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Speaker 1: Is the good news for America in terms of consumer

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Speaker 1: spending coming on the heels of bad news for fiscal responsibility.

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Speaker 1: And this is sort of one of the angsts underpinning

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Speaker 1: some of the longer term yields and how much they've

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Speaker 1: raised in joining US to help parse through exactly this question.

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Speaker 1: David Malpass, former President of the World Bank, here with

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Speaker 1: us in New York. David to that question, how much

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Speaker 1: are the buoyant retail sales, the resilience of the economy

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Speaker 1: being financed by a increasingly fiscally irresponsible government, not just

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Speaker 1: in the US, but globally.

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Speaker 2: Yeah, this is a huge factor because as they pump

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Speaker 2: out money in terms of spending, not just the fiscal deficit,

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Speaker 2: but all of the spending has to be added up

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Speaker 2: and its material within the global economy. So they're an

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Speaker 2: engine of demand that's sitting in the US. You know,

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Speaker 2: we're talking about two trillion dollars per year fiscal deficit.

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Speaker 2: It used to be after a crisis like the COVID crisis,

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Speaker 2: you would bring down the fiscal deficit, but this time

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Speaker 2: it's gone up and planned to go up even more

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Speaker 2: into the future. And so that has to be at

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Speaker 2: one explanation. That was my Wall Street Journal column a

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Speaker 2: couple of weeks ago.

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Speaker 3: The idea that.

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Speaker 2: As you try to raise interest rates, it doesn't really

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Speaker 2: get at this part of demand.

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Speaker 1: There's also a question about how much of some sort

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Speaker 1: of united effort there can be by global developed markets,

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Speaker 1: by governments that are not on the same page anymore

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Speaker 1: in the same kind of way. How much is there

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Speaker 1: sort of a go it alone, keep borrowing until you

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Speaker 1: can't any more feeling that wasn't there, say, ten years ago.

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Speaker 2: Clearly during COVID, there was an official policy of IMF,

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Speaker 2: of ACB of the US to spend as much as possible,

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Speaker 2: and a lot of the developing countries did that. They

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Speaker 2: borrowed at floating rates, So now there is the need

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Speaker 2: for adjustment. There was talk on your previous sector segment

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Speaker 2: of whether five percent interest rates is sustainable. I find

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Speaker 2: that I'm really skeptical of that because if you think

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Speaker 2: of the whole concept of finance, it's based on a

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Speaker 2: return on investment. So if your riskless rate is five percent,

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Speaker 2: what possible projects could you be doing that are going

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Speaker 2: to return more than five percent over a period of time.

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Speaker 2: It doesn't add up. So we have to get to

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Speaker 2: a spot where there can be lower interest rates, I

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Speaker 2: think that requires a lot more downward pressure on prices

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Speaker 2: from production. So the whole question mark variable is how

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Speaker 2: much energy production is going to be done in order

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Speaker 2: to make.

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Speaker 3: Up for all these deficits.

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Speaker 2: You can't run the world economy on eighty five dollars

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Speaker 2: a barrel oil with a hostage crisis going on.

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Speaker 3: That's not going to be sustainable.

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Speaker 4: Yeah, this is fascinating. There's a David Mailpass World Bank

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Speaker 4: president who had a certain aura about him. We've got

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Speaker 4: to sit here, the bear Stearns David Malpass. We're talking

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Speaker 4: here in immediacy and changes as you come out of

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Speaker 4: the World Bank into the private sector. Again, been David

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Speaker 4: mill Pass fears for years. I don't see the politicians

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Speaker 4: agreeing with you. In Washington, Brussels, London, the rest of

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Speaker 4: the capitals around the world, it's fence fends fend David.

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Speaker 3: How do we get here?

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Speaker 2: Yeah, the capitals are really resistant to making any changes

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Speaker 2: in the growth of government. So in each of the

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Speaker 2: cities you named, those cities are booming while their countries

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Speaker 2: are not doing nearly as well, and that goes into

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Speaker 2: the federal reserve policy, which I've also complained about.

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Speaker 3: Look what we've done.

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Speaker 2: We've gone from zero percent interest rates now to five

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Speaker 2: and people are five and a half, and people are saying, well,

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Speaker 2: we might just keep them at five.

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Speaker 3: It doesn't make any.

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Speaker 4: More associate for elites, is that what this is all for?

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Speaker 3: Least?

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Speaker 2: Think of how much money has made when you go

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Speaker 2: to zero. You know that Wall Street and the financial

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Speaker 2: markets get really rich on zero percent rates. Now as

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Speaker 2: you adjust, they've locked in their low rates and everybody

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Speaker 2: else is paying floating rates. So the five it doesn't

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Speaker 2: make any more sinse to talk about high for long,

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Speaker 2: high interest rates for long. Then it was for low

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Speaker 2: for long. Why did we go year after year with

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Speaker 2: economists saying low for long is great for the world.

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Speaker 2: It wasn't It allocated capital to narrow But this.

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Speaker 4: Is critical now you were discussing, as you have for

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Speaker 4: a generation, David Malpass, the idea that this is a

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Speaker 4: policy for elites. When we clear that, do we clear

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Speaker 4: it with stability and controlled glide pass or do you

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Speaker 4: see jump conditions and instability.

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Speaker 2: Here That's yet to be seen. And it depends then

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Speaker 2: on where it settles out. So if oil prices stay

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Speaker 2: at eighty five. I think that ends up forcing the

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Speaker 2: Fed to keep the rates long. The wealthy are able

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Speaker 2: to adjust to that, and they preserve their capital. If

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Speaker 2: you could get oil prices down, it would be an

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Speaker 2: effective response to Russia, to Iran, the to to the

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Speaker 2: power that's growing outside the United States. So that becomes

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Speaker 2: a critical issue just.

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Speaker 3: Like it was.

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Speaker 2: I I hate to think back in history, but in

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Speaker 2: the Reagan administration in eighty eighty one eighty two, the

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Speaker 2: critical turning point was oil was plunging as markets resolved,

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Speaker 2: and then you got a favorable recovery.

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Speaker 1: Right now, we seem to be further and further away

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Speaker 1: from the reality that you're putting forth as a likelihood

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Speaker 1: for some sort of easy resolution to what we're dealing with.

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Speaker 1: Right now, it seems like oil prices are on the

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Speaker 1: brink of actually a breakout higher as a result of

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Speaker 1: the conflict in the Middle East. Just how vulnerable is

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Speaker 1: the global economy if it does go to one one

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Speaker 1: hundred and ten one hundred and twenty dollars in barrel.

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Speaker 3: It's a dangerous world.

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Speaker 2: And one problem here is the US won't be the

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Speaker 2: one that feels the brunt of it. So you see

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Speaker 2: the resilience, the fiscal depths that can keep going on.

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Speaker 2: You know they're planning to do it for another ten years.

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Speaker 2: And so the US keeps going, draining capital from rest

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Speaker 2: of the world. And then you see these fred these

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Speaker 2: wars breaking out in one country after another, and China,

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Speaker 2: China and Russia both know exactly how to put a

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Speaker 2: wedge into that product.

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Speaker 4: I got to slip this in Joyce Chang of JP.

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Speaker 4: Morgan was lights out at the panel on the bond

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Speaker 4: worries to EM how fragile is EM debt in EM

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Speaker 4: currency stability right.

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Speaker 3: Now really fragile.

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Speaker 2: And so you see currencies in Nigerian, in Egypt and

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Speaker 2: in other countries under pressure. Of course, Argentina having its

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Speaker 2: currency dive, and so then it becomes really important do

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Speaker 2: central banks realize that currency stability has to be their

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Speaker 2: guidepost for recovery. That was the learning experience, I think

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Speaker 2: from the Asian crisis in nineteen ninety eight. The currencies

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Speaker 2: were crashing, the countries were doing terribly, and then one

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Speaker 2: by one countries stabilized After.

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Speaker 4: That, Eric Martin wants to know, our great IMF World

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Speaker 4: Bank reporter, are you going to show up at the

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Speaker 4: Spring meetings.

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Speaker 2: David, I'm really focused on global benefits for people around

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Speaker 2: the world, so I'll do whatever i can to help good.

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Speaker 4: That's a mail passing invitation to Spring me.

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Speaker 3: Thank you so much.

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Speaker 4: The former president of the World Bank and just wonderful

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Speaker 4: for decades. Bear Stearn's as well.