Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Joining us now who
Speaker 1: has been writing fire recently. Adam Posen of the Peterson
Speaker 1: Institute for International Economics, who has been pretty aggressively talking
Speaker 1: about some of the harmful ramifications from a new World Order.
Speaker 1: But before we get to all of that, I want
Speaker 1: to get to how this is set up and how
Speaker 1: this feels very different than previous Jackson Hall meetings.
Speaker 2: Thank you Lisa for having me back. It's good to
Speaker 2: be back with you and Tom. And you're right, it
Speaker 2: is different. It's different inherently because it will be Powell's
Speaker 2: last speeches chair, and he's had quite the tenure, and
Speaker 2: there's always the combination. Now it so happens of his
Speaker 2: potential legacy speech talking about the Framework review and the
Speaker 2: fact that the economic situation is genuinely unclear. But then
Speaker 2: of course there's this whole overlay of the Trump administration's
Speaker 2: variegated attempts to put pressure on the FED in an
Speaker 2: overt way, using personal attacks and using social media in
Speaker 2: a way that is unprecedent and harmful.
Speaker 1: I know that human nature is such that if someone
Speaker 1: tells you what to do again and again and again,
Speaker 1: and you have somewhat of a rebellious spirit.
Speaker 3: You want to do the opposite.
Speaker 1: And I wonder how academics who get together and who
Speaker 1: want to do what they think is right are airing
Speaker 1: on the side of being overly hawkish in order to
Speaker 1: sort of thumb their nose at what they see as
Speaker 1: political interference and something that isn't their fault. Do you
Speaker 1: feel that in some capacity, I feel they're thinking about it.
Speaker 2: I feel that they're trying to be very self aware
Speaker 2: of that. And there is a history lease of central
Speaker 2: bank independence, and Tom and I are old enough to
Speaker 2: remember this that when the buddiest bank was like the
Speaker 2: leading bank setting policy outside the US, whenever a left
Speaker 2: wing finance minister, or for that matter, a conservative finance
Speaker 2: minister would say you're too tight, the central Bank would
Speaker 2: explicitly Hans Steetmeyer would explicitly say, you yell at me,
Speaker 2: I'm not doing anything.
Speaker 3: So there is that element.
Speaker 2: But I think what Paula said, what President Collins, who
Speaker 2: you just had, has said, is they are trying to
Speaker 2: make the right call in the economy, and in the end,
Speaker 2: I think, if anything, they're going to bend over backwards
Speaker 2: to not be hawkish today because they want to show
Speaker 2: then no matter what the Trumpies do, they're going to
Speaker 2: make the call on the basis of the economy.
Speaker 4: And Posen with us the Peterson Institute, as we welcome
Speaker 4: all of you worldwide good morning on Bloomberg Radio and
Speaker 4: on Bloomberg Television as well, to call this for you
Speaker 4: in the limited time that we have. Doctor Posen's essay
Speaker 4: and Foreign Affairs days ago sets the table for a
Speaker 4: post American world. Doctor Posen, of course, channeling the economist
Speaker 4: Joni Mitchell from nineteen seventy. It was good of you
Speaker 4: to end the essay looking at a parking lot with
Speaker 4: the lights turned out. In the seventies, the inflation was
Speaker 4: six point eight percent. We've been running three ish, four
Speaker 4: ish depending out. Jason measures it for me. The answer is,
Speaker 4: do you fear an inflation back to the time of
Speaker 4: big yellow TAXI?
Speaker 3: Yeah? Tom, thank you.
Speaker 2: I know you curate foreign affairs articles for your audience,
Speaker 2: and I'm grateful you've picked up on mine, and I
Speaker 2: think people have been missing the big picture. This is
Speaker 2: an economic regime change. It's not just the tariffs. It
Speaker 2: goes to the thirty year bonds and the international flows
Speaker 2: that you were talking about and so is inflation going
Speaker 2: to get out of hand? No, Ultimately, no matter who
Speaker 2: succeeds Powell, who Trump appoints, they'll be forced to turn
Speaker 2: around if it gets big. But what you're going to
Speaker 2: get is the stuff we saw in the early eighties.
Speaker 2: You're going to get a steeper yield curve, You're going
Speaker 2: to get a higher yield curve. You're going to get
Speaker 2: risk premium. You're going to get more out of the dollar.
Speaker 4: Right, can we go all nerd?
Speaker 3: Now? Places? What were we doing before?
Speaker 2: Right?
Speaker 3: Come on?
Speaker 4: As buried in the middle of every textbook chapter twenty ors,
Speaker 4: so is in chapter insurance. Your essay is that we've
Speaker 4: given up the ghost of us being the insurer for
Speaker 4: the world in the seventies, in the sixties, post World
Speaker 4: War Two? Can we recover after Trump back to an
Speaker 4: insured world where they trust America to be the insurer?
Speaker 2: Just as some foreign policy types talked about after Vice
Speaker 2: President Vance at the Munich Summit and all this stuff
Speaker 2: against NATO. You don't do it in a day. If
Speaker 2: the president realizes the mistake, if the Congress steps up,
Speaker 2: if there's an election and the changes, we can go back.
Speaker 2: But you have to think of it, like Germany or
Speaker 2: Japan after the war. You have to rebuild trust, you
Speaker 2: have to invest. And the longer this goes on, the
Speaker 2: longer the US ceases to provide the kinds of insurance
Speaker 2: that it did. Other countries self insure, and so they
Speaker 2: take money out of the dollar, They invest in different institutions,
Speaker 2: they make different trade deals, they try to build things up.
Speaker 2: So the longer it goes, the harder it's going to
Speaker 2: be to turn it back. And everybody's sours off, including
Speaker 2: the US, but they make the best of it they can.
Speaker 1: That's the big picture as you see it. Some people
Speaker 1: would say that this was already fracturing in other ways
Speaker 1: heading into this, and we saw that in the post
Speaker 1: pandemic reality. But shifting to the inflation side that tom'son
Speaker 1: rightly picked up on. If the FED does cut by
Speaker 1: twenty five or fifty basis points now and you do
Speaker 1: see inflation pick up materially, what do you see as
Speaker 1: a risk that they have to hike materially next year?
Speaker 1: Something that Ken Rogoff has talked about.
Speaker 2: Well, I mean nothing against KEM, but you and I
Speaker 2: have been talking about this on your show for a
Speaker 2: year and a half did. I no, but anyway, But
Speaker 2: so I'm aligned with the brilliant rogueff. It's they I
Speaker 2: think they have a reversal built in at this point
Speaker 2: because essentially they're gambling on.
Speaker 3: The fact that the our star hasn't risen.
Speaker 2: They're gambling on the fact that the recessionary effects of
Speaker 2: the tariffs and the anti migration will more than offset
Speaker 2: the inflationary effects. They're gambling on the fact that long
Speaker 2: term inflation expectations will remain fully anchored, which amidst everything
Speaker 2: else after the last few years and after the attacks
Speaker 2: on the FED, seems like a bad gamble.
Speaker 3: And ultimately they're gambling on.
Speaker 2: The fact that the pass through of these things is
Speaker 2: going to be very limited, which gets us back to
Speaker 2: Tom's seventy's analogy.
Speaker 1: At the same time, if you look at the unemployment
Speaker 1: rate of young adults sixteen to twenty four, it's ten percent.
Speaker 1: It's the highest ever been on super recession. You see
Speaker 1: an increasing number of people remaining on jobless claims. We're
Speaker 1: receiving those roles because they cannot get a job. Doesn't
Speaker 1: the labor market worry you at this point?
Speaker 2: It does, But that's different from what you and I
Speaker 2: were just talking about Lisa. This is what happens when
Speaker 2: you run a terrible policy mix, when you get stagflation,
Speaker 2: is you have no good choice, and then you're stuck
Speaker 2: worrying about inflation despite the fact people are suffering.
Speaker 3: This is the problem.
Speaker 2: It's not because there aren't going to be problems and
Speaker 2: aren't already problems in the labor market. It's because the
Speaker 2: inflation threat is worse at this point.
Speaker 3: And if the.
Speaker 2: Trump administration hadn't done all the things that had done,
Speaker 2: we wouldn't be facing this terrible trade off.
Speaker 4: I noticed last night I looked at the Nielsen ratings
Speaker 4: and there were two people listening in Wyoming as the
Speaker 4: Red Sox beat the Yankees. It was me and Adam.
Speaker 4: We were sitting in our little he was in a
Speaker 4: pup tent. I'm in a little bigger tent, and we
Speaker 4: were listening to the Red Sox on our radio.
Speaker 1: Oh yeah, this is your transistor radio that you have. Yeah, yeah,
Speaker 1: everyone's buying that out here. Those are really good. Do
Speaker 1: they have a chance except all you want to know today.
Speaker 3: They have a chan They always have a chill.
Speaker 1: Imposed of the Peterson Institute for International Economics on economics,
Speaker 1: on policy, and on the red sox.
Speaker 3: Thank you so much for being with us