The Joe Walker Podcast

Joe speaks with the 26th Prime Minister of Australia, Kevin Rudd. Kevin led Australia from December 2007 to...

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Joe speaks with the 26th Prime Minister of Australia, Kevin Rudd. Kevin led Australia from December 2007 to June 2010 and again in 2013. His government’s fiscal stimulus package enabled Australia to avoid technical recession during the 2007-09 Global Recession. Only three other advanced economies achieved this feat (Poland, Slovakia and South Korea). Kevin also played a key role in forming the G20 and coordinating its global response to the financial crisis. Kevin is fluent in Mandarin and is internationally regarded as a China expert. He is currently the inaugural President of the Asia Society Policy Institute in New York.

Joe caught up with Kevin to learn about the edge-of-your-seat discussions in the Australian government about whether to guarantee domestic banks on the weekend of 11-12 October 2008, worth a cool $2.5 Trillion, while the sky was falling in around the rest of the world. He also presses Kevin on the decision to introduce a temporary First Home Buyers’ Boost, which resuscitated a flagging housing market, potentially leaving a time-bomb for a future government.

Selected links

• Follow Kevin Rudd: Website | Twitter

• Kevin’s new book, The PM Years

• Text and video of Kevin’s Apology to Australia’s Indigenous Peoples speech

• Text of Scott Morrison’s National Apology to Victims of Child Sexual Abuse speech

• Real-time financial crisis Twitter account

• The global financial crisis, Kevin’s 2009 The Monthly essay

• Efficient Capital Markets: A Review of Theory and Empirical Work, by Eugene Fama

• The Theory of Moral Sentiments, by Adam Smith

• The Wealth of Nations, by Adam Smith

• The Road to Serfdom, by Friedrich Hayek

• “Catallaxy”

• Eugene Fama’s Nobel Lecture, where he outlines his view on “bubbles”

• Destined for War, by Graham Allison

• The Asia Society Policy Institute, Kevin’s New York-based think tank

Topics discussed

• What is Kevin’s theory on speechwriting? [3:05]

• Kevin’s story about writing the ‘Sorry speech’. [8:15]

• Why Kevin needed to guarantee Australia’s banks during the global financial crisis. [9:48]

• How the Australian government had begun preparing contingency plans for the GFC in February 2008 - months ahead of the 15 September collapse of Lehman Brothers. [13:56]

• What was the atmosphere in the decision-making room on the weekend of 11-12 October when the Australian government was contemplating a run on the banks the following Monday? [17:35]

• Kevin’s 10,000-word Monthly essay on the GFC and its central thesis. [19:51]

• Are markets efficient and can we predict bubbles? [25:12]

• Does Australia have a housing bubble? [30:12]

• Did Kevin re-inflate the Australian housing bubble? [38:44]

• Is Kevin worried about Australia’s economy at this moment? [42:50]

• Has Kevin forgiven Julia Gillard for ousting him as Prime Minister? [45:22]

• What is ‘forgiveness’? [45:59]

• Why do great powers go to war and can China and the US avoid the same trap? [48:12]

Joe speaks with former Greek Finance Minister Yanis Varoufakis, the man who defied Europe to save Greece -...

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Picture a Giant Anaconda, sitting in the corner of the room. Very still, observing everything - after a...

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Picture a Giant Anaconda, sitting in the corner of the room. Very still, observing everything - after a while you forget it is even there. One day its head moves an inch to the left. It is only a small movement, but it is enough to scare the shit out of everyone in the building.

This is how Nick Bishop describes the bond market.

Nick is the head of fixed income at Aberdeen Standard Investments. In this episode he pulls back the curtain on how the global bond market works and why it matters to you.

The bond market is worth $40 trillion in the United States alone, double that of the equity market. Around the world, governments use bonds to borrow money to spend and central bankers in a post-GFC world are using bonds to encourage spending and growth (it’s called quantitative easing, more on that in the episode).

Whether you are a seasoned professional or a humble observer, this episode is valuable - starting with the basics of what a bond is, Nick explains why they are a leading indicator of economic recessions (yield curves are important here) and why bond traders need to look decades ahead to stay at the peak of their game.

Resources:

- Australian Office of Financial Management: https://aofm.gov.au/

- Bond Economics Blog (found this after the episode was recorded, quite interesting)

- Our series on the Australian Housing Market

Topics:

- What is a bond? [4:09]

- How do governments use bonds? [5:31]

- How do governments sell bonds? [7:08]

- Governments defaulting [09:45]

- Relationship between price and yield (important) [12:05]

- Why we should care about the bond market [15:04]

- The Italian Government Bond hiccup and the EU [18:46]

- Taking advantage of the volatility [22:18]

- Dealing with the stress of volatility [23:30]

- Sell German, Buy Italian [24:29]

- Negative Yield Bonds and Quantitative Easing [25:50]

- Central banks coordinating [30:55]

- Unwinding QE [32:09]

- Bond Market Yield Curves [35:43]

- Inverted Yield Curves (important) [37:34]

- Softening ahead? [40:41]

- The Australian Housing Market [44:38]

- Nick’s experience during the GFC [47:45]

- Aberdeen still like Mortgage Backed Securities in Oz - [52:16]

- Long tail risks in the market [55:15]

- 100 year bonds [56:49]

- The bond landscape today, where do we sit? [1:02:31]

- How you and I observe the bond market [1:04:36]

- Volatility around President Trump and Brexit [1:07:54]

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