPRESENTS A SIGNIFICANT TIGHTENING OF FINANCIAL CONDITIONS AND IT WILL EVEN IF THE U.S. AND THAT POLICY. EXPLAIN WHY THIS IS A TIGHTENING OF FINANCIAL CONDITIONS AND WHAT KIND OF HIT THE ECONOMY IT WILL HAVE. DAVID: ONE BIG EFFECT IT CREATED WAS A RUSH TO SAFETY. WE SAW THE AVERAGE DOLLAR GO UP 2% OR 3% AND TUESDAY AND IT HAS ALREADY BEEN VALUED EXCESSIVELY SINCE THAT TIME. IT HAS GROWN 20% AND THE REASON THAT IS IMPORTANT IS THERE'S A LARGE ART OF THE WORLD ECONOMY WHOSE CURRENCY IS TIED TO DOLLAR. ROUGHLY 40% OF COUNTRIES TIE THEIR CURRENCY TO THE DOLLAR. THAT KIND OF PUTS A CHOKE ON THEM. THERE HAS BEEN HUGE GROWTH IN THE PARALLEL DOLLAR SYSTEM, ABOUT $10 TRILLION OF LOANS AND SURETIES THAT HAD ARISEN OUTSIDE THE U.S. FIRMS ISSUING THESE BORROWS AND TAKING THEM SIDE THE U.S. THAT MAKES THE DEBT MORE

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Did the ECB Plant the Seed That Grew Into Brexit?

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