WEBVTT - Adam Posen on a Surreal Jackson Hole in a Post-American World 0:00:02.720 --> 0:00:13.920 Bloomberg Audio Studios, Podcasts, radio News. 0:00:18.520 --> 0:00:22.239 Hello and welcome to another episode of the Odd Lots Podcast. 0:00:22.320 --> 0:00:23.960 I'm in show Wisenthal. 0:00:23.560 --> 0:00:24.599 And I'm Tracy Alloway. 0:00:24.840 --> 0:00:27.360 Tracy, we're still here at Jackson Hall. It's funny saying 0:00:27.400 --> 0:00:29.360 things like we're still here because we're recorded all these 0:00:29.400 --> 0:00:31.560 episodes at the same time and we don't really know 0:00:31.600 --> 0:00:34.160 exactly when you're listening. But this is yet another Jackson Hall. 0:00:34.080 --> 0:00:36.440 Up, another special missive from Jackson Hall. 0:00:36.720 --> 0:00:39.560 So I think there's like an element, if I'm being honest, 0:00:39.720 --> 0:00:42.839 a certain surreality of Jackson Hole this year, because it 0:00:42.960 --> 0:00:46.519 is an academic conference historically, and now they're setting aside 0:00:46.600 --> 0:00:49.479 the chairman speech, which we'll talk about more. Setting aside 0:00:49.479 --> 0:00:51.360 that speech. You know, it's a place for like talking 0:00:51.360 --> 0:00:54.920 about important issues, and yeah, academic economics and that's great 0:00:54.920 --> 0:00:56.960 and I love that stuff and it's super interesting and 0:00:57.000 --> 0:01:01.320 all that, and yet the big story is really the 0:01:01.640 --> 0:01:04.800 attack on the whole premise on the independent Central Banks. 0:01:05.319 --> 0:01:07.319 And yet it sort of like feels like everything but 0:01:07.480 --> 0:01:08.360 that gets talked about. 0:01:08.640 --> 0:01:11.800 I think that's right, And you said setting aside pal speech, 0:01:11.840 --> 0:01:14.319 but it was very, very noticeable that in his speech 0:01:14.360 --> 0:01:16.680 he could have taken it as an opportunity to talk 0:01:16.720 --> 0:01:19.920 about things like central bank independence or things like data 0:01:20.000 --> 0:01:23.360 integrity given what's been happening at the Bureau of Labor Statistics, 0:01:23.560 --> 0:01:24.360 but he chose not to. 0:01:24.560 --> 0:01:27.160 Yeah, great point, you're right, Like he could have because 0:01:27.160 --> 0:01:28.600 we were wondering, like, you know, this is going to 0:01:28.640 --> 0:01:32.400 be his last speech, last time speaking as the Federal 0:01:32.400 --> 0:01:35.199 Reserve chairman, so he could have said something really big 0:01:35.200 --> 0:01:38.840 about reflecting on a career of being a central banker 0:01:38.959 --> 0:01:41.040 and the importance of all these things, and he gave 0:01:41.080 --> 0:01:43.240 a you know, macroeconomic policy speech. 0:01:43.520 --> 0:01:45.959 There's also this other layer, which is a lot of 0:01:46.000 --> 0:01:48.160 what he's trying to do now, which seems to be 0:01:48.280 --> 0:01:52.160 to focus on labor market deterioration and maybe look through 0:01:52.280 --> 0:01:55.200 some of the upside risks to inflation right now that 0:01:55.480 --> 0:01:58.360 only happens if you have a credible central bank that 0:01:58.440 --> 0:02:03.000 can pin longer term expectations for inflation down. Like, yes, 0:02:03.160 --> 0:02:05.160 the only reason he's able to do some of this 0:02:05.360 --> 0:02:08.000 is because of the credibility of the social capital that 0:02:08.040 --> 0:02:10.160 the FED has built up over decades. 0:02:10.040 --> 0:02:12.360 Exactly right. And the reason why we're talking about this, 0:02:12.960 --> 0:02:15.040 just to be very clear, it's because of the attacks 0:02:15.080 --> 0:02:19.079 from the Trump administration on Jerome Powell, also other FED 0:02:19.120 --> 0:02:22.320 governors also, you know, the whole thing. And this is 0:02:22.400 --> 0:02:25.280 just part and parcel of one attempt to sort of, 0:02:25.400 --> 0:02:29.240 you know, restructure how the US does both domestic and 0:02:29.280 --> 0:02:33.400 international policy. Because there's the tariffs obviously, and those intersected 0:02:33.440 --> 0:02:35.960 with monetary policy. But then there's just also this sort 0:02:36.000 --> 0:02:39.480 of changing relationship with other countries that gets into things 0:02:39.480 --> 0:02:42.680 like you know, like let's get payment for security or 0:02:42.720 --> 0:02:45.480 something like that. Like big look so many like big 0:02:45.560 --> 0:02:47.840 hinges and pivots at one point, it's. 0:02:47.720 --> 0:02:50.080 I mean, I don't think it's hyperbole to say it's 0:02:50.120 --> 0:02:52.760 an attempt at a restructuring of the global order, both 0:02:52.880 --> 0:02:56.840 in terms of the economy via the international financial system 0:02:56.880 --> 0:02:59.839 and also in terms of security. I think the con 0:03:00.160 --> 0:03:03.800 using part for me is it is a fact that 0:03:03.880 --> 0:03:07.760 America has the world's biggest economy. America came through the 0:03:07.760 --> 0:03:10.639 pandemic a lot better than a lot of other countries. 0:03:10.720 --> 0:03:12.840 We ended up having lower inflation than a lot of 0:03:12.880 --> 0:03:16.000 other parts in the world. And yet the Trump administration 0:03:16.120 --> 0:03:21.120 seems very very convinced that the US is somehow losing 0:03:21.200 --> 0:03:25.080 out from the current international order, or maybe they feel 0:03:25.120 --> 0:03:28.400 that there's just more that they could get from restructuring it. 0:03:28.560 --> 0:03:30.920 So I think we should talk about maybe the motivations 0:03:31.400 --> 0:03:33.959 behind some of this, and then what the new world 0:03:34.000 --> 0:03:35.000 could possibly look like. 0:03:35.360 --> 0:03:38.360 Well, we literally have the perfect guests, someone we've had 0:03:38.440 --> 0:03:40.240 on the pot, someone who we always catch up with 0:03:40.280 --> 0:03:41.000 injecta hulk. 0:03:41.080 --> 0:03:42.040 It's becoming a tradition. 0:03:42.160 --> 0:03:44.640 It's a tradition. And he's literally the perfect guest because 0:03:44.640 --> 0:03:47.280 he used to be on the Monetary Policy Committee at 0:03:47.360 --> 0:03:51.200 the Bank of England, so as all the monetary policy bonafides. 0:03:51.520 --> 0:03:54.320 He is currently the president of the Peterson Institute for 0:03:54.360 --> 0:03:58.000 International Economics, and he is the author of a recent 0:03:58.120 --> 0:04:01.440 article the New Geography Who Profits in the Post American 0:04:01.480 --> 0:04:05.280 World that was in foreign affairs. And he's not one 0:04:05.360 --> 0:04:08.440 to like sort of dance around big issues. He doesn't mean, yeah, 0:04:08.480 --> 0:04:10.160 so this is what I said, goes to talk about 0:04:10.200 --> 0:04:12.760 this someone. I was like, Okay, if we talked to Ediposen, 0:04:12.840 --> 0:04:15.680 we can actually really like talk about all these things 0:04:15.680 --> 0:04:18.040 that maybe many people are anxious to talk about. So, Adam, 0:04:18.279 --> 0:04:20.320 thank you so much for coming back on Odelaw's great 0:04:20.360 --> 0:04:22.440 to see you again here at Jackson Hall. 0:04:22.520 --> 0:04:25.400 Thank you for having me back and congratulations Tracy and 0:04:25.480 --> 0:04:28.920 Joe on the upwards profile of odd lots ever higher. 0:04:29.000 --> 0:04:30.120 So it's very cool. 0:04:30.720 --> 0:04:32.760 Very kind of you to say, are we right that 0:04:32.800 --> 0:04:36.440 there is a certain surreality to the vibes here right now? 0:04:36.680 --> 0:04:39.520 Yeah? It is. As you said, there was a lot 0:04:39.560 --> 0:04:43.360 of deliberate focusing down of chair pal speech, and there's 0:04:43.360 --> 0:04:46.480 been a lot of self discipline of members of the 0:04:46.600 --> 0:04:51.400 FOMC and everybody to be quite restrained at a time 0:04:51.480 --> 0:04:55.120 when the attacks on the FED and the weaponization of 0:04:55.200 --> 0:04:59.160 government files to attack individual FED members and so on 0:04:59.440 --> 0:05:02.680 is going on. I think Tracy's absolutely right, and we 0:05:02.720 --> 0:05:04.960 didn't script this in advance, but it is all part 0:05:05.040 --> 0:05:09.680 of this broader context of do you keep inflation expectations anchored? 0:05:09.720 --> 0:05:11.440 Do you have faith in the dollar? Do you have 0:05:11.480 --> 0:05:13.599 faith in the credit of the US, do you have 0:05:13.640 --> 0:05:17.760 faith in the US foreign policy? And those are all 0:05:17.800 --> 0:05:20.640 things which FED officials are not supposed to talk about, 0:05:21.200 --> 0:05:24.640 with the exception of the inflation expectations, and now the 0:05:24.680 --> 0:05:28.119 inflation expectations even they are, they're reluctant to talk about 0:05:28.120 --> 0:05:32.200 it because it can become self fulfilling if they talk 0:05:32.240 --> 0:05:36.000 about worrying about it, then it's ours unravel, but also 0:05:36.080 --> 0:05:41.440 to be fair, because the seeming message of the rapid 0:05:41.480 --> 0:05:43.640 come down in inflation that we talked about our last 0:05:43.640 --> 0:05:46.440 few times we were together in Jackson Hall over twenty 0:05:46.520 --> 0:05:52.080 twenty two was due to having anchored long term inflation expectations. 0:05:52.120 --> 0:05:55.320 At least that's one argument. But it is surreal, Joe. 0:05:55.480 --> 0:05:57.960 I mean, I've gotten to talk to several of the 0:05:58.000 --> 0:06:02.120 members of the committee and they are trying to get 0:06:02.120 --> 0:06:07.159 on with their lives and it's hard. But I also 0:06:07.279 --> 0:06:10.840 just want to emphasize it's not that different than their 0:06:10.880 --> 0:06:16.479 colleagues in Washington at the Treasury, or at EPA or 0:06:16.520 --> 0:06:20.120 at the Bureau of Labor Statistics that they also are 0:06:20.240 --> 0:06:20.840 under attack. 0:06:21.520 --> 0:06:23.800 So we've done an episode on this before, but I 0:06:23.800 --> 0:06:27.359 would love to get your take what exactly happens to 0:06:27.480 --> 0:06:31.880 central banks when their credibility starts to come under attack, 0:06:32.000 --> 0:06:35.560 or even when maybe on the fiscal side, you see 0:06:35.600 --> 0:06:39.279 politicians interfere a little bit more with monetary policy, even 0:06:39.320 --> 0:06:42.120 if that interference is just a truth social post or 0:06:42.160 --> 0:06:42.800 something like that. 0:06:42.880 --> 0:06:46.279 Yeah, I think Tracy, the emphasis should be on the 0:06:46.400 --> 0:06:50.200 latter part of what you said. When elected officials who 0:06:50.240 --> 0:06:54.599 are superior to central banks in any power struggle. When 0:06:54.880 --> 0:06:57.839 fiscal policy, which if it gets really out of whack, 0:06:58.760 --> 0:07:02.760 has what's called dominance, fiscal dominance can overpower whatever monetary 0:07:02.760 --> 0:07:07.880 policy is. When the context for central banking changes, then 0:07:08.040 --> 0:07:10.400 it's not so much as say the credibility the central 0:07:10.440 --> 0:07:13.920 bank per se. It's the credibility the central bank will 0:07:13.960 --> 0:07:16.880 be allowed to deliver what it's supposed to deliver. And 0:07:16.920 --> 0:07:19.360 I'm not saying that to make excuses for the central bank. 0:07:19.360 --> 0:07:22.440 There are instances like Arthur Burns in the seventies where 0:07:22.480 --> 0:07:26.560 the central bank itself is compromised and fails to deliver. 0:07:27.000 --> 0:07:28.600 But I think that's the way to see it. And 0:07:28.640 --> 0:07:30.680 where you see it is where we're already seeing it 0:07:30.720 --> 0:07:33.120 in the US, which is you see it in a 0:07:33.160 --> 0:07:36.840 slightly higher risk premium on long term government bonds. You 0:07:36.960 --> 0:07:41.200 see it in weakening of the currency. And some of 0:07:41.240 --> 0:07:44.200 this I think can be tied to the broader Again, 0:07:44.240 --> 0:07:45.680 I sorry to keep coming back to that, but to 0:07:45.720 --> 0:07:49.400 the broader Trump economic agendas. Both of you said it 0:07:49.520 --> 0:07:54.080 is a real regime change, but we're seeing it already. 0:07:54.120 --> 0:07:56.840 And so there's a chart in this Foreign Affairs article 0:07:56.880 --> 0:07:59.760 the New Economic Geography I put out thank you again, 0:08:00.600 --> 0:08:03.040 that does a simple version of something a lot of 0:08:03.280 --> 0:08:07.920 economists academics have unemore sophisticated versions, which is basically the 0:08:07.960 --> 0:08:12.400 correlations on the dollar have reversed that with a couple 0:08:12.480 --> 0:08:15.760 interruptions in two thousand and eight, in the late seventies 0:08:15.760 --> 0:08:20.120 early eighties, the dollar has the quality that when it 0:08:20.160 --> 0:08:23.640 gets into trouble, more money flows into it, and even 0:08:23.680 --> 0:08:25.880 if the US is causing a problem in the world, 0:08:26.080 --> 0:08:28.960 people believe they're safer in the US than there was 0:08:29.000 --> 0:08:31.920 the ultimate exact two thousand seldom example, dollar just down, 0:08:32.000 --> 0:08:37.760 but basically treasury bond rates and dollar move and lockstep, 0:08:37.840 --> 0:08:40.480 which is another way of saying they don't have to 0:08:40.520 --> 0:08:44.160 put up the rates to defend the dollar. And it 0:08:44.240 --> 0:08:47.520 also means that most of the movement in the dollar 0:08:47.640 --> 0:08:50.480 day to day is just macro news, just day to 0:08:50.559 --> 0:08:54.040 day news, and so putting in simple mindedly, there's a 0:08:54.080 --> 0:08:59.640 correlation very strongly positive in intra day, intraweek data between 0:08:59.679 --> 0:09:02.240 the dollar in the tenure treasure rate. Until April one, 0:09:02.880 --> 0:09:05.920 April one of this year, that correlation shifts from plus 0:09:06.040 --> 0:09:09.400 zero point eight to minus zero point four reversus sign 0:09:10.120 --> 0:09:13.120 And what happens is when something screwy happens in the US, 0:09:13.240 --> 0:09:16.520 like we decide unilaterally to bomb Iran, Like when we 0:09:16.720 --> 0:09:21.600 do crazy stuff on one big, beautiful bill, it's fiscally irresponsible, 0:09:21.760 --> 0:09:26.160 like when Powell is attacked in vicious terms by the president. Gee, 0:09:26.720 --> 0:09:29.480 interest rates go up, dollar goes down, and that looks 0:09:29.480 --> 0:09:32.719 like an emerging market. Anyway, This is not just a 0:09:33.000 --> 0:09:36.120 data mining. You can do it in very fancy econometric ways. 0:09:36.120 --> 0:09:38.600 You get the same result. The correlation of safety on 0:09:38.679 --> 0:09:41.080 the dollar has reversed, and that would be a sign 0:09:41.160 --> 0:09:42.400 of what you're talking about, Tracy. 0:09:42.840 --> 0:09:45.200 Our friend Karlick Center and who's been on the podcast, 0:09:45.200 --> 0:09:47.680 always talks about's sort of the definition of an emerging 0:09:47.720 --> 0:09:50.160 market is if your rates at the long and go 0:09:50.280 --> 0:09:53.120 up in the recessions, right, Because you know, in times 0:09:53.160 --> 0:09:55.640 of crisis in the US too historically you're like, oh, 0:09:55.679 --> 0:09:56.920 there's a really bad in the US, I'm going to 0:09:57.000 --> 0:09:59.720 pile into dollars at treasuries. This is what you're talking about, 0:09:59.720 --> 0:10:02.600 which is that reflex has not kicked in exactly. 0:10:03.240 --> 0:10:05.440 We've got four and a half months of very clear data. 0:10:05.440 --> 0:10:07.880 It's going the other way. A lot of the things 0:10:07.920 --> 0:10:11.240 that Trump administration is doing are going to reinforce that 0:10:11.320 --> 0:10:15.200 because they've talked about taxing foreign investors differently in the 0:10:15.320 --> 0:10:18.200 US than domestic investors. They've talked about punishing people who 0:10:18.200 --> 0:10:20.920 tried to switch out of the dollar. Stephen Moran, who's 0:10:21.000 --> 0:10:24.840 been nominated to be a Federal Reserve Board governor, you know, 0:10:24.920 --> 0:10:27.600 has talked about amar a Lago accord and re putting 0:10:27.600 --> 0:10:30.440 the dollar down. There's real reason for it to behave 0:10:30.480 --> 0:10:30.800 this way. 0:10:30.840 --> 0:10:34.720 Now, talk to us about like your foreign affairs piece, 0:10:34.760 --> 0:10:36.439 like the sort of you know, this idea of like 0:10:36.480 --> 0:10:39.360 the restructuring of the global and who profits from it, 0:10:39.640 --> 0:10:41.320 because you also talk about this idea of like the 0:10:41.440 --> 0:10:44.559 US is like sort of the global insurer of last resort. 0:10:44.600 --> 0:10:46.080 But talk to us a little bit about what this 0:10:46.120 --> 0:10:46.880 whole piece was about. 0:10:46.960 --> 0:10:49.440 Thank you, Joe. And this goes to what Tracy was 0:10:49.600 --> 0:10:53.360 saying at the start about how what you think you're 0:10:53.400 --> 0:10:56.640 achieving with this world change. So what I'm trying to 0:10:56.760 --> 0:11:01.960 argue is that the Trump administration decided that the world 0:11:02.040 --> 0:11:05.439 economy is playing the US for a soccer, and that 0:11:06.320 --> 0:11:11.679 very harsh direct bilateral measures starting with terroriffts, but also 0:11:11.720 --> 0:11:16.640 with other threats, Demands for investment, demands for military assaults 0:11:16.640 --> 0:11:20.120 on social media, all these things, threats to withhold military 0:11:20.120 --> 0:11:23.559 assistance in the case of Ukraine and others, that this 0:11:23.640 --> 0:11:27.280 will be a rebalancing, that this will get more money 0:11:27.320 --> 0:11:32.120 from these countries into the US and thereby make our 0:11:32.120 --> 0:11:35.760 fiscal situation better, be fairer, and somehow do great things 0:11:35.800 --> 0:11:39.840 for the US economy. This is wrong on every level, 0:11:39.840 --> 0:11:43.040 But the fundamental point going to the insurer is I 0:11:43.080 --> 0:11:46.040 build a mental model, not a mathematical model, but a 0:11:46.080 --> 0:11:48.360 mental model that I think most people have found quite 0:11:48.440 --> 0:11:51.920 apt that for the last eighty years since World War Two, 0:11:52.080 --> 0:11:54.600 the US's main role in the world economy has been 0:11:54.679 --> 0:11:58.520 to be the insurance provider. We made sure that you 0:11:58.559 --> 0:12:02.079 could ship things through with through different oceans and get 0:12:02.080 --> 0:12:05.319 there safely. That there was basically respect for property rights, 0:12:05.480 --> 0:12:09.800 respect for intellectual property rights. There were some standards, particularly 0:12:09.880 --> 0:12:13.200 technical standards, some brands. There was a dollar that you 0:12:13.200 --> 0:12:15.160 could get in and out of and park money, and 0:12:16.000 --> 0:12:18.640 it was deep enough markets and treasuries that you could 0:12:18.679 --> 0:12:20.960 get in and out that nobody cared and it didn't 0:12:20.960 --> 0:12:25.360 affect prices. There was stability to the US currency and 0:12:25.400 --> 0:12:27.600 the treasuries that let you do that. Just a whole 0:12:27.679 --> 0:12:32.160 host of things, plus military and alliance as well, obviously 0:12:32.200 --> 0:12:36.120 for NATO allies, for Japan, for Korea and others, and 0:12:36.160 --> 0:12:39.120 we charged premiums for that. We did get premiums. We 0:12:39.200 --> 0:12:41.400 had much lower interest rates. People would put a lot 0:12:41.440 --> 0:12:43.840 of money into US government debt and that made the 0:12:43.840 --> 0:12:48.760 whole economy go off better. We had basically obedience from 0:12:48.760 --> 0:12:52.400 all these countries and military alliances that they would do sanctions. 0:12:52.440 --> 0:12:54.360 For the most part, if we want to do sanctions, 0:12:54.400 --> 0:12:58.319 they would in Okinawa, in Rhinemind Air Base. They would 0:12:58.360 --> 0:13:02.600 take our troops and support them and have them garrisoned 0:13:02.920 --> 0:13:05.559 in their country, have our troops forward and doing it. 0:13:06.000 --> 0:13:08.520 Whole host of things. And on the economic front, it 0:13:08.600 --> 0:13:12.760 gave us disproportionate shares not just of the stable investment 0:13:12.840 --> 0:13:19.240 and treasuries, but things like our standards for technology, our 0:13:19.320 --> 0:13:25.240 standards for legal matters are our financial system were the default. Anyway, 0:13:25.320 --> 0:13:28.199 this had lots of benefits, lots of benefits for them, 0:13:28.320 --> 0:13:32.680 lots of benefits for us. It was a good business. Essentially. 0:13:32.679 --> 0:13:35.320 What's happened is you have a beach house in Malibu 0:13:35.679 --> 0:13:38.400 which you had insured, and you weren't going to build 0:13:38.440 --> 0:13:42.280 the beach house unless it was insured. Fine, you're paying insurance, 0:13:42.360 --> 0:13:46.480 you're getting something for it. Now there's global warming, hurricanes 0:13:46.480 --> 0:13:50.040 are more likely, there's erosion in the beach. You're prepared 0:13:50.080 --> 0:13:52.160 to pay a bit more for your insurance, but instead 0:13:52.200 --> 0:13:55.199 you find your insurer has decided, no, we're going to 0:13:55.280 --> 0:13:57.360 deny your claims. So you have to slip us something 0:13:57.440 --> 0:14:00.880 under the table to get your claim adjusted. Nope, we're 0:14:00.920 --> 0:14:03.199 tripling your premium and if you don't like it, we're 0:14:03.200 --> 0:14:04.680 going to leave the state and you're not going to 0:14:04.720 --> 0:14:08.200 have insurance anymore. That's what the Trump administration is doing. 0:14:08.400 --> 0:14:10.600 I mean, the role of insurance also acts as a 0:14:10.640 --> 0:14:14.280 sort of like umbrella for economic development, right, because if 0:14:14.320 --> 0:14:17.400 you have insurance on the beach in Malibu, other people 0:14:17.440 --> 0:14:20.440 can build houses and you can have shops and things. Exactly, 0:14:20.560 --> 0:14:23.720 maybe your house price starts to rise and you benefit 0:14:23.760 --> 0:14:27.520 from that. So this is a slightly unfair question because 0:14:27.560 --> 0:14:30.560 I'm going to ask you to channel someone else's thinking. 0:14:30.760 --> 0:14:34.840 But what exactly is the argument from the Trump administration 0:14:35.000 --> 0:14:38.600 here as to why they are losing out from the 0:14:38.720 --> 0:14:42.680 current international economic or financial order, which very much seems 0:14:42.720 --> 0:14:46.160 to have been built by the US. And as you 0:14:46.240 --> 0:14:51.040 pointed out has a lot of tangible and intangible benefits 0:14:51.200 --> 0:14:51.960 for America. 0:14:52.480 --> 0:14:55.760 Well, this is something I and colleagues of the Peterson 0:14:55.760 --> 0:14:59.840 Institute have been struggling against for several years now. On 0:15:00.080 --> 0:15:02.840 not just Trump. There are people on the Democratic side 0:15:03.240 --> 0:15:05.480 who've had this view as well. So in the same 0:15:05.520 --> 0:15:08.320 issue of foreign affairs, Wally Adamayo, who you know who 0:15:08.400 --> 0:15:12.640 was Deputy Treasury Secretary in the Biden administration, has an article, Yes, 0:15:12.640 --> 0:15:16.480 the trade system was broken during the Biden residency. The 0:15:16.640 --> 0:15:19.840 US Trade Representative gave a speech in which she said 0:15:19.880 --> 0:15:23.840 she basically agreed with everything her predecessor, Robert Leitheiser, had 0:15:23.840 --> 0:15:26.520 said during the Trump inversation. So this has been out 0:15:26.560 --> 0:15:28.960 there a long time. I know you want me to 0:15:29.000 --> 0:15:30.920 answer a question, but I'm not going to try to 0:15:31.040 --> 0:15:34.640 rationalize it. I think there are three or four things 0:15:34.640 --> 0:15:39.040 going on. One is there is an excessive sense that 0:15:39.520 --> 0:15:43.320 China has been unfair, but even more so that China 0:15:43.360 --> 0:15:46.240 got away with being unfair and is dangerous because of 0:15:46.320 --> 0:15:49.720 things we did on the economic side. And I don't 0:15:49.720 --> 0:15:53.280 think this is justified. Not that I have any love 0:15:54.120 --> 0:15:57.080 for the Chinese Communist Party, I'm on record calling she 0:15:57.160 --> 0:16:00.480 an Autocrat, but just the Tom Brady and Bill Belichick 0:16:00.520 --> 0:16:04.560 didn't win Super Bowls because they cheated in the little ways. 0:16:04.760 --> 0:16:07.720 China did not become China because it cheated a little 0:16:07.720 --> 0:16:10.920 bit here and there. The second thing is there was 0:16:10.920 --> 0:16:14.120 a legitimate concern which the Biden people cared about and 0:16:14.120 --> 0:16:16.200 the Trump people say they care about, but don't seem 0:16:16.240 --> 0:16:21.680 to care about that. If we're too dependent on concentrated, 0:16:21.720 --> 0:16:26.560 single sources for things like the semiconductors in Taiwan, that 0:16:26.600 --> 0:16:28.960 puts US at a national security risk, that puts US 0:16:29.000 --> 0:16:32.520 at an economic risk. The reason I say that Trump 0:16:32.520 --> 0:16:35.560 people don't seem to genuinely care about that is because 0:16:35.840 --> 0:16:38.600 being totally concentrated in the US in one spot isn't 0:16:38.640 --> 0:16:42.000 any good either, because then your subject still to natural disasters, 0:16:42.000 --> 0:16:45.200 to terrorism, to political problems, to corruption. You can care 0:16:45.240 --> 0:16:47.840 about this and say we got to make sure it's diversified. 0:16:49.080 --> 0:16:52.040 The third thing that's going on is there's a perception, 0:16:52.320 --> 0:16:55.240 fed by the so called China Shop literature, that US 0:16:55.400 --> 0:17:00.000 manufacturing was devastated, and this led to particular small cities 0:17:00.120 --> 0:17:04.119 and towns in the US being devastated. There's a lot 0:17:04.160 --> 0:17:08.240 of exaggerations and problems with this literature, and it doesn't 0:17:08.240 --> 0:17:11.360 square well with the reality, including the reality of most 0:17:11.359 --> 0:17:14.120 of the places that are cited as having had problems 0:17:14.440 --> 0:17:18.560 had problems in the seventies, and that there's plenty of 0:17:18.560 --> 0:17:22.280 places like Pittsburgh and Rallington, North Carolina that got back. 0:17:23.240 --> 0:17:25.760 But anyway, there's that sense. And I think you've had 0:17:25.760 --> 0:17:28.560 on my colleague Robert Lawrence with Peterson and Harvard, who 0:17:28.640 --> 0:17:32.720 talks about the limits of a manufacturing strategy. And then finally, 0:17:33.000 --> 0:17:36.679 and this is my own interpretation, people get mad at 0:17:36.680 --> 0:17:39.040 me when I say this. I think there's a lot 0:17:39.040 --> 0:17:42.200 of displaced anger. I think there are people who were 0:17:42.240 --> 0:17:46.960 relatively privileged. They weren't necessarily rich, but relatively privileged in 0:17:47.640 --> 0:17:50.440 older society, in the way the US society used to 0:17:50.520 --> 0:17:54.840 be that I have been disrupted and offended by change 0:17:54.920 --> 0:17:59.280 and by forces towards equality. I also think there's a 0:17:59.280 --> 0:18:03.200 bunch of people who are understandably very angry and disappointed 0:18:03.840 --> 0:18:08.520 with elites after the two thousand and eight financial crisis, 0:18:08.560 --> 0:18:15.080 after COVID been perceptions of mishandling after the Iraq Afghanistan 0:18:15.320 --> 0:18:18.840 invasions and occupations for twenty years that didn't produce anything, 0:18:19.840 --> 0:18:24.520 so there's a lot of anger that's discredited that they 0:18:24.680 --> 0:18:28.680 have discredited elites who are associated with being globalists, right, 0:18:29.000 --> 0:18:31.800 But I don't think that anger is well placed. And 0:18:32.400 --> 0:18:34.560 I'm not trying to be patronizing. I mean, we've seen 0:18:34.640 --> 0:18:38.040 this in the US history and other history. You know, 0:18:38.160 --> 0:18:40.840 people will stir up anger against immigrants, or stir up 0:18:40.880 --> 0:18:44.280 anger against Native Americans or people of color or refugees 0:18:45.240 --> 0:18:48.159 or com mythical communists in the government in the fifties 0:18:48.600 --> 0:18:51.439 because they're angry about something else or they're scared of 0:18:51.480 --> 0:18:55.440 something else. But it gets blamed on that. So that's 0:18:55.480 --> 0:18:57.800 where I think it comes from. But I just want 0:18:57.800 --> 0:19:01.240 to emphasize what you've said at the start, and that's 0:19:01.280 --> 0:19:04.200 part of the point my article's trying to make. Is 0:19:04.880 --> 0:19:07.720 there's a very clear list of benefits the US had 0:19:07.800 --> 0:19:10.800 by running the system, and by had a good business model. 0:19:10.840 --> 0:19:13.879 It was a profitable business model providing insurance. And like 0:19:13.960 --> 0:19:17.280 you said, if you're providing insurance for some people, that 0:19:17.480 --> 0:19:20.320 lets commerce expand and lets other people free ride, and 0:19:20.320 --> 0:19:22.200 that's a good thing that they free ride, and because 0:19:22.640 --> 0:19:25.640 then you get more commerce and more taxes and more 0:19:25.920 --> 0:19:29.400 livelihood and better off people and Additionally, one thing where 0:19:29.440 --> 0:19:32.960 the analogy breaks down, it's even more favorable for the US, 0:19:33.720 --> 0:19:37.159 because you know, if you're chiulb Order, Liberty mutual or 0:19:37.200 --> 0:19:41.080 state farm insurance, you don't really have a big effect 0:19:41.359 --> 0:19:44.520 on the extent of risks out there by how much 0:19:44.560 --> 0:19:47.719 insurance you give. But if you're the US and you 0:19:47.800 --> 0:19:51.960 say I'm going to guarantee your security, you actually do 0:19:52.080 --> 0:19:56.920 reduce the risks that are out there, and that means 0:19:56.960 --> 0:19:59.399 you're collecting the same premiums and paying out. 0:19:59.320 --> 0:20:19.000 Less at the risk of carrying the insurance analogy too far. 0:20:19.240 --> 0:20:21.679 I mean, it is true that we have insurers pulling 0:20:21.680 --> 0:20:25.240 out of areas like Florida because they say it's no 0:20:25.320 --> 0:20:28.520 longer economic to ensure these areas. It's just too risky. 0:20:28.520 --> 0:20:31.000 It's going to cost too much to rebuild. Is there 0:20:31.040 --> 0:20:33.879 a case to be made at all here that maybe 0:20:33.920 --> 0:20:36.880 the Trump administration is looking around the world and saying, well, 0:20:36.920 --> 0:20:39.040 it's riskier now than it was before, and we don't 0:20:39.080 --> 0:20:41.560 want to be on the hook to put out a 0:20:41.640 --> 0:20:42.800 billion fires. 0:20:43.280 --> 0:20:47.320 I think there is a case to be made in 0:20:47.320 --> 0:20:52.040 the national security sphere more narrowly defined, that the US 0:20:53.119 --> 0:20:56.199 may have overextended or needs to prioritize, and there is 0:20:56.240 --> 0:20:59.520 a set of foreign policy thinkers out there talking about 0:20:59.600 --> 0:21:02.880 this issue. You, I still don't think that's quite right, 0:21:03.040 --> 0:21:07.600 because actually deterrence and protection kind of like you said before, 0:21:07.600 --> 0:21:11.600 there's an umbrella effect. But let's say that the national 0:21:11.640 --> 0:21:15.520 security part you can set aside and say there is 0:21:15.560 --> 0:21:17.840 an argument to be had. The rest of it doesn't 0:21:17.840 --> 0:21:22.040 make any sense because you're giving up strength of the 0:21:22.119 --> 0:21:26.480 dollar and lower interest rates. You're giving up disproportionate compared 0:21:26.520 --> 0:21:30.000 to your size in the world. Foreign direct investment, you're 0:21:30.040 --> 0:21:32.800 giving up disproportion compared to your size in the world. 0:21:33.320 --> 0:21:38.199 Influence over technical standards, love for your brands, spread of 0:21:38.240 --> 0:21:43.719 your services. You're giving up disproportionate amounts of influence on 0:21:43.800 --> 0:21:47.719 other populations. Again, it's just like looking at foreign students 0:21:47.720 --> 0:21:49.479 coming here, which I know you've talked about in some 0:21:49.520 --> 0:21:52.600 of your episodes, that unless you come up with some 0:21:52.720 --> 0:21:56.120 absolutely mythical number of how many of them are not 0:21:56.160 --> 0:21:59.320 only spies for the Chinese but successfully pull it off, 0:21:59.400 --> 0:22:03.399 are undertail and take the Chinese information that they couldn't 0:22:03.520 --> 0:22:07.760 possibly have gotten through cyber attacks and other means. Unless 0:22:07.760 --> 0:22:10.200 you call it with an absolutely absurd number like that 0:22:10.280 --> 0:22:12.960 all the benefits come to us from having foreign students here, 0:22:13.400 --> 0:22:15.920 and that's what can be said about all these things 0:22:15.920 --> 0:22:17.160 on the economic side. 0:22:17.320 --> 0:22:19.040 By the way, when you were talking about the you know, 0:22:19.440 --> 0:22:21.280 well we had going. You know, it's like that breaking 0:22:21.280 --> 0:22:23.800 bad speech that I've seen a good thing going. 0:22:23.880 --> 0:22:24.080