WEBVTT - Bloomberg Wall Street Week - June 21st, 2024 0:00:00.280 --> 0:00:04.720 This is Bloomberg Wall Street Week. The global push into infrastructure, 0:00:04.760 --> 0:00:08.480 breaking the IPO logjam in text, the financial stories that 0:00:08.560 --> 0:00:11.680 sheepe are work cutting inflation without losing jobs. Do we 0:00:11.800 --> 0:00:14.440 need rate cuts and if so, how many? Investing in 0:00:14.480 --> 0:00:16.120 a time of geopolitical turmoil. 0:00:16.200 --> 0:00:18.520 Through the eyes of the most influential voices. 0:00:18.720 --> 0:00:22.480 Ten Rogueff economists at Harvard former FDIC had Shila Bert 0:00:22.680 --> 0:00:27.360 ge CEO, Larry Kulp, San Francisco FED President Mary Daily Bloomberg. 0:00:26.840 --> 0:00:30.240 Wall Street Week with David Weston from Bloomberg Radio. 0:00:30.360 --> 0:00:33.360 Markets hold their breath for snap elections in France and 0:00:33.440 --> 0:00:37.159 Great Britain, China braces for the US elections, and Generative 0:00:37.200 --> 0:00:40.479 AI continues to drive the US stock market higher. This 0:00:40.600 --> 0:00:44.200 is Bloomberg Wall Street Week. I'm David Weston. This week 0:00:44.280 --> 0:00:48.479 Glenn Hubbard of Columbia Business School on dissatisfaction with incumbents. 0:00:48.720 --> 0:00:52.040 We need a good dose of classical liberals like Adam 0:00:52.120 --> 0:00:54.400 Smith brought back to life. 0:00:53.840 --> 0:00:56.840 And Ian Bremmer of the Eurasia Group on Russia filling 0:00:56.840 --> 0:00:58.600 a power void in West Africa. 0:00:58.840 --> 0:01:01.760 The more that Russia is on the ground, the Russians 0:01:01.760 --> 0:01:05.640 are going to end up also having control over some 0:01:05.800 --> 0:01:09.640 critical nodes of the minerals that are necessary for a 0:01:09.760 --> 0:01:11.440 transition energy revolution. 0:01:24.520 --> 0:01:26.880 We start with the US economy and some signs that 0:01:26.920 --> 0:01:29.520 the consumer may be pulling back has seen this week 0:01:29.560 --> 0:01:31.800 in the retail sales numbers, and we welcome down our 0:01:31.920 --> 0:01:34.600 very special contributar, Larry Summers of Harvard. So we had 0:01:34.600 --> 0:01:36.959 the retail sales numbers which came in lower and expected 0:01:37.120 --> 0:01:40.160 by the housing starts were really down substantially. Are we 0:01:40.200 --> 0:01:41.720 seeing a slowing economy? 0:01:42.440 --> 0:01:44.960 We may be, and it's certainly not at the pace 0:01:45.120 --> 0:01:48.840 that it once was. I think it's a real question 0:01:49.000 --> 0:01:54.000 whether we're really seeing a profound slowing or month to 0:01:54.080 --> 0:01:58.400 month fluctuations. My guess is this is still in the 0:01:58.440 --> 0:02:02.360 world of month to month fluxus situations with an underlying 0:02:02.600 --> 0:02:08.799 picture around continuing growth. But you can't be sure, and 0:02:09.240 --> 0:02:12.960 I'd certainly agree that the data has been more on 0:02:13.000 --> 0:02:16.080 the slow side for the last month or two than 0:02:16.240 --> 0:02:17.440 on the rapid side. 0:02:17.560 --> 0:02:20.080 So last week we spoke. We talked about the possible 0:02:20.080 --> 0:02:23.120 economic policies of a Donald Trump if he were returned 0:02:23.360 --> 0:02:25.080 to the White House, because he had floated the idea 0:02:25.120 --> 0:02:28.560 of maybe having tariffs replace some or all of income taxes. 0:02:28.720 --> 0:02:31.399 You were not very enthusiastic with that. Since then, he's 0:02:31.440 --> 0:02:35.040 responded to you very specifically on a podcast called all 0:02:35.160 --> 0:02:37.919 In where they asked him about well, how he responded 0:02:37.960 --> 0:02:40.920 to your thoughts on tariff's and he said he respected you. 0:02:41.000 --> 0:02:43.120 He gave you nice plaudit said, he respects you. You 0:02:43.520 --> 0:02:45.799 speak your mind. Is I think what he said? But 0:02:45.880 --> 0:02:48.280 at same time, he really likes tariffs, he said, because 0:02:48.320 --> 0:02:53.040 it shows the power of a country, both economically and politically. Well, 0:02:53.200 --> 0:02:56.000 what do you make of his endorsement of tariffs as 0:02:56.080 --> 0:02:57.959 a major tool of policy. 0:02:58.440 --> 0:03:00.680 I don't see the evidence for his. 0:03:02.240 --> 0:03:06.880 Belief. First of all, the tariffs he proposes are going 0:03:06.960 --> 0:03:09.880 to be levied against Canada, They're going to be levied 0:03:09.960 --> 0:03:15.480 against our traditional European allies. If they are a tool 0:03:15.560 --> 0:03:19.360 of power and intimidation, it seems to me they should 0:03:19.360 --> 0:03:24.960 be used much more selectively than he has proposed. Second, 0:03:25.760 --> 0:03:29.160 when you launch attacks, then others respond and the whole 0:03:29.240 --> 0:03:33.840 thing can spiral. The classic example of a major tariff 0:03:33.880 --> 0:03:38.840 policy in American history was Smooth Hawley, and it contributed 0:03:38.960 --> 0:03:42.280 to making the depression great. 0:03:42.720 --> 0:03:43.480 As I look. 0:03:43.360 --> 0:03:49.119 Around the world at countries who have seen tariffs as 0:03:49.320 --> 0:03:53.760 the center of their economic strategy to make a nationalist 0:03:53.920 --> 0:03:58.720 point vis a vis other countries. The examples look like 0:03:58.880 --> 0:04:02.880 places like that, like Argentina and a number of places 0:04:02.960 --> 0:04:08.000 in Latin America where it has not been so successful. 0:04:08.440 --> 0:04:11.280 So I'd like to see what. 0:04:12.800 --> 0:04:13.680 The case. 0:04:14.880 --> 0:04:14.920 Is. 0:04:15.800 --> 0:04:21.200 But this is a case where it's about as universal 0:04:22.000 --> 0:04:28.200 among economists who study these things that you shouldn't pursue 0:04:29.120 --> 0:04:36.520 systematic across the board tariffs for long periods of time. 0:04:37.200 --> 0:04:39.640 Let's talk about change, because there's an awful lot of 0:04:39.720 --> 0:04:42.000 things that are changing around us right now. Whether it's 0:04:42.080 --> 0:04:45.240 climate that you've talked about at fair amount, geopolitics, the 0:04:45.480 --> 0:04:47.840 global economy, there are a lot of changes going at 0:04:47.839 --> 0:04:51.000 the same time. Are we going through a particularly tumultuous 0:04:51.120 --> 0:04:53.680 time of change right now? Do you think around us? 0:04:54.000 --> 0:04:55.040 Or has it always been? 0:04:55.120 --> 0:05:00.480 Thus, here's the sense I have, David. I was fortunate 0:05:00.640 --> 0:05:07.440 enough to welcome baby granddaughter, Francis Joanne into the world 0:05:07.600 --> 0:05:12.440 when my daughter had my first granddaughter, about ten days ago. 0:05:13.080 --> 0:05:16.279 So I've been thinking about her life and it made 0:05:16.320 --> 0:05:21.400 me think about my grandmother. My grandmother lived from nineteen 0:05:21.560 --> 0:05:26.560 hundred to nineteen seventy four. She saw indoor plumbing come. 0:05:27.040 --> 0:05:32.040 She saw electricity come. She saw a first telephone, then radio, 0:05:32.320 --> 0:05:40.520 then TV movies come. She saw air conditioning. She saw antibiotics, 0:05:40.600 --> 0:05:45.719 which made childhood death a rarity. She saw the ability 0:05:45.839 --> 0:05:49.800 to no longer ride in horses, but instead to be 0:05:49.839 --> 0:05:55.360 able to fly across the country in five hours. My 0:05:55.600 --> 0:06:01.159 life almost now as long as hers was yours. We've 0:06:01.200 --> 0:06:05.320 seen a lot of history. We've seen a lot of change. Yes, 0:06:05.560 --> 0:06:10.479 we've seen computers. We've seen the cell phone. We've seen, yes, 0:06:10.720 --> 0:06:18.440 the Bloomberg terminal, we've seen more modern financial markets. But 0:06:18.640 --> 0:06:22.000 I think you'd have to agree that we've saw much, 0:06:22.200 --> 0:06:28.520 much less change than my grandmother's generation did. I have 0:06:28.640 --> 0:06:33.800 a suspicion that my granddaughter is going to witness history 0:06:34.720 --> 0:06:41.880 like my grandmother did. And most importantly, I think we're 0:06:41.960 --> 0:06:46.520 going to see a step change with what happens in 0:06:47.360 --> 0:06:53.240 artificial intelligence. As I've said before, the wheel was awfully fundamental, 0:06:53.839 --> 0:06:56.760 but once you have the wheel, you don't automatically get 0:06:56.839 --> 0:07:01.680 more and better wheels. Same thing with electric but artificial 0:07:01.800 --> 0:07:07.760 intelligence has the capacity to make better artificial intelligence, and 0:07:07.880 --> 0:07:12.760 that puts in a kind of upward exponential ratchet that 0:07:13.280 --> 0:07:18.120 isn't a feature of any other technological change. So my 0:07:18.320 --> 0:07:24.120 daughter's going to witness seismic change, and the granddaughter is 0:07:24.160 --> 0:07:27.160 going to witness seismic change, and the issue. 0:07:27.000 --> 0:07:31.680 Is going to be can we manage it so we avoid. 0:07:32.120 --> 0:07:40.480 The catastrophes that were also part of my grandmother's interval 0:07:40.640 --> 0:07:41.360 on this earth. 0:07:41.560 --> 0:07:43.360 Larry, thank you so very much for being with us 0:07:43.360 --> 0:07:46.200 again this week. That's our special contriitor. Larry Summers of 0:07:46.360 --> 0:07:50.640 Harvard Markets took a day off for the Juneteenth holiday 0:07:50.720 --> 0:07:52.760 this week, but in the four days of trading, the 0:07:52.880 --> 0:07:56.119 S and P five hundred continues upward move, adding another 0:07:56.240 --> 0:07:59.000 six ten percent to end the week at fifty four 0:07:59.000 --> 0:08:01.600 to sixty five, which happens to be just above the 0:08:01.760 --> 0:08:04.520 new median level of fifty four to fifty that our 0:08:04.560 --> 0:08:06.680 Bloomberg l's are predicting for the end of the year. 0:08:06.960 --> 0:08:09.280 The NASAC was flat for the week, as in Vidio 0:08:09.320 --> 0:08:11.440 took a step back, and the yield and the tenure 0:08:11.600 --> 0:08:14.200 ended the week up three basis points at four point 0:08:14.280 --> 0:08:16.240 twenty five percent to take us through the week in 0:08:16.320 --> 0:08:19.960 the markets. Welcome back now, Sanalvias High Franklin Templeton Fixed 0:08:20.000 --> 0:08:22.920 Income Chief Investment Officer, Welcome back always good to have you. 0:08:23.040 --> 0:08:25.280 So give us your take on what the markets told 0:08:25.360 --> 0:08:26.560 us this week, if anything. 0:08:27.600 --> 0:08:30.200 So, you know, what I find really quite interesting is 0:08:30.320 --> 0:08:33.160 what markets didn't tell us, in the sense that, now 0:08:33.200 --> 0:08:35.719 it's been a couple of weeks, we're actually seeing I 0:08:35.880 --> 0:08:39.760 know that, you know, we talk about big sellers, big rallies. 0:08:39.760 --> 0:08:42.560 We're talking about three basis points, four basis points relative 0:08:42.679 --> 0:08:46.720 to what we've become accustomed to and fixed fixed in markets. 0:08:46.840 --> 0:08:49.640 The last week, week and a half actually has been 0:08:49.840 --> 0:08:52.600 pretty stable, you know, despite the fact that we've had 0:08:53.160 --> 0:08:56.280 data going one direction data going the other direction. What 0:08:56.440 --> 0:08:59.480 I think is quite interesting is how little fixed in 0:08:59.679 --> 0:09:00.840 market have actually moved. 0:09:00.880 --> 0:09:02.439 We're largely going sideways here. 0:09:03.080 --> 0:09:05.400 So we heard from Lurie Summer's just now saying he's 0:09:05.440 --> 0:09:07.680 not sure he can see a trend yet. The numbers 0:09:07.720 --> 0:09:09.760 do seem to be a bit softer. We certain retail 0:09:09.800 --> 0:09:12.280 sales housing starts this week. But do you agree that 0:09:12.440 --> 0:09:14.120 is there a trend you can discern so far? 0:09:15.320 --> 0:09:16.920 No, I would agree with him. 0:09:17.000 --> 0:09:20.000 Here's the thing. There are two things. One is that 0:09:20.400 --> 0:09:22.360 it is too soon to say that we're seeing a trend. 0:09:22.720 --> 0:09:26.160 The second thing is, even if we are, we are 0:09:26.240 --> 0:09:29.760 coming off an incredibly strong economy, we need to cool 0:09:29.840 --> 0:09:33.280 down a little bit. I would say that the type 0:09:33.320 --> 0:09:38.360 of cooling we've seen so far is probably generally welcome 0:09:38.679 --> 0:09:41.840 for the FED. We have been growing beyond potential now 0:09:41.960 --> 0:09:45.240 for a while, and we've had more infasion than we need. 0:09:45.360 --> 0:09:49.400 We've been growing above potential, and unemployment is coming off. 0:09:49.360 --> 0:09:51.839 Forty year loose. We can't expect to stay there. 0:09:52.160 --> 0:09:53.640 So you know, this is. 0:09:55.200 --> 0:09:57.480 Some slowing, but I repeat. 0:09:57.280 --> 0:10:00.240 I'd say it's probably somewhat welcome to those people making 0:10:00.320 --> 0:10:01.160 decisions at. 0:10:01.040 --> 0:10:02.920 The FED so soon as you know so well. Here 0:10:02.960 --> 0:10:05.400 at Bloomberg we pay most attention to FED. What's the 0:10:05.480 --> 0:10:07.280 FED good to think about the economy? We taking a 0:10:07.320 --> 0:10:09.760 thing about the numbers? Is there any message you think 0:10:09.800 --> 0:10:11.720 going forward to the FED right now? As we keep waiting, 0:10:11.800 --> 0:10:13.320 but are they going to cut it? They're not going 0:10:13.400 --> 0:10:14.400 to cut When are they going to cut? 0:10:15.440 --> 0:10:19.640 You know, honestly, at this stage, the market has accepted 0:10:19.760 --> 0:10:21.599 that the FED is not going to give it the 0:10:21.840 --> 0:10:24.360 outrageous number of cuts that the market was demanding at 0:10:24.360 --> 0:10:27.240 the start of the year. We're looking at still less 0:10:27.280 --> 0:10:29.920 than two cuts. It's around one and three quarters so far. 0:10:30.080 --> 0:10:33.000 Maybe the FED cuts twice, maybe it cuts once. The 0:10:33.040 --> 0:10:35.480 bottom line is I think what's more interesting in many 0:10:35.520 --> 0:10:38.480 ways is the total number of cuts, where I think, 0:10:38.720 --> 0:10:41.280 here I'm still not in agreement with what the FED 0:10:41.400 --> 0:10:44.600 is forecasting, which would take FED funds all the way 0:10:44.720 --> 0:10:48.120 sub for not next year but the year after. Overall, 0:10:48.240 --> 0:10:50.360 whether we go for one cut or two cuts this 0:10:50.559 --> 0:10:53.880 year is almost besides the point. The FED will FED 0:10:53.960 --> 0:10:56.480 wants to cut, and I think they will probably have 0:10:56.760 --> 0:10:59.400 space to cut by the end of the year. I 0:10:59.559 --> 0:11:04.000 just don't think it's going to be a dramatic series 0:11:04.080 --> 0:11:07.520 of cuts absent some exogynous. 0:11:06.880 --> 0:11:10.000 Shock of some kind, I'd say, and it's not my baseline. 0:11:09.600 --> 0:11:12.240 Right now, but of course things happen, and I think 0:11:12.280 --> 0:11:15.760 that's really important right to think about where the market 0:11:15.920 --> 0:11:17.920 is today and where it's come from. 0:11:19.040 --> 0:11:22.160 So what about data coming from outside the United States? 0:11:22.240 --> 0:11:24.679 We sid tend to focus on economic data here what's 0:11:24.720 --> 0:11:26.600 going with the FED, but we also have, for example, 0:11:26.640 --> 0:11:29.360 elections coming from France and the UK. There are a 0:11:29.360 --> 0:11:32.160 lot of things going on around the world, and I. 0:11:32.200 --> 0:11:33.760 Think that's actually something. 0:11:34.080 --> 0:11:37.760 It almost feels the combination of summer and the calm 0:11:37.840 --> 0:11:40.360 before the storm in some ways because You're absolutely right. 0:11:40.760 --> 0:11:44.760 We are seeing we are seeing political volatility over the pond, 0:11:44.840 --> 0:11:47.840 without a doubt, and I think the one area where 0:11:47.880 --> 0:11:49.959 we are seeing it is probably in the dollar. The 0:11:50.040 --> 0:11:54.200 dollar strength probably does reflect a certain amount of anxiousness 0:11:54.600 --> 0:11:59.880 about French elections. The UK elections are perhaps more predetermined, 0:12:00.360 --> 0:12:03.439 and that's coming up in July fourth, and importantly, our 0:12:03.520 --> 0:12:06.559 own set of elections next week I think will probably 0:12:06.640 --> 0:12:10.040 have the market much more focused after that on the 0:12:10.120 --> 0:12:13.240 outcome to our own elections. So yeah, political, you know, 0:12:13.280 --> 0:12:18.120 politically induced volatility is likely to probably go up, and 0:12:18.280 --> 0:12:20.280 that's something which we're paying a lot of attention to, 0:12:20.600 --> 0:12:22.480 looking to take advantage of it mainly. 0:12:22.720 --> 0:12:24.080 So now, it's always great to have you with us, 0:12:24.120 --> 0:12:28.600 Thank you so much. As Sanadasai of Franklin Templeton coming 0:12:28.679 --> 0:12:31.959 up the economics behind the hostility to incumbents around the 0:12:32.040 --> 0:12:34.760 world with Glenn Hubbard of the Columbia Business School. 0:12:35.000 --> 0:12:38.160 People are disaffected with the status quo and with the 0:12:38.280 --> 0:12:40.760 fact that status quo politicians, whether it's in the United 0:12:40.800 --> 0:12:43.599 States or in continental Europe, are just telling them, you know, 0:12:43.840 --> 0:12:44.839 like life is fine. 0:12:45.880 --> 0:12:48.199 That's next on Wall Street Week. I'm Bloomberg. 0:12:50.520 --> 0:12:54.680 This is Bloomberg Wall Street Week with David Weston from 0:12:54.840 --> 0:12:55.760 Bloomberg Radio. 0:13:02.400 --> 0:13:05.079 This is Waltreet Week. I'm David Weston. As we move 0:13:05.200 --> 0:13:08.600 past elections in Europe, India, and South Africa and toward 0:13:08.679 --> 0:13:10.920 them in France, the United Kingdom and the United States, 0:13:11.160 --> 0:13:14.000 the one constant seems to be large portions of the 0:13:14.040 --> 0:13:18.040 population very dissatisfied with their economic circumstances. To help us, 0:13:18.080 --> 0:13:21.480 don't understand where the disaffection may be rooted. Welcome back now, 0:13:21.600 --> 0:13:24.400 Glenn Hubbard of the Columbia Business School. Doctor Hubbard served 0:13:24.400 --> 0:13:27.240 as chair of President George W. Bush's Economic Council and 0:13:27.440 --> 0:13:30.079 is the author, most recently of The Wall and the Bridge. 0:13:30.120 --> 0:13:31.760 So welcome back. Great to have you here taking it. 0:13:32.120 --> 0:13:34.880 So go right to that question, because people seem to 0:13:34.960 --> 0:13:36.880 be a lot of people seem to be very disaffected 0:13:36.920 --> 0:13:39.360 in the United States, but also in Europe, even India, 0:13:39.640 --> 0:13:42.800 and yet the numbers, if you look at the numbers, growth, numbers, unemployment, 0:13:43.080 --> 0:13:44.640 I'm not sure why they're so unhappy. 0:13:45.120 --> 0:13:47.320 Well, it's a great question, and I think the American 0:13:47.400 --> 0:13:49.920 people are looking for more than come on, man from 0:13:49.960 --> 0:13:51.920 the White House, that they're looking for an explanation. And 0:13:52.520 --> 0:13:54.400 I think it's the numbers are right and they're not 0:13:54.520 --> 0:13:57.880 being fudged. But under the hood, let's start with inflation. 0:13:58.440 --> 0:14:01.880 So many people say, well, economists say, inflation rates are 0:14:01.960 --> 0:14:04.800 coming down, but the prices of things I'm buying are 0:14:04.840 --> 0:14:06.960 still higher than what I'm used to and my wages 0:14:07.080 --> 0:14:09.439 are not keeping up. That is a real problem, And 0:14:09.559 --> 0:14:14.640 inflation stands for a problem of unintended consequences of elite's decisions. 0:14:15.240 --> 0:14:17.559 And it's not the only one. We did it in globalization, 0:14:17.760 --> 0:14:20.320 We've done it in technological change, we did it in 0:14:20.360 --> 0:14:23.920 the global financial crisis. I think gaverage people might be 0:14:24.040 --> 0:14:24.840 onto something here. 0:14:25.080 --> 0:14:27.200 At the same time, Real wages are going up at 0:14:27.240 --> 0:14:28.880 this point in the United States, aren't they. People don't 0:14:28.880 --> 0:14:29.880 seem to appreciate that. 0:14:30.400 --> 0:14:33.680 Well, I think they finally are, but only modestly. And 0:14:33.760 --> 0:14:37.320 I think people are fearful about the future as well. 0:14:37.440 --> 0:14:41.200 We're being offered policy platforms, frankly by both the major 0:14:41.280 --> 0:14:44.080 party candidates that don't really have growth at the center. 0:14:44.480 --> 0:14:46.080 Well, what would it take to get growth? 0:14:46.720 --> 0:14:50.520 Well, I think it focuses on getting productivity growth and 0:14:50.680 --> 0:14:54.240 getting people able to work productively in the economy that 0:14:54.360 --> 0:14:58.120 we have, and productivity growth is about promoting investment, but 0:14:58.240 --> 0:15:01.760 it's also about promoting innovation, you know, rather than massive 0:15:01.840 --> 0:15:05.600 industrial policy subsidies, why not a lot more money for 0:15:05.720 --> 0:15:08.760 basic research for the new technologies of tomorrow. 0:15:09.120 --> 0:15:11.080 Where was the last time we had real productivity growth 0:15:11.120 --> 0:15:11.720 in the United States? 0:15:12.840 --> 0:15:16.240 Well, right now we are actually experiencing productivity growth. But 0:15:16.320 --> 0:15:19.440 the real booms in productivity growth were the period after 0:15:19.560 --> 0:15:22.360 the Second World War to the nineteen seventies, and then 0:15:22.400 --> 0:15:25.160 again in the mid nineteen nineties to about the mid 0:15:25.280 --> 0:15:27.680 of the first decade in the two thousands. There's no 0:15:27.840 --> 0:15:31.240 reason we can't have better productivity growth, particularly with all 0:15:31.320 --> 0:15:33.520 the encouraging news about artificial intelligence. 0:15:33.560 --> 0:15:35.920 But with both of those booms that you've described after 0:15:35.960 --> 0:15:37.720 World War Two and then in the mid nineteen nineties, 0:15:37.880 --> 0:15:40.200 how much of that was technological so almost it was 0:15:40.240 --> 0:15:43.040 actually changing the way we made things, which made it 0:15:43.120 --> 0:15:43.920 much more productive. 0:15:44.360 --> 0:15:47.880 Technology played a very big role, particularly in the second episode. 0:15:47.920 --> 0:15:51.600 But we're on the cusp of very major possibilities from 0:15:51.680 --> 0:15:55.600 artificial intelligence. The question is do we have the political 0:15:55.760 --> 0:15:59.120 will and skill to prepare people for that world because 0:15:59.200 --> 0:16:01.440 the pace of chan is going to be very fast. 0:16:02.120 --> 0:16:05.080 You understand economics so well, but also understand it from 0:16:05.120 --> 0:16:07.480 inside the White House where you were. How do you 0:16:07.560 --> 0:16:10.120 bridge the gap between what good economics would give you 0:16:10.560 --> 0:16:12.760 and what the people want? How do you make them 0:16:12.880 --> 0:16:14.280 want good economics? 0:16:14.920 --> 0:16:16.480 Well, I think it's a couple of things. First of all, 0:16:16.560 --> 0:16:18.800 you need to understand why people feel the way they do. 0:16:18.960 --> 0:16:21.479 A good politician, and I would argue a good economist 0:16:22.000 --> 0:16:24.440 is out there visiting with people, trying to see what's 0:16:24.480 --> 0:16:27.680 on people's minds. And you have to pose economics as 0:16:27.720 --> 0:16:30.960 the solution to a real problem. You know, when economists 0:16:31.000 --> 0:16:33.520 love markets and I love markets. The reason to love 0:16:33.600 --> 0:16:36.520 markets is not because markets are great, it's because what 0:16:36.680 --> 0:16:40.000 they produce. And we have to always make the connection 0:16:40.200 --> 0:16:43.800 between an economic mechanism and really helping people flourish. 0:16:44.440 --> 0:16:46.760 Where is that being done well around the world today, 0:16:46.880 --> 0:16:48.040 If anywhere. 0:16:47.960 --> 0:16:51.520 Gosh, it would be hard to find. We have done 0:16:51.560 --> 0:16:54.880 it in this country before. We did it in the 0:16:55.200 --> 0:16:57.080 nineteenth century, we did it in the middle of the 0:16:57.160 --> 0:16:58.840 twentieth century. We have done it. 0:16:59.320 --> 0:17:00.400 I would argue we need. 0:17:00.320 --> 0:17:04.160 A good dose of classical liberals like Adam Smith brought 0:17:04.240 --> 0:17:04.879 back to life. 0:17:05.480 --> 0:17:08.960 That's fascinating to what extent is the problem because we've 0:17:09.000 --> 0:17:12.240 subsidized so much of industry. I mean, we had the 0:17:12.320 --> 0:17:14.840 Great Financial Crisis, and I think most of us agree 0:17:14.840 --> 0:17:17.240 there had to be some intervention there. We had the pandemic. 0:17:17.520 --> 0:17:19.160 I think most would agree something had to be done 0:17:19.200 --> 0:17:21.919 about economy was about to a standstill. At the same time, 0:17:22.000 --> 0:17:24.000 we have the government playing in the game a lot 0:17:24.080 --> 0:17:27.119 more than just refereeing. At this point, it's a big problem. 0:17:27.400 --> 0:17:30.680 I mean, the clinical answer is that risks misallocating a 0:17:30.760 --> 0:17:33.960 lot of capital. But the more fundamental answer is government 0:17:34.080 --> 0:17:37.640 is not good at two things. One picking winners, which 0:17:37.720 --> 0:17:40.560 is what this is about, and more important, letting go 0:17:40.680 --> 0:17:44.800 of losers. The fear is that these subsidies become quasi 0:17:45.119 --> 0:17:49.359 permanent entitlements from the state that dull competition. You know, 0:17:49.680 --> 0:17:54.239 decades ago, people like Hayek, great economists, Nobel Laureate had 0:17:54.280 --> 0:17:56.600 this figured out and his essay on the Use of knowledge. 0:17:56.640 --> 0:18:00.080 You're better off having markets figure these things out of 0:18:00.160 --> 0:18:03.200 government being behind the scenes, maybe with new technologies, but 0:18:03.320 --> 0:18:04.399 not subsidies. 0:18:04.600 --> 0:18:06.880 As we look at some of the expression, I would 0:18:06.880 --> 0:18:10.800 think of satisfaction, maybe even anger. In Europe we had 0:18:10.840 --> 0:18:12.880 with the problem intary elections. Some of what we're seeing 0:18:12.920 --> 0:18:15.720 in polling here, is it because people think that they 0:18:15.840 --> 0:18:18.080 see a better route or they're just so unhappy with 0:18:18.160 --> 0:18:20.720 the current one they'll take anything because it's not clear 0:18:20.760 --> 0:18:24.240 to me always that there's a cohesive theory of economics. 0:18:24.560 --> 0:18:26.160 On the other side, that makes a lot of sense. 0:18:26.320 --> 0:18:27.080 It's a great point. 0:18:27.119 --> 0:18:30.200 I think people are disaffected with the status quo and 0:18:30.400 --> 0:18:32.879 with the fact that status quo politicians, whether it's the 0:18:32.960 --> 0:18:35.680 United States or in continental Europe, are just telling them, 0:18:35.840 --> 0:18:39.680 you know, life is fine. I don't really see articulate plans. 0:18:40.440 --> 0:18:43.040 On the other side. The idea that we would replace 0:18:43.200 --> 0:18:47.720 mushy industrial policy with tariffs is like, we're going back 0:18:47.800 --> 0:18:51.480 to a mercantilism debate from the eighteenth century. 0:18:51.840 --> 0:18:54.080 And we talked about some of what's going wrong right now. 0:18:54.440 --> 0:18:56.440 But you have a piece now out of National Affairs 0:18:56.520 --> 0:19:00.520 talking about sort of economic models different of the years 0:19:00.800 --> 0:19:03.560 and why maybe we need maybe a new model take 0:19:03.640 --> 0:19:05.680 us through what we have been through and where we 0:19:05.760 --> 0:19:06.080 need to go. 0:19:07.040 --> 0:19:10.239 Well, you know, the historical debate over mercantilism is one 0:19:10.280 --> 0:19:14.240 we're living through again today. The traditional response from economists 0:19:14.280 --> 0:19:17.760 is you need to focus on markets. Yet as economists, 0:19:17.800 --> 0:19:20.520 we often make that sound very abstract, and why should 0:19:20.520 --> 0:19:23.000 you care about markets? The reason is that they are 0:19:23.119 --> 0:19:27.960 delivering the best outcomes for all of us in the economy. Now, 0:19:28.040 --> 0:19:31.000 markets don't always work perfectly. The title of the piece 0:19:31.040 --> 0:19:33.879 I wrote was markets for the People. When would you 0:19:34.000 --> 0:19:37.720 step in? You'd step in for national defense reasons, for example, 0:19:38.160 --> 0:19:41.800 you would step into support basic research and innovation. But 0:19:41.920 --> 0:19:43.760 we need that kind of a new. 0:19:43.760 --> 0:19:47.399 Focus, and there are massive slowdowns the Great Depression, I 0:19:47.480 --> 0:19:50.480 mean the Great financial crisis, I assume where you would say, yeah, 0:19:50.480 --> 0:19:52.600 the government does need to step in there. You can't 0:19:52.680 --> 0:19:54.080 just let the markets bail us out of that. 0:19:54.320 --> 0:19:56.680 Well, correct, But let's go back to the intuition and 0:19:56.760 --> 0:19:59.400 economists like Cain's had at the time of the depression. 0:19:59.720 --> 0:20:02.400 It was it's really the notion of the state being 0:20:02.440 --> 0:20:05.640 a kind of actor of last resort in a true crisis, 0:20:05.800 --> 0:20:09.040 you know, really awful events, the state steps in. But 0:20:09.200 --> 0:20:12.680 now the state keeps stepping in. When does the state 0:20:12.920 --> 0:20:16.440 not step in? That's not what Caines had in mind. 0:20:16.800 --> 0:20:19.240 And it's not even a question about budget as much 0:20:19.280 --> 0:20:23.720 as it is dulling the competitive senses of the private economy. 0:20:23.760 --> 0:20:25.520 If the state is always going to bail us out. 0:20:26.160 --> 0:20:28.520 Is it a question of democracy as well, ironically in 0:20:28.600 --> 0:20:30.679 the sense that once the people see that they can 0:20:30.720 --> 0:20:33.480 get bailed out, then there's sort of an impetus to 0:20:33.640 --> 0:20:35.879 have their elective representatives bailing out. And people want to 0:20:35.880 --> 0:20:38.399 get re elected, so they say, let's make sure we 0:20:38.720 --> 0:20:40.240 smooth over all the rough patches. 0:20:40.440 --> 0:20:43.399 Exactly so, except the problem is we can't do it. 0:20:43.880 --> 0:20:46.560 If you look ahead in the next twenty years of 0:20:46.680 --> 0:20:50.040 the nation's fiscal policy, we are going to need to 0:20:50.080 --> 0:20:52.840 spend more on aging Americans. We're going to have to 0:20:52.960 --> 0:20:57.920 raise spending on defense. No one seems excited about raising taxes. 0:20:58.440 --> 0:20:59.840 This math doesn't work. 0:21:00.840 --> 0:21:03.240 How do we create a society where we have equal 0:21:03.280 --> 0:21:05.720 opportunity without guaranteeing results? 0:21:06.359 --> 0:21:07.000 Great question. 0:21:08.000 --> 0:21:10.400 I think we need to have a right to opportunity, 0:21:10.640 --> 0:21:13.879 much as we have property rights in markets. But a 0:21:14.000 --> 0:21:17.240 right to an opportunity is not the right to a result. So, 0:21:17.720 --> 0:21:20.440 to be specific, a right to an opportunity could be 0:21:21.000 --> 0:21:25.920 much more support for education, for training for places that 0:21:26.040 --> 0:21:29.639 have been left behind, for the government supporting much more 0:21:29.720 --> 0:21:32.480 in the way of basic research. All of that's very 0:21:32.680 --> 0:21:35.600 different than a system that says results only matter. 0:21:35.880 --> 0:21:40.040 How do you converensate for very large differences where people 0:21:40.119 --> 0:21:42.160 start out in the process. I mean, we all differ 0:21:42.280 --> 0:21:43.720 of where we start out in a matter of where 0:21:43.760 --> 0:21:45.720 we went to school, where we grew up, whatever. But 0:21:45.800 --> 0:21:48.040 there are some huge differences here where some people are 0:21:48.119 --> 0:21:50.879