WEBVTT - Globalization’s Public Defender 0:00:13.840 --> 0:00:17.200 Hello, and welcome to What Goes Up, a weekly markets podcast. 0:00:17.320 --> 0:00:19.680 My name is Mike Reagan. I'm a senior editor at 0:00:19.720 --> 0:00:23.920 Bloomberg and Humble Donna higher across as a reporter with Bloomberg, 0:00:24.560 --> 0:00:26.800 and this week on the show, well, there's no getting 0:00:26.840 --> 0:00:30.240 around it. The world has changed a tremendous amount in 0:00:30.360 --> 0:00:33.720 just the last six weeks. Russia's invasion of Ukraine is 0:00:33.800 --> 0:00:36.760 not only destabilized Eastern Europe, but it's threatening to cause 0:00:36.840 --> 0:00:41.040 disruption in global alliances and macroeconomics the likes of which 0:00:41.080 --> 0:00:44.040 most of us have never seen in our lives. We'll 0:00:44.080 --> 0:00:45.880 try to unpack it all with a very well known 0:00:45.920 --> 0:00:51.080 economist who focuses on global economics. But first, Bolda, I 0:00:51.120 --> 0:00:54.720 thought of you the other night because my daughter is 0:00:54.880 --> 0:00:57.800 she's very good at matt She's taking a P calculus 0:00:58.240 --> 0:01:01.840 and she was doing her homework and I confess I'm 0:01:01.840 --> 0:01:05.960 a little rusty on my calculus. I haven't used it 0:01:06.000 --> 0:01:09.039 in about thirty years. And so she knows this, and 0:01:09.080 --> 0:01:12.040 she knows not to ask me any advice on calculus. 0:01:12.160 --> 0:01:14.640 And you know, I'm sitting in the room watching basketball 0:01:14.640 --> 0:01:16.959 and she she comes at me with a worksheet with 0:01:17.040 --> 0:01:19.039 a bunch of calculus problems on it. I think she 0:01:19.080 --> 0:01:22.000 sends the panic in my eye and she said, don't worry, Dad, 0:01:22.400 --> 0:01:26.760 it's not a calculus question. It's a grammar question. I've 0:01:26.840 --> 0:01:30.360 noticed a grammar problem in this word problem and I 0:01:30.440 --> 0:01:31.720 and I need you to tell me if this is 0:01:31.800 --> 0:01:35.160 right or wrong. And I thought this sounds like Fildonna. 0:01:35.240 --> 0:01:38.639 Like Fildonna, you would you would like refuse to answer 0:01:38.680 --> 0:01:42.000 that calculus question until the grammar, as she was resolved. 0:01:42.040 --> 0:01:45.000 I feel like I'm one of those annoying people who 0:01:45.280 --> 0:01:48.200 will point out grammar mistakes to other people, you know, 0:01:48.280 --> 0:01:51.720 even when they're talking, or especially if Bloomberg with with 0:01:51.760 --> 0:01:53.760 all of our stories, I'll email people, I'll say you 0:01:53.800 --> 0:01:59.480 misspelled this, and it very rarely goes appreciated. Let the 0:01:59.480 --> 0:02:01.400 record show you're the one who said annoying, not me. 0:02:01.480 --> 0:02:05.600 But by the way, about that, yeah, okay, but the 0:02:05.840 --> 0:02:08.200 the segway you're waiting for the segway? I know. And 0:02:08.400 --> 0:02:11.480 and I was thinking about the calculus of global relations 0:02:11.560 --> 0:02:14.080 right now. I think it's about as tricky of an 0:02:14.080 --> 0:02:17.760 equation as we've seen in years, and I think we 0:02:17.840 --> 0:02:19.840 got the perfect guests to solve it for us. What 0:02:19.880 --> 0:02:22.840 do you think we do. That's a great transition. I 0:02:22.880 --> 0:02:25.120 wasn't sure where you're you were going with it at first, 0:02:25.200 --> 0:02:29.800 but great transition. I'm really really excited to have Adam Posen, 0:02:30.080 --> 0:02:33.800 president of the Peterson Institute for International Economics, join our 0:02:33.800 --> 0:02:36.240 show today. Adam, thank you so much for coming on 0:02:36.240 --> 0:02:39.200 the podcast. Thank you, and thank you for not seguaying 0:02:39.280 --> 0:02:43.320 to me about being annoying that would have been, or 0:02:43.360 --> 0:02:50.240 about calculus. Thank you, Adam. I know I'm not the 0:02:50.280 --> 0:02:52.600 only one who's I've lost all of my my high 0:02:52.639 --> 0:02:55.680 school and college calculus. It's just gone. It's like a 0:02:55.720 --> 0:02:59.480 new language to me. It's great to me. Yeah. But 0:03:00.000 --> 0:03:02.079 as to her was when you're doing calculus homework, don't 0:03:02.080 --> 0:03:05.360 worry about the grammar. You're wasting your time. Just just 0:03:05.360 --> 0:03:07.920 just just georder. I think I think I think your 0:03:08.000 --> 0:03:11.720 daughter is onto something right A demonstrate it's how the 0:03:11.840 --> 0:03:15.080 question is phraised. Even if it's a word problem that matters. 0:03:15.600 --> 0:03:19.919 As you are about to demonstrate, it doesn't matter, Adam. 0:03:19.960 --> 0:03:21.880 I want to start out very broadly speaking. I was 0:03:21.919 --> 0:03:25.160 hoping you could just lay out what the Peterson Institute 0:03:25.240 --> 0:03:27.400 is for our audience and what you guys are all 0:03:27.400 --> 0:03:31.440 about sure, thank you. We're a nonprofit, nonpartisan what's called 0:03:31.440 --> 0:03:35.800 the think tank or research institute. We are committed to 0:03:35.840 --> 0:03:39.640 the idea that globalization well managed to open it for 0:03:39.720 --> 0:03:44.520 your trade remove of ideas and people is welfare and 0:03:44.600 --> 0:03:47.480 ancing is which is he can speak for better for 0:03:47.560 --> 0:03:49.960 the people of the world and people of the US, 0:03:50.000 --> 0:03:53.200 and that there are policies that matter in managing that. 0:03:53.680 --> 0:03:59.280 So our staff, which is about senior scholars, half full 0:03:59.320 --> 0:04:03.960 time half academics nolsewhere are people who have generally served 0:04:04.000 --> 0:04:07.480 in senior roles in government and at some point in 0:04:07.520 --> 0:04:10.600 their life got a PhD into some research and now 0:04:10.720 --> 0:04:14.040 do policy work instead of teaching or instead of making 0:04:14.080 --> 0:04:17.080 a big map. You know, I want to get into 0:04:17.160 --> 0:04:21.120 sort of the nitty gritty of the current events around 0:04:21.120 --> 0:04:23.159 the world. Um, but I wanted to first take a 0:04:23.160 --> 0:04:27.119 step back and just talk about the notion of globalization. Uh. 0:04:27.160 --> 0:04:30.040 And and the term globalists. You know, this has obviously 0:04:30.120 --> 0:04:34.960 become sort of a a loaded term among many in 0:04:35.080 --> 0:04:39.360 politics on the right, especially um um, starting on you know, 0:04:39.520 --> 0:04:43.080 during the Trump administration and now obviously you know, uh, 0:04:43.240 --> 0:04:45.240 this whole notion of what you know, what's going to 0:04:45.320 --> 0:04:50.520 happen to the global order of economics after Russia's invasion. Uh. 0:04:50.680 --> 0:04:53.400 You wrote a really interesting piece on this, asking, you know, 0:04:53.520 --> 0:04:56.479 is this the end of globalization? But I was sticking 0:04:56.520 --> 0:04:57.840 back to when I was a kid, and I think 0:04:57.880 --> 0:05:00.040 you and I are pretty much in the ballpark of 0:05:00.720 --> 0:05:03.320 same age, you know, meaning we're very young guys obviously 0:05:03.520 --> 0:05:08.880 um strapping, trapping bright futures. But I was thinking back to, say, 0:05:08.920 --> 0:05:12.000 the seventies and eighties, when we're kids, and there was 0:05:12.120 --> 0:05:15.760 very much a major push back to globalization back then. 0:05:15.800 --> 0:05:18.640 You know, Japan was sort of emerging as a major 0:05:18.720 --> 0:05:23.280 manufacturing powerhouse UM OPEC. There was a lot of resentment 0:05:23.360 --> 0:05:26.240 towards OPEC because of the oil embargoes of the seventies, 0:05:26.520 --> 0:05:28.920 and there was very much this sort of nationalist made 0:05:28.920 --> 0:05:32.240 in America push UM and and year after year you'd 0:05:32.240 --> 0:05:34.360 hear politicians saying, you know, I'm gonna fix this. We're 0:05:34.360 --> 0:05:37.440 gonna bring back manufacturing. We're gonna bring back you know, 0:05:37.520 --> 0:05:40.080 the steel mills and everything else, all these other good 0:05:40.080 --> 0:05:42.880 blue collar jobs. But it all ended up to be 0:05:43.360 --> 0:05:46.120 sort of just talk, right, and through the years it 0:05:46.160 --> 0:05:50.400 seemed like sort of a further integration of the US 0:05:50.480 --> 0:05:54.360 and the global economy was almost inevitable, like like gravity, right, 0:05:54.440 --> 0:05:59.680 you know, um, with better technology, better transportation, air travel, 0:05:59.760 --> 0:06:01.960 that it was just inevitable that the world was gonna 0:06:02.040 --> 0:06:04.600 trade with each other more and become sort of more 0:06:04.680 --> 0:06:08.520 liberal globally as far as trade goes. So I'm wondering, 0:06:08.760 --> 0:06:13.080 is this episode we're experiencing now and really which started 0:06:13.120 --> 0:06:16.760 under the Trump administration, is it a different Is this 0:06:16.839 --> 0:06:19.040 a game change or a nours it? You know, is 0:06:19.080 --> 0:06:21.360 it sort of the same idea that there's this pushback, 0:06:21.440 --> 0:06:24.520 but that sort of that gravity of globalization will will 0:06:24.560 --> 0:06:27.760 take over again and the world will bend towards that 0:06:27.760 --> 0:06:31.240 that outcome eventually. It's actually a little worse than you 0:06:31.400 --> 0:06:36.160 portray it. Um. The it isn't just since Trump. We 0:06:36.160 --> 0:06:39.359 we published some research in colleagues did about two years 0:06:39.360 --> 0:06:41.960 ago where we decided to look at the facts, and 0:06:42.040 --> 0:06:46.440 the US has actually been deglobalizing or closing itself off 0:06:46.520 --> 0:06:51.919 more accurately basically since roughly two um, so it's twenty years. 0:06:52.120 --> 0:06:55.599 It accelerated on their Trump and but it and it 0:06:55.680 --> 0:07:00.480 got more vocal. But actually we have been falling behind. 0:07:00.680 --> 0:07:02.400 And when I say coming behind, I mean that quite 0:07:02.440 --> 0:07:08.080 literally the rest of the world, including high income democracies 0:07:08.080 --> 0:07:11.560 like those in Europe and Japan, but also places that 0:07:11.680 --> 0:07:14.400 you would not think of as terribly liberal or open 0:07:14.880 --> 0:07:17.480 have been continuing to open up. The US is a 0:07:17.640 --> 0:07:21.320 very big outlire. It's not just trade, it's for direct investment, 0:07:21.560 --> 0:07:25.960 it's trade deals, it's immigration, the whole host of dimensions 0:07:26.000 --> 0:07:29.520 on which the US has been closing itself off increasingly 0:07:29.600 --> 0:07:32.680 for twenty years. So you're right that the perception is 0:07:32.880 --> 0:07:37.080 the globalization most dish other not that wiped out everything 0:07:37.120 --> 0:07:41.720 in front of it. But that's actually a false characterization. 0:07:42.240 --> 0:07:45.400 What has happened and I do think is the turning 0:07:45.400 --> 0:07:48.559 point now, and there I agree with you, is that 0:07:48.760 --> 0:07:52.040 these longer term worries about China not playing fair and 0:07:52.080 --> 0:07:56.000 taking advantage of us, and this long term political sense 0:07:56.000 --> 0:08:00.160 in the US that we we have to protect the 0:08:00.160 --> 0:08:02.640 the limited number of manufacturing jobs in the world is 0:08:02.680 --> 0:08:07.560 the problem. Those things are accelerated and reinforced by what's 0:08:07.600 --> 0:08:11.000 happening now in Ukraine, by the Russian invasion. And so 0:08:11.040 --> 0:08:14.000 I do think we're at a turning point where the 0:08:14.000 --> 0:08:17.640 world is starting to break into economic blocks in a 0:08:17.680 --> 0:08:20.640 way we haven't seen. As you said, you're in all time. 0:08:23.280 --> 0:08:25.240 So you have been writing quite a bit just to 0:08:25.280 --> 0:08:27.360 bring this all back to the recent event. You've been 0:08:27.400 --> 0:08:29.400 writing quite a bit about this, which is why I'm 0:08:29.400 --> 0:08:31.280 so happy to have you on the podcast this week. 0:08:31.560 --> 0:08:34.240 But in one of your recent pieces, you did write 0:08:34.240 --> 0:08:36.640 exactly that that the world is splitting into two camps, 0:08:37.440 --> 0:08:39.720 one center on China, one around the US. So I 0:08:39.760 --> 0:08:41.760 wanted to ask you to to talk about them, what 0:08:41.840 --> 0:08:44.880 that looks like and how that develops. Yeah, and I'm 0:08:44.880 --> 0:08:46.720 grateful to you. Feel done for inviting me on the 0:08:46.720 --> 0:08:49.400 show and noticing what I've been writing. And then you're 0:08:49.520 --> 0:08:52.160 doing a think think that God is helping people notice 0:08:52.200 --> 0:08:56.640 what you're saying. Um, I think the splitting into two 0:08:56.640 --> 0:08:59.800 camps isn't going to be absolute. So you know, Trump 0:09:00.080 --> 0:09:05.040 and his US trade representative Lightheiser had this term decoupling 0:09:05.120 --> 0:09:07.760 from China, which they didn't really do, but to the 0:09:07.800 --> 0:09:10.640 extent they tried it, As my colleague at Peterson, Chad 0:09:10.640 --> 0:09:14.520 Bound and others are documented the failed. Um. But what 0:09:14.559 --> 0:09:17.160 I do think is happening is what I call corrosion 0:09:17.160 --> 0:09:21.199 of globalization. That there were these linkages along multiple lines, 0:09:21.640 --> 0:09:24.760 including people going back and forth, ideas going back and 0:09:24.800 --> 0:09:28.200 forth business norms as well as things like trading in 0:09:28.320 --> 0:09:34.920 hard woods manufacturers, um, and that's going to get increasingly separated. 0:09:35.000 --> 0:09:39.000 I think actually the trade stuff will continue more than 0:09:39.080 --> 0:09:42.280 other things because it's harder to control and it's harder 0:09:42.280 --> 0:09:46.440 to substitute for. But you know, we're already seeing restrictions 0:09:46.600 --> 0:09:50.120 on American ownership in China and vice versa on Chinese 0:09:50.160 --> 0:09:53.200 ownership in the US. We're already seeing a lot of 0:09:53.240 --> 0:09:58.800 suspicion about Chinese grad students and otherwise students and professors 0:09:58.840 --> 0:10:01.160 in the US. I think a lot of its Exandrea. 0:10:01.360 --> 0:10:04.080 But whatever it is, we're gonna end up in a 0:10:04.120 --> 0:10:06.920 world where there's going to be a lot of restrictions 0:10:06.960 --> 0:10:12.040 focused on keeping technology moving between the US and China 0:10:12.080 --> 0:10:15.360 and between US and allies and Chinese want. And that's 0:10:15.360 --> 0:10:20.560 a world that probably a slower innovation that reinforces the 0:10:20.600 --> 0:10:25.040 divisions because you start having different technical standards, you start 0:10:25.080 --> 0:10:28.840 having different product lines, and and so it just becomes 0:10:29.400 --> 0:10:34.200 real self reinforcing, you know. And Adam, I want to 0:10:34.360 --> 0:10:37.280 uh sort of ask you to put on your Central 0:10:37.320 --> 0:10:40.439 bankers hat um and and listeners who aren't familiar with that, 0:10:40.520 --> 0:10:44.080 AMA don't read his Wikipedia pages. One of these fascinating resumes. 0:10:44.679 --> 0:10:46.880 We would need a whole another podcast to go through 0:10:46.880 --> 0:10:49.800 it all. But work for some time at the Federal Reserve, 0:10:50.000 --> 0:10:53.360 the Bank of England. UM. I don't know if you 0:10:53.440 --> 0:10:58.840 work for consulted with the Bundesbank in Germany. UM long ago. 0:11:00.080 --> 0:11:04.319 Thank you, Thank you for touting not mine. It's a 0:11:04.320 --> 0:11:05.959 good one. It's a good one. I encourage people to 0:11:06.000 --> 0:11:10.079 read it. But I want to talk specifically about UM inflation. 0:11:10.120 --> 0:11:12.440 You know, one of the things people like to say 0:11:12.480 --> 0:11:15.680 about this deterioration of globalization is that it will be 0:11:15.720 --> 0:11:20.800 an upward pressure on inflation obviously going forward. But you know, 0:11:20.800 --> 0:11:22.960 when we look at this red hot inflation that we're 0:11:22.960 --> 0:11:25.520 seeing right now, there's a lot of finger pointing going on. Obviously. 0:11:25.559 --> 0:11:28.079 You know, there's some research from the FED sort of 0:11:28.280 --> 0:11:31.679 pointing out the finger at fiscal policy. UM. I think 0:11:31.679 --> 0:11:33.200 a lot of people are pointing their finger at the 0:11:33.200 --> 0:11:37.959 FED for keeping policy so loose, uh, perhaps for too long. UM. 0:11:38.000 --> 0:11:42.040 The de globalization and obviously the supply chain issues that 0:11:42.080 --> 0:11:44.600 we've seen around the world. I wonder if if in 0:11:44.679 --> 0:11:47.640 your head it's possible to rank sort of what the 0:11:47.679 --> 0:11:53.000 contributors have been uh to inflation. And you know, with 0:11:53.040 --> 0:11:56.000 the benefit of hindsight, is there anything you think the 0:11:56.080 --> 0:12:00.240 FED or Congress and the government did wrong far as 0:12:00.280 --> 0:12:04.640 monetary or fiscal policy to get us in this situation. Yeah, 0:12:05.000 --> 0:12:07.960 I think that the story is a little more complicated 0:12:08.000 --> 0:12:10.960 in terms of the linkage between globalization and foreign policy. 0:12:11.080 --> 0:12:16.840 I think the reduction in openness it does, uh diminish 0:12:16.920 --> 0:12:20.200 the amount of downward price pressure you get from abroad 0:12:20.280 --> 0:12:24.400 and diminishes competition, and over time that's bad for both 0:12:24.440 --> 0:12:27.680 inflation and productivity. But I think in the short term 0:12:27.720 --> 0:12:32.320 it's actually kind of disinflationary because it lowers the return 0:12:32.360 --> 0:12:37.480 on capital because you're investing duplications and redundancies. It lowers 0:12:37.559 --> 0:12:41.600 the diversification of capital because you're having to keep more 0:12:41.640 --> 0:12:45.360 money at home, either because of regulation or fear, and 0:12:45.440 --> 0:12:49.360 so in the first instance, it slows things down. In 0:12:49.440 --> 0:12:51.880 terms of why we have such inflation in the US 0:12:52.040 --> 0:12:54.559 right now, I think a chunk of it is stuff 0:12:54.600 --> 0:12:59.360 that nobody foresaw. That people myself included lots of much 0:12:59.360 --> 0:13:04.040 smarter people in the central banking community, didn't fully get 0:13:04.240 --> 0:13:06.040 just how big a deal it was going to be 0:13:06.160 --> 0:13:11.880 to reopen the economy. After COVID shutdowns, and in particular 0:13:12.080 --> 0:13:15.560 how disruptive that would be to labor markets. Now, it's 0:13:15.640 --> 0:13:19.840 interesting if you compare the US and Europe. The euro 0:13:19.960 --> 0:13:25.480 areas saying before the Russians in the Ukraine, their inflation 0:13:25.559 --> 0:13:29.440 rate was meaningfully lower than the US, and you know, 0:13:29.600 --> 0:13:32.679 and their difference between core and headline inflation, meaning how 0:13:32.760 --> 0:13:36.360 much of it was just attributable to energy versus more 0:13:36.400 --> 0:13:40.280 general inflation was much bigger than the US. And I 0:13:40.320 --> 0:13:44.280 think that was consistent with the story that we did 0:13:44.440 --> 0:13:47.160 much better than the US had done in two thousand 0:13:47.320 --> 0:13:50.200 eight pen and in the past about looking after people 0:13:50.240 --> 0:13:53.720 when there was an external but an exologia crisis, in 0:13:53.760 --> 0:13:56.680 this case, the pandemic, but we didn't do it quite 0:13:56.720 --> 0:13:59.760 as well as the Europeans. That the Europeans ran their 0:14:00.200 --> 0:14:03.480 programs to encourage people to stay in their jobs. They 0:14:03.480 --> 0:14:06.720 subsidize people working part time or people being furloughed but 0:14:06.760 --> 0:14:10.840 not laid off, whereas some classic US fashion, most workers 0:14:10.840 --> 0:14:13.360 who had to get aid had to actually lose their job, 0:14:13.760 --> 0:14:16.560 and I think that led to a lot of the 0:14:16.679 --> 0:14:21.560 job switching and bidding and mismatch that we saw um 0:14:21.640 --> 0:14:24.720 driving up wages. But the other thing, and here people 0:14:24.760 --> 0:14:27.840 like my colleagues leve a blond charge Jason Furm and 0:14:27.920 --> 0:14:33.240 Larry Somers, I think are right. Is the American Rescue 0:14:33.280 --> 0:14:39.000 Package of early, the big additional fiscal package to the 0:14:39.000 --> 0:14:43.120 Biden administration path through Congress, really was too much and 0:14:43.120 --> 0:14:46.560 too short a time. I mean, we we didn't need 0:14:46.640 --> 0:14:49.400 as much as we spent then, and it was all 0:14:49.440 --> 0:14:52.280 spent in a pretty short order, and so you did 0:14:52.320 --> 0:14:55.400 get overheating. So then you turn to the FED, and 0:14:55.400 --> 0:14:57.440 I promise I won't go on forever, But then you 0:14:57.520 --> 0:15:00.480 turn to the FED. I think the FED took a 0:15:00.520 --> 0:15:05.000 reasonable gamble, which was that if we run the economy hawk, 0:15:05.080 --> 0:15:07.560 which is a lot of good reasons to want to do, 0:15:07.760 --> 0:15:12.200 especially since we kept under shooting inflation for years before 0:15:12.280 --> 0:15:15.520 this UM, there's a chance E company overheat, but we 0:15:15.520 --> 0:15:18.400 can afford to see how loo we can go. I 0:15:18.440 --> 0:15:20.720 think the FED took the gamble, but I think they 0:15:20.760 --> 0:15:22.920 should have and I would have, sitting in their place, 0:15:23.080 --> 0:15:26.560 made the same game. But I think by the time 0:15:26.600 --> 0:15:30.640 the Biden administration announced the American Rescue Package, and certainly 0:15:31.640 --> 0:15:35.880 by middle of one, it was very clear the gamble 0:15:35.960 --> 0:15:39.240 turned out badly and they should have been changing policy 0:15:39.280 --> 0:15:41.880 and admitting they should need a change policy, meaning move 0:15:41.920 --> 0:15:46.160 towards tightening. By that, I don't fully get what happened 0:15:46.240 --> 0:15:51.200 essentially between April and December of last year. Adam. I 0:15:51.280 --> 0:15:53.320 think I can speak for Voldada, and when I say 0:15:53.360 --> 0:15:55.800 that journalists like us, we like it when people like 0:15:55.840 --> 0:16:00.760 you go on forever. So so I love to hear 0:16:00.760 --> 0:16:07.560 myself talk perfect Adam. What about the supply chains component 0:16:07.600 --> 0:16:11.000 of this. I heard another interview you did with the 0:16:11.080 --> 0:16:14.000 Marketplace podcast a couple of weeks ago, and you were 0:16:14.000 --> 0:16:17.280 talking about how there's this fear potentially with other countries 0:16:17.280 --> 0:16:20.160 that they're thinking maybe US, the US and others could 0:16:20.240 --> 0:16:23.920 start to cut them off. Countries are moving production. I 0:16:23.920 --> 0:16:26.120 think the term that's used a lot is on shore 0:16:26.440 --> 0:16:30.600 or on shoring, And you know, we're hearing announcements from 0:16:30.680 --> 0:16:33.760 from countries like Hungary. They're reporting food because of the 0:16:34.400 --> 0:16:38.600 issues around supply chains and what's happening obviously with Russia 0:16:38.640 --> 0:16:41.280 and Ukraine. So how does how does that play a 0:16:41.360 --> 0:16:44.800 part in all of this? Oh, it definitely plays a part. Atlanta, 0:16:44.960 --> 0:16:49.120 and we've got you know, the first thing that we 0:16:49.200 --> 0:16:53.480 said about supply chains is that they weren't designed and 0:16:53.600 --> 0:16:57.480 any sort of popped down way they were. They were 0:16:58.520 --> 0:17:01.080 they sort of grew up organic. You had these large 0:17:01.160 --> 0:17:05.680 multinational companies who would make individual decisions at the working 0:17:05.760 --> 0:17:08.000 level of this departments as I got to cut cost, 0:17:08.080 --> 0:17:11.119 Oh I can move this from US to China, or 0:17:11.160 --> 0:17:15.280 from China to all and or if you're German, from 0:17:15.320 --> 0:17:21.600 Boland to Romania, um and and each individual decision may 0:17:21.600 --> 0:17:24.000 have made sense, but then it ended up with a 0:17:24.119 --> 0:17:28.000 situation which was revealed exposed to be we had really 0:17:28.080 --> 0:17:32.760 overextended this projects. And similarly lots of small businesses as 0:17:32.760 --> 0:17:34.840 well as large businesses that oh, this is great just 0:17:34.960 --> 0:17:37.720 in time delivery. I don't need to worry about inventory. 0:17:37.800 --> 0:17:40.520 I can get what I need whenever I wanted. Oops, 0:17:40.560 --> 0:17:43.040 that didn't really work out. And so I think there 0:17:43.280 --> 0:17:48.320 is just a genuine learning experience and adjustment that's worth 0:17:48.400 --> 0:17:52.800 doing in in terms of recalibrating what's in the supply 0:17:52.920 --> 0:17:55.879 chains and thinking about the more top down the sense 0:17:55.960 --> 0:17:58.879 as a risky portolio of investments rather than as a 0:17:58.960 --> 0:18:02.240 system you could rely out. And my colleagues at Peterson 0:18:02.359 --> 0:18:05.119 I mentioned chap Bow, but also Mary Lovely in particular, 0:18:05.560 --> 0:18:10.800 have been doing a lot of interesting work on this um. 0:18:10.840 --> 0:18:13.600 But then as you mentioned there there it starts being 0:18:13.640 --> 0:18:17.439 this sort of political angle to it, and that's you 0:18:18.160 --> 0:18:20.719 angle to it, and that's where things really get as 0:18:20.760 --> 0:18:25.800 a trouble. The basic economic instinct and analysis is you're 0:18:25.840 --> 0:18:29.280 better off diversifying than trying to be self reliant, and 0:18:29.280 --> 0:18:35.800 you're better off stockpiling than trying to insist on production. Uh. First, directly, 0:18:35.960 --> 0:18:38.639 just over time, is put your less at risk or 0:18:38.720 --> 0:18:42.320 where you get yourself from the second, because if you 0:18:42.400 --> 0:18:46.040 go into a world where everybody's scared the other people 0:18:46.080 --> 0:18:48.560 won't give them what they want, then you get hoarding, 0:18:48.680 --> 0:18:51.480 which is what we saw sadly at the start of 0:18:51.480 --> 0:18:56.720 the COVID pandemic, where the rich country's hoarded medical equipment 0:18:56.840 --> 0:19:00.760 and vaccines rather than allowing each other the poor countries 0:19:00.840 --> 0:19:04.200 to get accessed and so and so. Now we see 0:19:05.000 --> 0:19:08.400 this situation where Germany made itself much to dependent on 0:19:08.400 --> 0:19:12.360 one supplier of energy as to Italy in this case Russia, 0:19:13.200 --> 0:19:16.920 and it would be better if they had been more diversified. 0:19:17.680 --> 0:19:23.399 But um, you know, uh, that's not the way it 0:19:23.440 --> 0:19:27.440 worked out. And yet we still have Americans officials like 0:19:27.840 --> 0:19:32.679 us t R. Ambassador tie or or or even President 0:19:32.760 --> 0:19:34.719 by himself saying we need to make more at home, 0:19:34.760 --> 0:19:37.720 we need manufacturing at home. Frankly, it's gonna make us 0:19:37.720 --> 0:19:47.119 wor saw. I feel like there is a certain element 0:19:47.160 --> 0:19:52.960 of politician who wants to bring the manufacturing back on shore, 0:19:53.040 --> 0:19:57.240 but also cap immigration um. And it seems it seems 0:19:57.280 --> 0:19:59.160 to me like you can have one or the other. 0:19:59.200 --> 0:20:01.520 If you try to do, you're gonna be in trouble. 0:20:01.560 --> 0:20:03.800 I don't I don't see how we couldn't say a 0:20:03.840 --> 0:20:08.360 fox Con type of manufacturing facility or a semiconductor foundry 0:20:08.400 --> 0:20:11.280 without you know, some supply of both low skill and 0:20:11.359 --> 0:20:14.879 high skill skill immigrants to pull that off. Is that 0:20:14.680 --> 0:20:19.000 is that basically you know the deal. I think they're 0:20:19.040 --> 0:20:22.600 exactly right on two counts. First, that for all the 0:20:22.680 --> 0:20:27.719 talk about economics, these are very much political decisions um 0:20:27.760 --> 0:20:32.320 that not by the individual companies necessary, but the elected officials. 0:20:32.640 --> 0:20:36.000 That often it's the same people who are anti immigration 0:20:36.080 --> 0:20:39.520 are also anti trade, also anti foreigner in other ways. 0:20:39.720 --> 0:20:42.200 And we saw this in the UK and Brexit as well. 0:20:42.280 --> 0:20:45.520 That it you know, it wasn't just this rational decision. No, 0:20:45.720 --> 0:20:47.919 I don't want to have too much regulation from the EU. 0:20:48.720 --> 0:20:51.159 The same people who were voting for Brexit were the 0:20:51.200 --> 0:20:54.040 same people who were nasty the refugees, for the most part, 0:20:54.080 --> 0:20:57.560 who were the same people who are just generally suspicious 0:20:57.560 --> 0:21:01.080 of foreigners. So there's that element. But you made a 0:21:01.200 --> 0:21:06.639 very important point that immigration is critical through all kinds 0:21:06.640 --> 0:21:10.439 of processes, not just manufacturing services, the functioning of the 0:21:10.520 --> 0:21:14.919 US economy. And this has been true across our entire history. 0:21:14.960 --> 0:21:18.280 This is frankly true going back to the ancient Egyptians 0:21:18.280 --> 0:21:21.800 where they brought in these the Israelites of the time 0:21:21.840 --> 0:21:25.680 to work in the fields. You know, you really set 0:21:25.680 --> 0:21:29.280 your economy back when you don't make good use of 0:21:29.320 --> 0:21:32.159 the people who want to come work there. And and 0:21:32.240 --> 0:21:36.520 so this is reassuring. When it is combined for ideological 0:21:36.600 --> 0:21:41.639 reasons or even unwittingly with anti immigration, is definitely going 0:21:41.720 --> 0:21:45.359 to fail. I also wanted to ask you how these 0:21:45.400 --> 0:21:48.720 trends manifest themselves for the average person. So it's the 0:21:48.840 --> 0:21:52.000 average American. You know, if if the average American is 0:21:52.040 --> 0:21:55.000 looking around, how do we see some of these trends 0:21:55.000 --> 0:21:57.239 playing out? I think you mentioned we're going to have 0:21:57.800 --> 0:22:01.119 less innovation, but how else is the all changing around us? 0:22:01.600 --> 0:22:05.000 On an everyday basis sort of yeah, I think well, 0:22:05.000 --> 0:22:07.560 I mean, clearly, part of it is the short term inflation, 0:22:07.640 --> 0:22:10.879 and that's very meaningful people, meaningful for people. Part of 0:22:10.920 --> 0:22:16.040 it is we're already starting to see less variety in 0:22:16.119 --> 0:22:18.639 our stories and you know, and evenage sometimes when people 0:22:18.680 --> 0:22:21.000 say that is, oh, you will feed liberal, you want 0:22:21.080 --> 0:22:26.119 twenty kinds of trees and competter. But it also means 0:22:26.160 --> 0:22:29.600 things very practically in terms of what kinds of cars 0:22:29.640 --> 0:22:33.320 are available, what kinds of computer capacities are available, what 0:22:33.480 --> 0:22:37.720 kinds of training frankly is available. Because you start pulling out, 0:22:37.760 --> 0:22:42.520 for example, the thousands of Chinese graduate students and researchers 0:22:42.560 --> 0:22:45.840 from the US science system, we don't have enough people 0:22:45.880 --> 0:22:48.760 to teach a lot of classes, uh, and to to 0:22:48.960 --> 0:22:52.400 enable us to develop our our science capabilities. And so 0:22:52.480 --> 0:22:54.720 we're already starting to see some of these things. I 0:22:54.760 --> 0:23:00.119 think we're also going to see very soon. Um, you know, 0:23:00.520 --> 0:23:04.159 probably after some correction in the stock marked whenever the 0:23:05.240 --> 0:23:08.480 I explain to you, which they will. Um, you're gonna 0:23:08.520 --> 0:23:12.320 see somewhat lower returns going forward because people are not 0:23:12.359 --> 0:23:16.160 going to be able to diversify and and money sort 0:23:16.200 --> 0:23:20.639 of shut up in inside the US doesn't have to 0:23:20.920 --> 0:23:24.560 elicit as competitive a yield. So I think people are 0:23:24.560 --> 0:23:28.240 going to really start feeling it very soon. Adam, I 0:23:28.240 --> 0:23:30.480 gotta say I personally, I do want the twenty types 0:23:30.480 --> 0:23:32.800 of cheese. Um, you can call me what everyone, I'm 0:23:33.000 --> 0:23:37.560 I'm done with that. But speaking of food, UM, that's 0:23:37.560 --> 0:23:39.600 a big topic these days. I don't know if this 0:23:39.640 --> 0:23:41.840 takes you out of your ears comfort zone at all, 0:23:41.880 --> 0:23:45.639 because it's not often that sort of food and grain 0:23:46.400 --> 0:23:50.000 and fertilizer prices enters the discussion of macro economics. But 0:23:50.040 --> 0:23:52.880 I feel like they are now and and perhaps will 0:23:52.920 --> 0:23:55.159 even more so in the future. You know, obviously Ukraine 0:23:55.240 --> 0:24:00.119 Russia are both big producers of wheat, huge producers of 0:24:00.280 --> 0:24:04.480 all manner of fertilizers. Um. You know, there's a lot 0:24:04.600 --> 0:24:08.800 of talk about potential shortages of both. We've already seen 0:24:08.800 --> 0:24:13.320 the prices go through the roof. You know, how are 0:24:13.320 --> 0:24:17.680