WEBVTT - Roubini Macro Associates CEO Nouriel Roubini Talks Fed

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>What an honor to have with this Noural Rubini professor.

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<v Speaker 3>He's not emeritus. When you're you know, you travel like

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<v Speaker 3>he does. Such a young kid. I don't know how

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<v Speaker 3>emeritusy he is at New York University in christ Chairman

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<v Speaker 3>Rubini at Global Economics. One of the great moments for

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<v Speaker 3>me was with Professor Rubini and Davos a million years ago,

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<v Speaker 3>where he's simply outlining two thousand and seven, eight and

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<v Speaker 3>nine to come.

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<v Speaker 2>No, I don't care. The reason you're here is I'm.

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<v Speaker 3>Looking May thirty first, Munich, I mean a hitter like

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<v Speaker 3>you. You gotta be looking the private skybox on StubHub inter

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<v Speaker 3>Milan versus PSG for twenty nine thousand dollars. You got

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<v Speaker 3>two seats in the private skybox. Are you gonna roll that?

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<v Speaker 4>I'll watch it on TV.

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<v Speaker 2>It's very exciting. He's a diehard from his youth in

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<v Speaker 2>the old world inter Milan. I want to go back.

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<v Speaker 3>This really serious, folks, and it's off the radar right now.

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<v Speaker 3>It shouldn't be bread sets or who you started has

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<v Speaker 3>been on fire. You and bread Setster wrote a book

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<v Speaker 3>eleven years ago whatever. Fred Bergston wrote a wonderful introduction

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<v Speaker 3>on EM. How does EM affected when I see Taiwan

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<v Speaker 3>dollar go out?

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<v Speaker 2>Five standard deviations? Whatever? How is emerging a market off

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<v Speaker 2>the radar?

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<v Speaker 3>Affected by China, US, US, Canada, US EU.

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<v Speaker 2>What happens to your EM? Well?

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<v Speaker 4>The good news for EM is that this time around

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<v Speaker 4>the trade shock have not led to a strengthening of

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<v Speaker 4>the dollar, but rather a weakening of the dollar. With

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<v Speaker 4>the dollar weekends, EM currencies tend to appreciate.

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<v Speaker 2>It's also true.

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<v Speaker 4>That some of these Asian nations are sitting on trillions

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<v Speaker 4>of dollars of US treasuries, Their foreigners are very high,

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<v Speaker 4>and there's been some diversification. And because we're dented, how

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<v Speaker 4>to say, the dollar as a major global reserve currency,

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<v Speaker 4>given our unstable policies, so people move out of US

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<v Speaker 4>treasurer and sell them and then go back to their

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<v Speaker 4>own local currency. There has been some appreciation and that

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<v Speaker 4>has taken some momentum. There's also hope in Asia. I

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<v Speaker 4>think that there'll be trade deals and then answer reciprocal TIFFs.

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<v Speaker 4>They're going to be much smaller than an on April second.

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<v Speaker 4>That's also strengthening some of these currencies because some of

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<v Speaker 4>them were weakening because of the risk of a trade

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<v Speaker 4>war and so on. So the thing is a variety

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<v Speaker 4>of factors leading to that happening.

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<v Speaker 1>How concerned are you, if at all, about the US

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<v Speaker 1>economy in the face of the uncertainty of all this

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<v Speaker 1>trade discussion back and forth and back and forth. It

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<v Speaker 1>seems like consumers might be pulling back. It seems like

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<v Speaker 1>corporate executives are pulling back on guidance. So I'm not

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<v Speaker 1>sure how it's can impact their businesses. How do you

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<v Speaker 1>think that's going to affect the US economy?

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<v Speaker 4>Well, there are some headwinds coming from trade and it's uncertainty,

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<v Speaker 4>and there are some tailwinds coming from strong cappacks, especially

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<v Speaker 4>aid riven and still good income growth creation and so on.

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<v Speaker 4>I would say that over the medium term. Actually, I'm

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<v Speaker 4>quite bullish about US economy. I think that because of technology,

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<v Speaker 4>US potential growth by the end of the decad it

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<v Speaker 4>could be four percent, an increase of two hundred business points,

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<v Speaker 4>and even poor tray and migration policy can reduce growth

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<v Speaker 4>only by fifty business points. So the ratio within the

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<v Speaker 4>good stuff to hundred business points to the mad fifties

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<v Speaker 4>four to one, So I think we'll be on the

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<v Speaker 4>verge of a secular boom over the next few years.

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<v Speaker 4>So I'm quite optimistic. But then in the short run

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<v Speaker 4>we'll have probably any recession by your end. There is

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<v Speaker 4>an increasing job You.

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<v Speaker 3>Mentioned a medium term. You got from Europe to mention

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<v Speaker 3>the medium term. We don't do that in America. My

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<v Speaker 3>basic conundrum, ur Rabini yep, is we've got the short

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<v Speaker 3>term reality within an American political system which you live

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<v Speaker 3>with President Clinton, out to the long term view of

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<v Speaker 3>whatever economics is and maybe a more optimistic future. How

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<v Speaker 3>do we get is they would say up in Maine,

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<v Speaker 3>or you don't know this up in Maine, or Lisa

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<v Speaker 3>collects black flies, they get from here to there? How

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<v Speaker 3>do we get from short term to long term success?

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<v Speaker 4>The way we get it is this year there will

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<v Speaker 4>be a massive slowdown of growth. As you point out,

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<v Speaker 4>consumer and business confidence is down. Inflation is going to

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<v Speaker 4>go corpus to four percent by your end, and that's

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<v Speaker 4>going to be a significant eat on real disposal income.

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<v Speaker 4>So by Q four we're going to be in a

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<v Speaker 4>near recession. The good news is that the FAT is

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<v Speaker 4>now credibly committed to fight inflation, they're not cutting rates. Therefore,

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<v Speaker 4>inflection expctitions are anchored. Therefore, once inflation is higher but

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<v Speaker 4>growth is lower and you have beginning of increasing unemployment rate,

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<v Speaker 4>the FAT is going to be able to cut rates.

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<v Speaker 4>But think it's going to be a short and shallow recession,

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<v Speaker 4>maybe a couple of quarters Q one, Q four, and

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<v Speaker 4>Q one of next year, and then all have a

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<v Speaker 4>strong recovery because the tail winds coming from the technology

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<v Speaker 4>are massive. Guys is leading in all the technology of

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<v Speaker 4>the future.

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<v Speaker 3>Claims are out there on plan unit labor costs and productivity.

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<v Speaker 2>We're elevated.

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<v Speaker 3>We'll talk about your unit labor costs jump from a

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<v Speaker 3>revised two percent up to five point seven percent. I

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<v Speaker 3>got a terraf regime of three percent. You arguably were

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<v Speaker 3>one of the people that set up coming off the

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<v Speaker 3>Atlantic Charter, the global trade, the globalization mantra of a

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<v Speaker 3>lower Terra regime. Even if we pop from one hundred

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<v Speaker 3>and forty five percent drama in China and we come

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<v Speaker 3>back down to like a blended thirteen percent, I don't

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<v Speaker 3>get it is in the gap from a three percent

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<v Speaker 3>blended tariff up to a ten percent or thirteen percent

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<v Speaker 3>blended tariff.

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<v Speaker 2>Isn't that insurmountable.

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<v Speaker 4>Probably the blend is going to be more than thirteen

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<v Speaker 4>because my baseline is ten to fifteen percent for all

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<v Speaker 4>the world and sixty percent for China. So the blend

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<v Speaker 4>that could be in the high teens. It's a bad world.

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<v Speaker 4>But let's put its way. I suppose that is an

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<v Speaker 4>OVI stariff's a reciprocal and Europe of ten percent as

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<v Speaker 4>opposed to twenty big deal. The Europe can go up

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<v Speaker 4>and down ten percent in a matter of months. So

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<v Speaker 4>is it good?

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<v Speaker 1>Now?

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<v Speaker 2>Is it terrible?

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<v Speaker 4>It's going to something? Is that to destroy the world?

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<v Speaker 4>Probably not, because currency can move more than ten percent

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<v Speaker 4>in a matter of months. So of course is the

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<v Speaker 4>world it is fragmented. The world is the globalize. But

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<v Speaker 4>if the average startft were being say ten to fifteen

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<v Speaker 4>percent rather than on the three, the impact on growth

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<v Speaker 4>is going to be how to say moderate, I would

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<v Speaker 4>say this is will be moderate. Of course with Chinese

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<v Speaker 4>a different story. With China at sixty percent, we're going

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<v Speaker 4>to do couple from China and the shock on their

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<v Speaker 4>growth and the shock around inflation is going to be significant.

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<v Speaker 4>So I'm more worried about the fact we're not going

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<v Speaker 4>to de escalate with China.

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<v Speaker 2>To be an extent, with all of your.

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<v Speaker 3>Political economics neural revealing, do you believe.

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<v Speaker 2>Common sense will come to the rescue in Washington? Well

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<v Speaker 2>more than common sense.

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<v Speaker 4>I said, there'll be four guard raids against stupid policy

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<v Speaker 4>like tariffs, market discipline, good economic advisors, fed discipline, and

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<v Speaker 4>thin majority in Congress. Guess what when the stock market crashed,

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<v Speaker 4>bonding were higher, credit spreads are higher to always hire,

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<v Speaker 4>they blinked and they started to de escalate. Two in

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<v Speaker 4>that game of Chicken between Trump and Powell, Trump blinked

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<v Speaker 4>because he knew it was a ground fire. Powell, There'll

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<v Speaker 4>be a shock to the market, so e blain. Therefore

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<v Speaker 4>feed fed independence was a binding constraint. Eventually, the Peter

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<v Speaker 4>Navarro of the world were sidelines and the Scott Passings

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<v Speaker 4>of the world at the upper end, good economic advisors

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<v Speaker 4>and already, I mean.

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<v Speaker 2>It was boxing by four guard raids.

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<v Speaker 4>That's exactly what I said in the same other.

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<v Speaker 2>Times I got.

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<v Speaker 3>I got goose bumps because I got normal obinion. Richard

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<v Speaker 3>Porters back to back. I mean, talk, it's an academic

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<v Speaker 3>monk fest here right now. Have you ever done a

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<v Speaker 3>panel with Peter Navarro.

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<v Speaker 4>I've not done a panel. I met him doing the

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<v Speaker 4>Trump one administration in the White House a couple of times.

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<v Speaker 4>So it's a strange economics from much.

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<v Speaker 3>Did you teach Navarro economics at New York University?

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<v Speaker 2>No?

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<v Speaker 4>No, he was at PhD at Harvard, So but we

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<v Speaker 4>didn't overlap. Yeah, surprising a PhD economics of Harvard. But

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<v Speaker 4>Steve Mian is also PhD in economics of Harvard.

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<v Speaker 3>So do I How does I got twenty seconds? How

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<v Speaker 3>does inter Milan be PSG?

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<v Speaker 2>What? How does inter Milan be PSG?

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<v Speaker 3>I don't know you're going to be there?

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<v Speaker 2>You spend twenty eight dollars? Thank you, Thanks for the

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<v Speaker 2>interesting listen. Wants to know when's a new book out.

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<v Speaker 4>I don't have any one. Mega Threats came out two

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<v Speaker 4>years ago, still going and all the themes of the

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<v Speaker 4>book Mega Threats are still very important today. All the

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<v Speaker 4>threats I talked about are materializing.

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<v Speaker 3>Okay, So, Manorial, thank you so much, greatly appreciate it.

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<v Speaker 2>Nourro Rabini