:00:00. > :00:00.Not it's time for this week's Meet The Author,
:00:00. > :00:00.with the journalist and novelist John Lanchester.
:00:00. > :00:07.The phrase interest rates crops up all the time when people are talking
:00:08. > :00:10.about finance and the economy, but how many of us can truly say we
:00:11. > :00:13.know what economists and bankers and politicians mean
:00:14. > :00:20.Or just why interest rates are so important.
:00:21. > :00:26.Step forward John Lanchester, whose book How To Speak Money, What
:00:27. > :00:31.The Money People Say And What They Really Mean, is a lexicon of money
:00:32. > :00:34.speak, from triple A ratings to zombie banks, via derivatives, risk
:00:35. > :00:39.weighting and something called the hot waitress index.
:00:40. > :00:41.John Lanchester started out as a novelist, but he is also
:00:42. > :00:44.a journalist who writes regularly about finance and economics and,
:00:45. > :01:07.which aimed to explain just why the 2008 crash happened at all.
:01:08. > :01:16.John Lanchester, since this is a dictionary, what is the hot waitress
:01:17. > :01:21.index? It is a nakedly sexist term people in Wall Street and the city
:01:22. > :01:26.use to describe the level of economic activity, one is looking
:01:27. > :01:32.out the window and counting the number of creams, and it is the idea
:01:33. > :01:39.that when the economy is thriving, attractive women get high`paid jobs
:01:40. > :01:45.as models and actresses, but being waitresses when things are doing
:01:46. > :01:50.less well. And interest rates come up when talking about money, and a
:01:51. > :01:56.lot of baggage that comes with that, which to the lay reader or Lesnar
:01:57. > :02:03.may not be evident. When people who understand money used AAA interest
:02:04. > :02:09.rates, what are they thinking about? It is the cost of money, which is a
:02:10. > :02:15.strange idea for civilians to think about. That money has a price, the
:02:16. > :02:19.interest rate is that price. And the rate at which you can invest without
:02:20. > :02:26.risk, because you can buy a government bond and now you will get
:02:27. > :02:30.your money back. So there is a J can't exceed ease of knock`on
:02:31. > :02:38.effects, the rate at which dismisses can borrow. When rates go up,
:02:39. > :02:43.business is harder, and harder to compete, if your business is having
:02:44. > :02:47.to compete with a high guaranteed rate of interest. And when interest
:02:48. > :02:53.rates go up, the currency goes up, sucking money into that government
:02:54. > :02:58.bond, life becoming much harder for exporters, because goods more
:02:59. > :03:05.expensive. And all these effects which compound and overlap, packed
:03:06. > :03:09.into two words, and people who understand money now and follow
:03:10. > :03:13.that, but you can be on the back foot and lose the train of the
:03:14. > :03:20.argument. So what is the purpose of this book? I was interested in the
:03:21. > :03:26.way city and Finance works, because it is such an essential thing in
:03:27. > :03:32.London and the UK more generally, but you look out the window and see
:03:33. > :03:36.the effects of finance in London, especially how it has changed. So I
:03:37. > :03:42.ended up educating myself to write the book and then being asked to
:03:43. > :03:47.write or comment about it. And what always happens, the common thread
:03:48. > :03:54.was always about explanation. That people really seem to feel the need
:03:55. > :03:59.simply to understand. Often linked to a scandal or disaster, something
:04:00. > :04:09.that has blown up, such as the situation with LIBOR, such as the
:04:10. > :04:16.gold spot price, JP Morgan lose $8 billion through their London unit,
:04:17. > :04:25.and some derivatives I still do not understand. But something that has
:04:26. > :04:34.blown up and what is it? You quote a conservative officer called Michael
:04:35. > :04:41.Oakeshott, and you set him opposite the tendency of economists to talk
:04:42. > :04:45.about science, and you clearly do not believe in economics is a
:04:46. > :04:54.science? Presumably you are hoping to draw us into that conversation?
:04:55. > :04:59.Exactly, the idea from Michael Oakeshott was seen to be a bit
:05:00. > :05:05.English, but it is very compelling, the idea that philosophy and
:05:06. > :05:11.history, across time, talking to the past, and also talking to each
:05:12. > :05:19.other, and economics is more like that, and my framing, my background
:05:20. > :05:24.is in writing, so I would see it as a question of language, but I do,
:05:25. > :05:32.and that is something basic about literally not understanding the
:05:33. > :05:36.words. And there is an element of responsibility about it. I have a
:05:37. > :05:41.Porsche degree from a Porsche University, working on a political
:05:42. > :05:48.magazine for ten years and I was nearly 50 before I knew what fiscal
:05:49. > :05:51.and monetary meant. `` I have Porsche degree. And after hearing
:05:52. > :05:58.that thousands of times over the radio. And that is what I would like
:05:59. > :06:05.people to do, too bothered to find out. And also political subtext, you
:06:06. > :06:09.are now find of neoliberal economics. Quick definition and what
:06:10. > :06:17.is wrong with it? The idea that you take away the rules and livery and
:06:18. > :06:21.open up markets, rapidly and openly, that the rich will get rich quick
:06:22. > :06:30.than everyone else, but everyone will get rich, so do you really ``
:06:31. > :06:33.so you deregulate and the trickle`down effect will make
:06:34. > :06:39.everyone better off. It would be fine if it works, but it would have
:06:40. > :06:43.trickled by now. It came in with Margaret Thatcher and Ronald Reagan
:06:44. > :06:49.at the beginning of the 1980s, but the previous approach was seen to
:06:50. > :06:54.have failed, which some people may call Keynesian, after John Maynard
:06:55. > :07:02.Keynes, had that field? She seems to be put in the `` John seems to be
:07:03. > :07:05.spoken about as being in favour of government spending. And that
:07:06. > :07:13.government spending equals a good thing. But are economies had become
:07:14. > :07:20.problematic. And bogged down. And clearly our moment of inflection was
:07:21. > :07:26.needed, a historic turning point, and very clear across the developed
:07:27. > :07:33.world that in the late 70s and early 80s something was needed. So I am
:07:34. > :07:38.not calling for revolution, but we need an equivalent inflection back
:07:39. > :07:42.to watch the fact that ordinary people's living standards have not
:07:43. > :07:49.improved. Three decades of these policies and the people in the
:07:50. > :07:53.middle are stuck, not fear that the rich get richer and the people in
:07:54. > :07:55.the medal more permanently stuck. John Lanchester, thank you very much
:07:56. > :08:07.indeed. The weather is out there right now.
:08:08. > :08:09.Some clear spells