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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: President Donald Trump's tariffs to slow growth and boost prices,

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Speaker 2: but the scale of the impact, of course, depends on

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Speaker 2: just how the tariffs are implemented. This week, the OECD

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Speaker 2: slashed its outlook for the second time this year, suggesting

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Speaker 2: the world is heading for its weakest growth since a

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Speaker 2: global pandemic. And while Trump has called for rate cuts,

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Speaker 2: FED officials have signaled they'll hold them setty until they

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Speaker 2: have a better understanding of how tariff's, immigration, and taxes

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Speaker 2: will all affect the US economy. So there's a lot

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Speaker 2: to discuss with Philip Hildebrand, the vice chair at Blackrock. Philip,

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Speaker 2: as always, thanks you so much for joining us. I

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Speaker 2: think last time we got up was right before the inauguration.

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Speaker 2: It was actually in Davos, and there we were trying

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Speaker 2: to figure out what kind of presidency or what kind

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Speaker 2: of impact it will have on globalization. We're now at

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Speaker 2: the start of juwe and what have you learned over

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Speaker 2: lost six to seven weeks.

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Speaker 3: It's good to be here, Francine, it's been a while. Look, guys,

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Speaker 3: I think generally speaking, it's pretty clear that we're moving

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Speaker 3: from a in a sense of longstanding policy equilibrium to

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Speaker 3: a new one, and we're I would say, in between.

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Speaker 1: And what is not.

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Speaker 3: Clear is where this new equilibrium will ultimately settle. And

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Speaker 3: so until that becomes clearer, and the budget that you

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Speaker 3: mentioned at the outset is another indication, until it becomes

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Speaker 3: clear where ultimately the new world will land, as it were,

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Speaker 3: we are in this transition period and that is a

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Speaker 3: period of volatility of very rapid news cycles. You know,

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Speaker 3: you wake up every morning and you have more news

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Speaker 3: and want to digest it to watch you and come here.

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Speaker 3: So I think we need to sort of step back

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Speaker 3: a bit and think about where does the world kind

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Speaker 3: of go to in this in this clearly new regime

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Speaker 3: that has that has begun, where do you.

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Speaker 1: Say going to?

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Speaker 2: But also is there a danger that you know, we're

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Speaker 2: going from A to B or A to say it

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Speaker 2: if it's radically different, that a lot of things break

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Speaker 2: in this journey.

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Speaker 3: I think that is the risk is always when you're

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Speaker 3: in these transition phases that you know, uncertainty is heightened.

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Speaker 3: Heightened uncertainty tends the way on demand. And then on

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Speaker 3: top of it, I think as an overarching theme, you

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Speaker 3: have high debt vulnerability in most countries, all countries virtually

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Speaker 3: have come out of the Great Financial Crisis, and then

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Speaker 3: COVID industrial policy.

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Speaker 1: These three big.

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Speaker 3: Forces have led most countries to accumulate huge debt loads, frankly,

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Speaker 3: and that kind of weighs over the entire system. And

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Speaker 3: you can see that in the sense that rates tend

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Speaker 3: to be edging up. There's a term premium that's beginning

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Speaker 3: to clearly emerge in US bond So you know, all

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Speaker 3: these things are indicators that we are in this volatile

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Speaker 3: and uncertain transition and we just have to kind of

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Speaker 3: stay fixated on the longer term and see where it

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Speaker 3: all lands.

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Speaker 2: And so I want to come back to actually the

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Speaker 2: debt in a second. But as a central banker, why

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Speaker 2: have we not seen so we have very concerning surveys

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Speaker 2: about people being worried not spending, but it hasn't quite

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Speaker 2: materialized yet. So does that come all at once? Is

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Speaker 2: it a laggered or could we get away with actually

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Speaker 2: the economy being okay?

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Speaker 3: Well, it's complicated because number one, if you look at

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Speaker 3: trade policy, we don't know where things will settle, and

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Speaker 3: you can see markets react as soon as there's some

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Speaker 3: pullback of the most extreme scenarios. So that's part of it.

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Speaker 3: The other part is it just takes time. It takes

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Speaker 3: time for these things to settle through. Investment plans don't

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Speaker 3: change overnight. Spending patterns don't change overnight. The US consumer

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Speaker 3: has always been resilient historically. There's also a lot of

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Speaker 3: cash on the sidelines, so if you look at it

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Speaker 3: from an investor's perspective, a lot of incentives to sort

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Speaker 3: of stand ready with the cash and invest when the

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Speaker 3: opportunity comes. So all these forces kind of lead to

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Speaker 3: this slightly uncomfortable interim period in a sense, between a

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Speaker 3: new equilibrium and the old equilibrium. And it takes time

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Speaker 3: for these things to manifest themselves in the real economy.

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Speaker 2: So the markets also behave differently because of all of

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Speaker 2: the money in private markets.

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Speaker 3: So I think that's part of it. You know, there

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Speaker 3: are some great opportunities out there in the marketplace. Let's

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Speaker 3: just look at a statistic the other day. I'm heading

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Speaker 3: to Germany tomorrow. There are apparently four thousand bridges in

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Speaker 3: Germany that are in urgent need of repair. This is

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Speaker 3: a very kind of basic infrastructure story. Then you think

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Speaker 3: about artificial intelligence, you think about the data centers, the

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Speaker 3: energy supply that that will require, the new data centers

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Speaker 3: that will be built. So there is so much there's

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Speaker 3: so many opportunities, and a lot of them do occur

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Speaker 3: or will occur in private markets, which is one of

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Speaker 3: the reasons we have invested heavily in our private markets capabilities.

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Speaker 1: Going forward, the US.

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Speaker 2: And China ratching up tensions. I guess, you know, the

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Speaker 2: concern is about debt. So Elon Musk has ways of

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Speaker 2: doing it which are a little bit unorthodox, going after

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Speaker 2: the president with you know, port field words. But the

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Speaker 2: bottom line is that he's worried about a debt and

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Speaker 2: that he's cut so much in dolge and that doesn't

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Speaker 2: go anywhere. How should we view treasuries? Should we start

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Speaker 2: thinking about, you know, is it as safe as it

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Speaker 2: used to be? Does this also change everything?

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Speaker 1: Yeah?

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Speaker 3: I think this is in a way the critical question

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Speaker 3: when we talked about the new equilibrium.

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Speaker 1: And again, debt is not an issue just in the US.

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Speaker 1: It's an issue in most countries. It's a result of

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Speaker 1: the last twenty years.

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Speaker 3: In a sense, I would say, you know, there are

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Speaker 3: only a handful of countries that have never put in

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Speaker 3: question the sanctity of their sovereign signature that have never

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Speaker 3: outright had a sort of outright default. It is extremely

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Speaker 3: important that the US remains firmly in that camp of

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Speaker 3: those handful of countries. The US dollar remains the world's

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Speaker 3: reserve currency, It remains the anchor of the cysts them.

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Speaker 3: The US mod market is the anchor of the financial system.

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Speaker 3: So it is extremely important that Congress, you know, which

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Speaker 3: is deliberating the new budget now, keeps in mind this

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Speaker 3: this critical issue of protecting the sanctity of the sovereign

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Speaker 3: signature in the United States as the anchor of the system,

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Speaker 3: notwithstanding whatever changes they want to make to the overall

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Speaker 3: economic order, to the trade order. In particular, this question

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Speaker 3: of you know, being able to rely on the sanctity

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Speaker 3: of the sovereign signature in the United States is very

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Speaker 3: very important.

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Speaker 1: I know.

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Speaker 2: Larry Fink also pends a really interesting opinion piece, and

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Speaker 2: this is a quote that we picked out which is

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Speaker 2: basically the thesis of what he wrote, which is, you know,

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Speaker 2: what's emerging now is globalization's second draft, a red globalization

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Speaker 2: built not just to generate prosperity, but to aim at

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Speaker 2: towards the people in places left behind in the first time.

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Speaker 2: You know, it's difficult to see exactly where it ends up.

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Speaker 2: Given US China and this fight that keeps on escalating

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Speaker 2: every day, including today, it's difficult to know how ends

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Speaker 2: up because of AI that will break a lot of things.

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Speaker 2: When does it settle well.

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Speaker 3: I think we can see certain things emerging. And Larry

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Speaker 3: says nicely, you know, it's in some ways easier to

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Speaker 3: look at the seven years ahead than the seven days ahead,

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Speaker 3: which I thought was a great line. I would say,

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Speaker 3: we know that that issue has to be addressed.

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Speaker 1: I think that's critical.

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Speaker 3: It'll take time, and frankly, the best way to address

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Speaker 3: it is through growth policies.

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Speaker 1: You know what we have not seen it.

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Speaker 3: If you think about the sequencing of the new administration

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Speaker 3: in the United States, much of what has come initially

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Speaker 3: has been contractionary, has raised uncertainty, has in some ways

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Speaker 3: led to more volatility in the marketplace. The next leg

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Speaker 3: of it, hopefully at some point, will be the question

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Speaker 3: of what can you do to promote a pro growth policy.

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Speaker 1: If you recall.

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Speaker 3: Early on during the campaign, there was much talk about simplification, deregulation,

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Speaker 3: easing a bureaucracy, things like that that can help growth.

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Speaker 3: So there's no question that sustained higher growth would be

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Speaker 3: the best way to deal with the debt and deficit

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Speaker 3: problems in combination with reasonable budgetary policy.

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Speaker 1: And so I think that really is the key.

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Speaker 3: To make sure that we can maintain stability around debt,

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Speaker 3: because with all the other uncertaints that we have, the

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Speaker 3: last thing you want is questions around again the sanctity

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Speaker 3: of the SOLVEMN signature. The other thing that you can

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Speaker 3: see emerging and Larry has been very consistent on this

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Speaker 3: is the.

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Speaker 1: Power of capital markets.

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Speaker 3: It is clear that when you have debt levels the

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Speaker 3: way we have them across the world, governments will be

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Speaker 3: constrained in what they can do with public finances. And

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Speaker 3: this is the moment in a sense where private capital

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Speaker 3: has the step been.

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Speaker 1: We talked about the large cash balances.

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Speaker 3: This is needed for governments, it's needed for future prosperity.

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Speaker 1: It's a great opportunity.

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Speaker 2: Do you think, I mean, does capital get deployed differently

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Speaker 2: in you know, globalization two point zero and is it

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Speaker 2: being redrafted because of allies? Is it geopolitics or is

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Speaker 2: it about the economics?

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Speaker 1: Well, I think it's a bit of both.

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Speaker 3: Again, you know, we have this fragmentation of geopolitics. The

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Speaker 3: new system will be different than the eighty years that

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Speaker 3: we've known since World War Two. There may be more

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Speaker 3: of a home bias in how capital is deployed. I

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Speaker 3: firmly believe the globalization is not over, but it will

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Speaker 3: be reconfigured in a different way, and a stronger home

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Speaker 3: bias may well be part of the way you deal

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Speaker 3: with these fragmented geopolitical conditions.

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Speaker 1: So take Europe as an example.

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Speaker 3: Europe has extraordinary ten to eleven trillion euros are sitting

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Speaker 3: on bank deposits in Europe. That money sits on bank deposits.

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Speaker 3: It's not entirely idle. Of course, bank balance sheets are

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Speaker 3: being used to support the economy, but it's sitting there

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Speaker 3: in a way that doesn't really generate much of a return.

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Speaker 3: If part of that money can be deployed and mobilized

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Speaker 3: into the capital markets, and that is of course one

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Speaker 3: of the key objectives I think for Europe, this capital

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Speaker 3: markets union or savings and investment union. If that can happen,

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Speaker 3: you can see enormous growth potential, innovation potential that comes

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Speaker 3: out of that.

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Speaker 2: When you look at Europe, how confident are you that

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Speaker 2: this is not going to be a wasted opportunity that

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Speaker 2: Europe sticks together, comes together with more capital solutions and growth.

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Speaker 2: But is there a danger that I guess these you know,

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Speaker 2: even if trade goes back to normal, that there are

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Speaker 2: deeper issues that stay because of what we lived over lost.

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Speaker 3: Six There is always this danger frenzy, and Europe is

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Speaker 3: a very complicated construct that moves in complicated ways.

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Speaker 1: Whatever I explained Europe.

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Speaker 3: To my American colleagues, it's a difficult task. However, I

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Speaker 3: would say this, this is Europe is now under maximum pressure.

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Speaker 1: This is Europe's moment.

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Speaker 3: This pressure has always generated responses in Europe.

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Speaker 1: If you look at the last.

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Speaker 3: Time we've seen anything like this was in eighty nine

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Speaker 3: when the Soviet Union collapsed and lod behold what happened.

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Speaker 3: Within four years we had the Masters Treaty, which set

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Speaker 3: the foundation for the euro So I very much see

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Speaker 3: this as a similar moment where there is the New

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Speaker 3: World is exerting maximum pressure on Europe. And I think

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Speaker 3: we talked about the capital markets, completing the single market,

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Speaker 3: in telecom and energy and finance, there are huge opportunities

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Speaker 3: that Europe can rise to and really change the growth outlook.

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Speaker 3: And frankly, also in global investors outlook, they will reallocate

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Speaker 3: to Europe, at least at the margin, if they can

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Speaker 3: see Europe taking these actions that are necessary.

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Speaker 1: I want to put you on the spot.

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Speaker 2: If I give you five million today, where do you

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Speaker 2: I mean, given all the uncertainties you know, maybe let's

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Speaker 2: say it's a seven year horizon, where do you put

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Speaker 2: that five million.

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Speaker 3: I think infrastructure is a in all its kind of dimensions,

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Speaker 3: is a clear need that the world has.

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Speaker 1: It's a place where you have stable returns.

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Speaker 3: It's a place where governments can poort the mobilization of

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Speaker 3: private capital with the right policies. And I think Europe,

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Speaker 3: if again, if this pressure moment that Europe is under

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Speaker 3: can generate the actions that are required, particularly around the

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Speaker 3: capital markets Union, I think Europe is a great opportunity.

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Speaker 3: The world is very long dollars. The dollar will remain

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Speaker 3: the reserve currency. That's not going to change anytime soon.

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Speaker 1: But at the.

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Speaker 3: Margin, the world has gone very long the US dollar,

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Speaker 3: and at the margin, I think some reallocation to Europe

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Speaker 3: is very likely to occur, particularly if Europe can rise

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Speaker 3: to this unique challenge frankly, but also unique opportunity that

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Speaker 3: it has given the new geopolitical and financial order.

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Speaker 2: So thank you so much. I could speak to you

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Speaker 2: for anotherose three hours, so you'll have to come back

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Speaker 2: really soon. Philip Hildebrand, a vice chair at black Rock