Talking With Barry Eichengreen

Crises, the dollar and more

Barry Eichengreen has studied many, many crises over the years, from the role of the gold standard in the Great Depression to the attack on the British pound to the current crisis of Fed independence. I scheduled this conversation before the Lisa Cook affair came up, but wow, does his work seem more relevant than ever. Transcript follows.

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TRANSCRIPT:
Paul Krugman in Conversation with Barry Eichengreen

(recorded 8/26/25)

Paul Krugman: Hi everyone, Paul Krugman again. I am speaking today with Barry Eichengreen, one of the world's leading international economists, someone who's had many, many seminal works on international currency, international currency arrangements, central banking, has laterally been on some of the hot topics such as potentially destructive financial innovations and so on. We’re recording this on Tuesday, 8/26. It's two days after Donald Trump announced that he was firing Lisa Cook at the Federal Reserve. So I wanted to talk about central bank independence and stuff, though it's all become a little bit more acute than I imagined. There may well be news between now and the time this thing airs on Saturday, but what the heck? So hi Barry. Welcome aboard.

Barry Eichengreen: Hi Paul. So this is the Two Guys with White Hair and Beards Talking About Monetary Policy podcast.

Krugman: Yeah, well, we've known each other basically forever. I think since I was an assistant professor and you were a grad student at Yale. It is kind of alarming. And in fact, I'm going to drive your age home to you in a little bit.

Eichengreen: Can I tell one brief anecdote before we start? The very first time as a graduate student I attempted to present a mini seminar, a model to an audience in the Coles Foundation, it was, I think, 1977. This was a model of tariffs and the exchange rate asking, What effect would a tariff have on the dollar exchange rate? Well, it would push it up because you needed to switch demand back toward imported goods, but there were also financial market effects. So if uncertainty was too great, it might end up pushing it down. This is newly timely.

So I did that for about 45 minutes. And then the young assistant professor got up from the audience and said, “No, no, no. Here's how I would do it.” And you took the chalk and wrote a better model on the blackboard.

So it took me about three years to get that into publishable form. It did appear in the Journal of International Economics, and I've been better at taking constructive criticism ever since.

Krugman: My apologies. I was very young at the time. I actually wrote a paper about tariffs and the exchange rate a little bit later than that. And I went back to look at it, and it's terrible and best forgotten by history.

Barry Eichengreen: No, it was good.

Paul Krugman: Well anyway, what are your thoughts, reactions to this whole Lisa Cook and the Fed thing. If anyone doesn't know this, the president just announced that he's firing Lisa Cook, a member of the Federal Reserve Board of Governors, which as far as anyone can make out legally, he does not have the right to do. (Whether that matters in this current environment is unclear.) But anyway, what are your thoughts about where we are?

Eichengreen: So I'm going to be careful about this because I was Lisa Cook's PhD dissertation supervisor here at UC Berkeley in 1997. I know nothing about mortgage documentation. But I think I do know quite a bit about the character of the individual here. I know Lisa to be careful and ethical. She’s also one of the strongest people I know. I think coming out of her background—her family's background in the civil rights movement where they were close personal friends with Martin Luther King and family. There is a lot of history there. This is not someone that we should be making predictions about, but I think we have a very strong individual on the other side of this controversy.

Beyond that, I think there's no question in my mind that this is very serious business, the most serious kind of business affecting the future of monetary policy, the credibility of the U.S. economy in the eyes of financial markets in the world. So I'm gravely worried and I'm perplexed. But I'm going to throw it back to you now. I'm perplexed that the markets have not reacted more violently. What do you think about that?

Paul Krugman: Yeah, we all are perplexed but I think we may give markets too much credit. There's a whole bunch in Keynes about markets and how there's a conventional view and everybody adheres to it because everybody else adheres to it until eventually events just shock the market and then you get abrupt movements. And this could be one of these things where for the moment, people have decided not to be worried and nobody wants to be the first person to get out there in front and say, “Jesus H. Christ, all hell is breaking loose.” Better to have wrong along with everyone else than to be right but prematurely. So, I don't know, it's pretty amazing. It is a real shock.

[In terms of Lisa Cook], just to say, I find it really impossible to believe that there was any significant mortgage fraud, but in any case, it's not what For Cause firing is about. For Cause firing is that you've been drinking on the job or stealing office supplies. It's not because you may have had some financial misstatements at a time when you were a professor at Michigan State. So it’s bizarre.

Eichengreen: It is bizarre. Someone we both knew well had a statement to paraphrase about how crises take longer to arrive than you ever expect, and then they break out more violently than you ever believed was possible. So there's that. And another interpretation: if you look on Polymarket, something I think we will be talking more about perhaps, the punters are attaching only a 25% probability of Trump succeeding in removing Governor Cook, so there may be that.

Krugman: I do want to get to Polymarket along the way. By the way, that's Rudi Dornbusch. Dornbusch's law. “The crisis takes longer to happen than you can possibly imagine, then happens quicker than you can possibly imagine,” which has been applied many times over the course of our respective careers. So the kind of immediate issue beyond this whole horrifying personal thing is central bank independence. But to really understand where this idea comes from, you really want to go back to other ways in which we've tried to avoid the abuse of things like the printing press. And famously we used to have the gold standard.

Now, it probably annoys you as much as it annoys me to have people talk about your great work, stuff that’s so far in the past you can barely remember having done it, but you wrote a really great book, Golden Fetters, about the gold standard and the Great Depression. Do you want to talk about that a little bit? Because I think it is relevant to where we are.

Eichengreen: Well, I think the point of that book was, in part, that simple rigid rules are not a reliable guide for the conduct of monetary policy, and leaving it to the good judgment of an individual, be he in the boardroom of the Fed or the White House, is not a good arrangement either. We have been moving toward constrained discretion over time, where an independent central bank has discretion over monetary policy. But it faces constraints from its mandate, where the powers that be have kind of laid down what objectives it should pursue. And I do think that if you go back to the gold standard, it also functioned best when politicians didn't get in the way.

Before 1913, when political pressures were relatively limited, the extent of the franchise who could vote was limited in most countries, men of property in most places, white male adults in the United States. Trade unions were relatively unimportant, so people clamoring for lower interest rates to bring down unemployment wasn't a factor. All that changed after World War I with extensions of the franchise, the rise of labor unions and parliamentary labor parties. So with those pressures, the gold standard became more fragile and ultimately came crashing down in the Great Depression. So I think that tells you that no monetary ruler or regime is immune from political pressure, but you need an adequate setup, you need adequate institutions to contain that pressure.

Krugman: Yeah. Supposedly when FDR took the U.S. off the gold standard, his budget director said “This is the end of Western civilization.” So there was a view that it was really critical. You stole the phrase “golden fetters” from Keynes, but it was basically these kinds of chains that prevented countries from responding effectively to the Great Depression. Finding a way to have flexibility without opening the door to abuse of that flexibility was a long process, and we ended up with this modern regime of the independent central bank, ultimately answerable to the political process, but not quickly. But now technocrats and all of that is suddenly on the line again.

Eichengreen: Yeah, the idea that the central bank is independent but accountable to the politicians, that idea rests on the notion that the politicians will punish the central bank when it acts recklessly, but it will reward the central bank if it behaves responsibly. We're about to find out whether the United States is still operating in that kind of world.

Krugman: Well, constitutionally it has no independence. You would know better than me, but I'm not sure that there's anything enshrined legally about its independence. This is just kind of a convention that we arrived at.

Eichengreen: Right, so the Fed has some budgetary independence. It earns money from printing cash. So it doesn't rely on the Congress for that. And the other channel through which that independence is conferred is the long-term in office for the governors. And that's directly what is under threat now.

Krugman: Yes. Is it 14 years? Something like that?

Eichengreen: Yes, although many of these guys and gals take over incomplete terms, so they serve like Adriana Kugler did for shorter periods.

Krugman: There were a lot of criticisms of the Fed over the past few years, which seemed to be quite different from the criticism that Trump is leveling. How do you feel about the Fed’s management under Jay Powell?

Eichengreen: I think, broadly speaking, the Fed has done a good job in the Powell years. It was slow to cotton onto the inflation problem during COVID and to respond to it, as were many of us in all honesty. I would put myself in that camp as well. We hadn't seen that kind of supply shock in combination with a lot of fiscal stimulus in our lifetimes before. So I regard it as a regrettable but excusable footfall. But beyond that, I think the Fed has done a competent job as a bank regulator. It wears that hat as well.

Krugman: And that's one area where the Fed has a lot of responsibilities, as well. Monetary policy is made by a committee of which the governors like Lisa Cook are only a part, but the rest of the Fed is run by the governors. So your view is that they've done a good job, basically, of avoiding financial excesses and too many Silicon Valley bank type things.

Eichengreen: Yeah, and you know, here are two economists talking about the Fed's current policy stance. They're in a difficult situation because inflation is a bit high for comfort and showing every sign of going up while the economy is softening. What do you do under those circumstances? You don't move very fast in either direction because you'll be pursuing one goal and frustrating your efforts to achieve the other. It's a difficult situation that I think the Fed is currently navigating as well as is possible.

Krugman: Yeah, I would agree. Even before this latest stuff, I would not want to be a Fed policymaker because it's a very difficult situation. They are damned if you do and damned if you don't, or damned if you do anything. But yeah, I used to be kind of skeptical about the whole Fed credibility thing. But our success at getting inflation down from its peak in 2022—most of the way to where we wanted to be without big unemployment—it seemed plausible to say that the Fed's credibility was a big part of that.

Eichengreen: Yeah, so if you ask how did we achieve that reduction in inflation without unemployment going up significantly, the answer is that inflation expectations remain anchored. If you look at survey data about what people expect inflation to be over the next five or 10 years, if you look at the market's implicit forecasts of inflation over a longer period, back them out of the inflation index treasury rate, they show that expected inflation did not go up with actual inflation, so the Fed didn't have to put the economy through the wringer in order to bring those adverse expectations back down. And that's a long-winded way of saying “credibility.”

Krugman: For listeners, the US government issues a limited number of bonds that are protected against inflation. They're indexed to the consumer price index, and they pay lower interest because you're protected against inflation. And the spread in those bonds and ordinary bonds are a kind of market forecast of inflation. And all of that showed that people treated the inflation surge as transitory. They thought it was not going to last and they probably made decisions on that basis. Now, what we would normally think was the real question would be whether or not to raise a border point at the next meeting, what would you do?

Eichengreen: What would I do? I would listen to my staff. The advantage of the Fed is that it's not only these 10 voting members or whatever, both in the reserve banks and at the board. There are legions of very astute, competent professional economists who are parsing the numbers and also parsing the arguments. So the voting members of the FOMC get beige books and blue books, books of various colors full of analyses. Any answer I would give to your question, any yes or no answer I would give you would be half-baked because I'm not privy to all that information.

Krugman: FOMC is the Federal Open Market Committee, which is not the same as the Board of Governors, although it includes the Board of Governors, and they're the people who decide what the interest rate's going to be. I sometimes say that at a fundamental level, Jay Powell has the same information that you and I have, but maybe a little bit more because of the staff.

Eichengreen: Yeah, and the other thing I would say is that this is a close call. Two members of the board voted to cut rates against the decision not to cut rates last time, number one, that was not a crazy thing to do because there is an argument that with a softening economy, maybe cutting rates is timely.

Secondly, this is kind of a good signal for the future in that descent is now acceptable. It's part of the process. And if we end up with a very different kind of Fed share next year and other members don't like the guidance they're getting from the top, they have a precedent now to dissent if they see fit.

Krugman: Yeah, so you don't think that Stephen Moore will be able to get the FOMC to do whatever he wants. People may not quite get how big a joke that is, yeah. But I have to say that many of the proposed candidates are not reassuring.

I have to say I really admire your doing innovative academic research at our age. You talked about Polymarket. I think this is extremely relevant to the Fed credibility discussion.

Eichengreen: So, let me say, the way to do innovative research at our age is to have younger co-authors. The research that you're mentioning is done together with Ganesh Natraj, who's now a tenured member of the faculty at Warwick Business School. He was my student back in the day. Now, without his help and a couple of his students—my intellectual grandchildren—none of this would have been possible.

What we do is we take data from Polymarket, which is one of these big betting markets where you can now bet on almost anything. And it's on the blockchain, like many things digital now are. So you can observe people's bets when they are betting, say, on the likelihood that Trump will remove Powell from office by the end of the year, or the likelihood that the FOMC, Federal Open Market Committee, will cut interest rates by 25 basis points at its next meeting in September. So because these bets are on the blockchain, we can observe the individual better or the individual wallet. And we can ask, “When wallet number XYZ bets that Trump will remove Powell, does that individual also bet that the FOMC will cut rates at the next meeting?” And the answer is yes, that they think that Powell's removal will lead to a more dovish Fed. But you also see that the same bettors expect long-term interest rates to go up. They expect inflation to go up. What might be good from the standpoint of financial markets tomorrow, turns out to have very different effects, it would appear, even in the expectations of the same bettors down the road. So we found this quite striking and extraordinary. The paper is called Under Pressure.

Paul Krugman: Now I just figured out why the blockchain is actually helpful, for once. It lets you track individuals without knowing who they are, right? It would be really problematic to know the betting history of John Q. Smith. That would be a real intrusion. But if it's just wallet number XYZ then we can track it. And you’re saying that people who think the Fed is going to be politicized expect interest rates to be lower in the short run but actually higher in the long run because there'll be inflation.

Eichengreen: Because of inflation.

Krugman: Which, shockingly, is kind of what the textbooks would tell you. It sounds like people making bets on the market actually have views that are consistent with what a standard economic textbook analysis would say. That's really fascinating. It doesn't tell you that that's what will actually happen, but it does tell you that that is what people think, which is interesting. Given all that, it is kind of surprising after all the news of these past few days and there still hasn't been much movement in the markets.

Eichengreen: Indeed, I was about to try to connect this back to the non-reaction of financial markets to what's happened. You know, there have been a bunch of different things that happened in the last few days. Jay Powell made a speech on Friday, and then Trump asserted on Monday that he could fire Lisa Cook. So all of these bits of news are in the market, and they might not point in the same direction. But not much has happened on Polymarket in the last 24 hours that I can see.

Krugman: Good God. Another thing that I might need to keep track of. But maybe everybody's just kind of deadened. My sense is that our colleagues in the economics profession are looking at what's happening now as being sort of epochal. This is maybe looking at fundamental regime change in the whole way monetary policy is made. But markets are not reacting like that at all.

Eichengreen: That's right. Markets did not react violently to the firing of the BLS chief. They reacted violently, but only briefly, even to Liberation Day. So, you know, this is all part of the larger puzzle about why financial markets have been so resilient for the last eight months. And answering that question is above my pay grade.

Krugman: I don't know that anyone knows the answer to that. There's a lot of talk about the international role of the dollar and whether all of this seriously calls that special status into question. Where are you in that discussion?

Eichengreen: So I've long been of the view that we would see a gradual erosion of the dollar's dominance globally as the United States progressively became a smaller share of the global economy, something that is normal so long as emerging markets continue to emerge. As we see that movement toward a more multipolar global economy, we would see movement toward a more multipolar global monetary system where the dollar shared its global role, its exorbitant privilege with other currencies, maybe either big ones like the euro and the Chinese renminbi, maybe smaller ones like the Canadian dollar and the Aussie dollar. That's another conversation. But I viewed that evolution as broadly speaking, a good thing because the world would end up with multiple sources of international liquidity, different currencies that could be used to make cross-border payments and engage in cross-border lending and borrowing. So if something went wrong in one of those global liquidity providers, there would be other suppliers. Just like the world is better with a diverse ecosystem, it would be better off with diverse sources of global liquidity.

But I think we're now at a juncture where confidence in the dollar is seriously under threat, more seriously than at any time in our lifetimes. And those alternatives are either unable or unwilling to step up. So I do think that, again, this is the Rudi Dornbusch paradox. Why isn't the crisis here yet? Confidence in the dollar is under scrutiny. I do worry that the dollar's safe haven characteristic—where whenever a bad thing happens, people rush into dollars because the dollar is safe and markets and dollars are the deepest and most liquid in the world and investors lust after liquidity in turbulent times—I worry that that safe haven status is under threat. The dollar's attractions are being tarnished, but those alternative sources of supply are not able or willing to step up yet; the euro because there are not enough European Union bonds, not enough AAA-rated government bonds in Europe; The Chinese renminbi is not ready because it's starting out so far behind, and international investors have questions about rule of law and separation of powers in China. It's not only about the United States where we have such questions. So if there is flight from the dollar, which could happen at some point, we would suddenly be in a world where there's not enough liquidity to go around to finance global transactions as we know them. And that's a 1930s style scenario.

Krugman: Okay. I was about to ask that. You think this wasn't simply that countries were forced into deflationary policies because of the gold standard, but also that the breakdown of the system really just kind of crippled markets, the lack of liquidity, not that there was a lack of good assets to use as collateral.

Eichengreen: Right, so if you try to play out the scenario, what happens if there is a crisis of confidence in the dollar because people begin to worry that the Treasury secretary is gonna convert Treasury bonds into hundred year securities bearing a 1 or 2% interest rate or some such thing; if they begin to worry that the Trump administration is going to slap a tax on foreign central banks’ holdings of US treasuries? I'm not making these ideas up. They are very much out there.

Krugman: Yeah, and the guy who's responsible for them, Stephen Muron, is being appointed to the Federal Reserve Board.

Eichengreen: You know, those kind of worries could lead central banks and sovereign wealth funds around the world to dump their dollars. And what can they buy instead? They can buy gold. And I think we've been seeing some of that behavior already. But gold is clunky and really expensive and hard to use in cross-settle merchandise transactions or use as collateral for financial transactions. So yeah, I worry about the pressure on globalization as we know it in the event of a dollar crisis.

Krugman: Yeah, I mean, I've been using a line which I think I stole (but I don't know from who) which is that the real danger is not that something replaces the dollar, but that nothing does.

One of the pieces of research that I really admire was all the work you did around the European exchange rate mechanism crisis. It was kind of a new style of research in a way of looking at events. Instead of looking at what happened before, what happened after, there was a pretty strong conclusion about the ability of markets to anticipate a currency crisis. Do you want to talk about that? Because that has stayed with me all these years.

Eichengreen: Yeah, so, in 1992 there was an attack on the British pound sterling, which was pegged to the German Deutschmark and other currencies in what was then called the European monetary system. I think this was the episode when George Soros famously made about a billion dollars in a few weeks. I was on sabbatical in Europe at the time. And my whole research agenda went out the window because of these dramatic events.

I had a collaborator in France, Charles Wyplosz, who you will know well. Charles fortunately had four kids. So we were able to send out a survey to foreign exchange market dealers. His three daughters and son licked the envelopes. This was before you could do an online survey. So we did a survey to try to figure out what was going on. And the answer is that a system like that, the European monetary system—where exchange rates are pegged to one another but can and do change under duress—is not really viable in a world of high capital mobility.

That was the central conclusion which leaves two alternatives. One is to move to floating exchange rates, which many economies have done. And the other one is to move to an irrevocable peg like the euro, where European countries did away with the possibility of an exchange rate crisis in Europe by doing away with exchange rates within Europe. And I think that argument has basically stood the test of time.

Developing countries have not all moved away from soft pegs or intermediate exchange rate regimes because they retain controls on cross-border financial flows of one sort or another. They can better withstand the pressure, therefore. But with the exceptions of Hong Kong and Denmark, all the advanced economies with open financial markets and a bunch of emerging markets with increasingly open financial markets have moved toward flexible exchange rates as well. And I would expect that movement to continue slowly but surely going forward.

Krugman: I think we owe it to listeners to mention the impossible trinity. (Economic jargon isn't always boring.) I'm not even sure that Mandel even actually quite used the phrase, but everyone thinks he did. But it’s that you can't have stable exchange rates, independent monetary policy, and free movement of capital. You've got to pick two out of three.

What you're saying is that, by and large, countries are picking either common currencies like the euro or exchange rates that move minute by minute with the markets like the dollar-euro rate. But a few places, China to some extent, are on the third side of the triangle with limits on the movement of capital.

So, there was very little indication that markets saw the exchange rate crisis coming. I think, even within Britain, it wasn’t until George Soros started his big bets that people were anticipating a British exit from the system. Is that right? There were no indications?

Eichengreen: Yeah. The economy could have been stronger, but I think you're basically right. So we pushed as far as we could the argument that this was kind of a self-fulfilling crisis that once the pressure began to build, interest rates began to go up because money was being withdrawn from British financial markets and the Bank of England had to react to that.

That spawned all kinds of other problems, like higher interest rates made mortgages more expensive for homeowners in the leafy suburbs of London who voted conservative to service mortgages all being indexed in the UK. The doubts about sterling, which hadn't existed before, once they began to develop, they became self-fulfilling. You will also recall some unfortunate statements by foreign politicians and central bankers, like the head of the German Bundesbank, about sterling and the British economy and the Bank of England. So that's another reminder that politicians best distance themselves from monetary policy.

Krugman: I'd forgotten about that one. But yeah, it’s even worse if you're disparaging another country.

Eichengreen: We [in the States] would never do such a thing, of course.

Krugman: Yours and Charles's work on the euro thing converted me. I apologizes. I said I had been wrong. I hadn't believed in self-fulfilling crises. And then after that event, I did. But that was largely developed around the euro. The European exchange rate crisis of the early 90s was kind of where those ideas were developed, and we thought that was a crisis. And then came the Asian financial crisis of the late 90s, and that was really a crisis. But a lot of the same argumentation still applied.

Eichengreen: Right. So my own view is that countries that succumb to these self-fulfilling crises are not entirely blameless, that there is some underlying vulnerability that prevents the authorities from responding full force to the financial market pressure when it comes. So in Thailand during the Asian crisis in 1997, they had a big construction boom with overextended construction companies and banks that had been free to borrow offshore big time. So higher interest rates would have caused all kinds of real sector and financial sector problems in Thailand.

Krugman: And this actually harkens back to what you were saying about the gold standard working fairly well pre-World War I, in a way, because the interest groups who would demand that you go off the gold standard under pressure just had a lot less power than they did later on.

Eichengreen: Right, so I would contrast that with the case of Britain in 1931 when there was pressure on the pound sterling, still on the gold standard, and the Bank of England was reluctant to raise interest rates to defend the currency because unemployment was high and the labor unions among others were squealing. So I have an article I like very much on this topic together with OlivierJeanne in a book called Currency Crises, edited by Paul Krugman.

Krugman: Yes. What was interesting was that the failure to defend the pound was a really good thing. Britain actually had a milder Great Depression than everybody else, I think. Am I right?

Eichengreen: That's right. And in a way, one can argue the same thing about 1992, that Britain was forced out of the exchange rate mechanism of the European monetary system, but it was able to right the ship shortly thereafter because the Bank of England had the brilliant idea: Let's follow the New Zealanders and adopt inflation targeting. We’ll put a flexible but credible monetary regime in place. And that kind of did the trick. The bank was then rewarded with independence about five years later.

Krugman: In the thirties, it was John Maynard Keynes who said, We're now free from these gold fetters, or something. That's where you got the name of your book. And then, well, “singing in the bath.” Norman Lamont, the chancellor of the Exchequer at the time, claimed to be delighted that his attempt to defend the pound had failed and that he had been singing in the bath. But he lost his job anyway.

Anything you're looking at right now, I mean aside from the kind of erosion [of Fed independence]? Is there some other kind of imbalance out there that you’re concerned with?

Eichengreen: Well, I'm not looking at any obscure imbalances, but rather at some obvious ones like the fiscal imbalance, the way Congress and the administration doubled down on tax cuts for the wealthy, the fact that the fiscal trajectory in the United States is fundamentally unsustainable, and that the only way of correcting that problem—which is to raise more tax revenue—is a political third rail in the United States. So that's my biggest worry. There was basically a paper about that at Jackson Hole on Saturday. I was in the room. The discussion did not touch on the politics of correcting this problem. It did provide a fine diagnosis, but without providing a prescription going forward.

Krugman: There's so many things like that, where the economics is really not hard. The U.S. has a budget deficit, but we're also relatively low tax. The mechanics of getting our budget under control is perfectly simple and utterly impossible politically. I guess there's a lot of things like that.

Eichengreen: Yeah. If you look at countries that have been able to get those kinds of budget deficit problems under control, they tend to have relatively low levels of political polarization where the two political factions or wings can agree on a compromise and stay the course over time compared to the other advanced economies. The United States has a higher level of affective political polarization, effective with an A, meaning, how the Democrats feel about the Republicans and vice versa. And the level of political polarization so measured is rising, has been rising and continues to rise.

Krugman: Okay, so sort of coming back to the starting point. I have lots of friends at the Fed and they've always felt that, Well, at least we are kind of outside the craziness. And, it turns out, the craziness will find you wherever you happen to work. Would you do international finance all over again? I mean, you've had a great career at it but, I don't know. At times right now I feel like I almost wish I didn't follow this stuff because it's so stressful.

Eichengreen: No, I think I would still encourage people to do international finance. I intend to continue doing it. Interesting fields are full of analytical issues, but they're also full of politics. And that's kind of the definition of international macro and finance.

Krugman: Gosh. When you and I were together walking in the streets of New Haven in the 1970s I remember thinking, “Boy, this is a really interesting world. It's so crazy right now. And it'll never be that crazy again.” But it just keeps getting crazier. So plenty of stuff to work on. But here’s to a better future.

Eichengreen: Indeed.