WEBVTT - Why Global Economic Leaders Are Predicting a Slowdown

0:00:00.280 --> 0:00:07.200
<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

0:00:09.119 --> 0:00:11.720
<v Speaker 2>Right now, many of the most prominent and powerful people

0:00:11.800 --> 0:00:15.320
<v Speaker 2>in economics and finance are in Washington. The World Bank

0:00:15.360 --> 0:00:18.560
<v Speaker 2>and the International Monetary Fund are holding their annual meetings,

0:00:18.840 --> 0:00:22.239
<v Speaker 2>and so is the Institute of International Finance. It's a

0:00:22.280 --> 0:00:25.639
<v Speaker 2>who's who of central bankers and finance ministers and a

0:00:25.720 --> 0:00:28.640
<v Speaker 2>chance for them to coordinate how they respond to big

0:00:28.680 --> 0:00:32.640
<v Speaker 2>issues in the global economy. On the sidelines, Treasury Secretary

0:00:32.720 --> 0:00:36.519
<v Speaker 2>Scott Bessett tried to rally support from US allies and

0:00:36.600 --> 0:00:40.640
<v Speaker 2>condemn China for proposing new export restrictions on critical minerals.

0:00:40.840 --> 0:00:42.760
<v Speaker 3>This should be a clear sign to our allies that

0:00:42.840 --> 0:00:46.519
<v Speaker 3>we must work together, and work together we will. There

0:00:46.520 --> 0:00:49.920
<v Speaker 3>will be a series of meetings this week during World

0:00:49.920 --> 0:00:52.000
<v Speaker 3>Bank IMF week, and.

0:00:52.120 --> 0:00:55.840
<v Speaker 2>We are all on It's a moment for policymakers to

0:00:55.960 --> 0:00:58.600
<v Speaker 2>take stock of the global economy and what's driving in.

0:00:59.040 --> 0:01:01.560
<v Speaker 2>Andrew Bailey, the Governor of the Bank of England, is

0:01:01.560 --> 0:01:02.000
<v Speaker 2>one of them.

0:01:02.120 --> 0:01:03.959
<v Speaker 3>We've got to look at productivity growth and I think

0:01:03.960 --> 0:01:09.880
<v Speaker 3>we have to say what's the next likely general purpose technology? Well,

0:01:09.880 --> 0:01:12.039
<v Speaker 3>it's related to AI. It seems to me.

0:01:12.560 --> 0:01:15.480
<v Speaker 2>Who else has been making the pilgrimage to Washington this week.

0:01:15.880 --> 0:01:19.440
<v Speaker 2>Bloomberg reporters and editors from all over the world, including

0:01:19.480 --> 0:01:22.240
<v Speaker 2>Brendan Murray, who heads up our coverage of global trade,

0:01:22.720 --> 0:01:26.080
<v Speaker 2>along with Joe Wisenthal and Tracy Alloway, hosts of Odd Lots,

0:01:26.560 --> 0:01:29.200
<v Speaker 2>and they've been watching the dynamics between President Trump and

0:01:29.280 --> 0:01:32.319
<v Speaker 2>other world leaders, many of whom are still trying to

0:01:32.360 --> 0:01:33.840
<v Speaker 2>strike trade deals with the US.

0:01:33.920 --> 0:01:37.440
<v Speaker 4>President Trump is kind of realizing that if you're important

0:01:37.520 --> 0:01:41.119
<v Speaker 4>enough in the global financial system, and you drive hard

0:01:41.200 --> 0:01:43.800
<v Speaker 4>enough of a bargain, you can basically get what you want.

0:01:44.280 --> 0:01:47.039
<v Speaker 2>Tracy and Joe say, these meetings are taking place at

0:01:47.040 --> 0:01:51.280
<v Speaker 2>a time when big multilateral institutions, including the World Bank

0:01:51.360 --> 0:01:54.640
<v Speaker 2>and the IMF, are under threat, and at a time

0:01:54.640 --> 0:01:58.200
<v Speaker 2>when the US capital is in disarray. The federal government

0:01:58.520 --> 0:01:59.160
<v Speaker 2>is shut down.

0:01:59.400 --> 0:02:01.600
<v Speaker 1>I think this is like this direct link that you

0:02:01.640 --> 0:02:04.000
<v Speaker 1>can draw between the fact that the government is shut

0:02:04.040 --> 0:02:08.200
<v Speaker 1>down right now for who knows how long, and the

0:02:08.240 --> 0:02:11.320
<v Speaker 1>fact that all of these sort of institutions underneath them

0:02:11.360 --> 0:02:15.119
<v Speaker 1>there's this erosion, and that is why there's so much

0:02:15.160 --> 0:02:17.880
<v Speaker 1>concern about the stability of these entities.

0:02:21.960 --> 0:02:23.840
<v Speaker 2>I'm David Gerrett, and this is the big take from

0:02:23.840 --> 0:02:26.680
<v Speaker 2>Bloomberg News Today on the show, a look at the

0:02:26.760 --> 0:02:30.280
<v Speaker 2>health of the economy and global markets, with Tracy Alloway

0:02:30.320 --> 0:02:33.519
<v Speaker 2>and Joe Wisenthal of Odd Lots and Bloomberg's Brendan Murray

0:02:33.960 --> 0:02:36.880
<v Speaker 2>what they're hearing at panels and lectures and on the

0:02:36.919 --> 0:02:40.160
<v Speaker 2>sidelines of these big meetings about what the future holds

0:02:40.360 --> 0:02:43.720
<v Speaker 2>for the economy and the international financial system and for

0:02:43.800 --> 0:02:54.600
<v Speaker 2>the IMF, the World Bank, and the IIF themselves. Bloomberg's

0:02:54.600 --> 0:02:57.800
<v Speaker 2>Brendan Murray is spending this week in Washington, in DC's

0:02:57.800 --> 0:03:00.840
<v Speaker 2>Foggy Bottom neighborhood, which is home to the World Bank

0:03:00.880 --> 0:03:04.120
<v Speaker 2>and the International Monetary Fund. I asked him what he's

0:03:04.160 --> 0:03:05.760
<v Speaker 2>been hearing at their annual meetings.

0:03:06.280 --> 0:03:09.440
<v Speaker 5>So basically, all the main topics that are affecting the

0:03:09.480 --> 0:03:12.639
<v Speaker 5>world economy are on the agenda here. I would describe

0:03:12.639 --> 0:03:18.960
<v Speaker 5>the mood as sort of cautiously optimistic so far, with

0:03:19.120 --> 0:03:21.799
<v Speaker 5>the caveat that we haven't seen the worst of what

0:03:21.840 --> 0:03:26.079
<v Speaker 5>people think might happen in the situation that we're in,

0:03:26.160 --> 0:03:32.240
<v Speaker 5>with tariffs being completely unpredictable, rising government debt, and all

0:03:32.280 --> 0:03:35.160
<v Speaker 5>the other financial strains that are coming to bear on

0:03:35.200 --> 0:03:37.680
<v Speaker 5>some of these economies. So there's a lot of concern

0:03:37.760 --> 0:03:41.640
<v Speaker 5>that we're seeing sort of a slow burn happen rather

0:03:41.720 --> 0:03:44.400
<v Speaker 5>than a sudden shock to the global economy.

0:03:44.160 --> 0:03:48.840
<v Speaker 2>As we move from the IMF toif Tracy is cautious

0:03:48.920 --> 0:03:51.840
<v Speaker 2>optimism ruling the day. There at that meeting as well.

0:03:51.680 --> 0:03:55.000
<v Speaker 4>Well, I wasn't something called Debt Con which is held

0:03:55.080 --> 0:03:57.880
<v Speaker 4>every year over at Georgetown. It features a lot of

0:03:58.280 --> 0:04:03.080
<v Speaker 4>sought debt con bt coo N. This was Debt Con

0:04:03.200 --> 0:04:05.480
<v Speaker 4>eight from Crase you were wondering.

0:04:07.720 --> 0:04:08.120
<v Speaker 2>Must be.

0:04:09.920 --> 0:04:13.640
<v Speaker 4>But it features a lot of you know, policymakers, officials,

0:04:14.000 --> 0:04:17.000
<v Speaker 4>sovereign debt lawyers, those types of people. And there were

0:04:17.080 --> 0:04:19.279
<v Speaker 4>a couple of people from the IMF there, and I

0:04:19.360 --> 0:04:21.680
<v Speaker 4>asked them to give me some sort of on the

0:04:21.720 --> 0:04:24.719
<v Speaker 4>ground color of what they were hearing in their own meetings,

0:04:25.440 --> 0:04:28.960
<v Speaker 4>and they said that everyone was kind of surprised by

0:04:29.120 --> 0:04:34.520
<v Speaker 4>how optimistic Crystallina Georgieva, the director, sounded in her sort

0:04:34.560 --> 0:04:37.800
<v Speaker 4>of opener where they upgraded the economic outlook for the

0:04:37.800 --> 0:04:40.320
<v Speaker 4>world and basically said, you know, things are looking pretty

0:04:40.360 --> 0:04:43.400
<v Speaker 4>resilient so far. We've managed to weather all these tariffs

0:04:43.640 --> 0:04:47.200
<v Speaker 4>quite well. But they were telling me that a few

0:04:47.279 --> 0:04:50.000
<v Speaker 4>days before there was a curtain raiser by one of

0:04:50.000 --> 0:04:54.120
<v Speaker 4>the deputy directors, and he struck a very very different tone,

0:04:54.400 --> 0:04:57.600
<v Speaker 4>more quietly behind closed doors, and it was a little

0:04:57.600 --> 0:04:59.960
<v Speaker 4>bit more dire, a little bit more passive. I don't

0:05:00.000 --> 0:05:02.479
<v Speaker 4>if you can be a little bit more dire, certainly

0:05:02.520 --> 0:05:06.159
<v Speaker 4>more pessimistic than what we heard in the official you know,

0:05:06.240 --> 0:05:09.520
<v Speaker 4>economic projection update. So take of that what you will.

0:05:10.200 --> 0:05:11.880
<v Speaker 2>Right, let's talk a bit about the economy sort of.

0:05:11.880 --> 0:05:14.920
<v Speaker 2>Brennan will turn to you first. I've covered these meetings

0:05:14.920 --> 0:05:16.920
<v Speaker 2>before and they're kind of this interesting prism through which

0:05:16.960 --> 0:05:18.800
<v Speaker 2>you can get a sense of how the global economy

0:05:18.839 --> 0:05:20.719
<v Speaker 2>is doing and what people think about it. So there's

0:05:20.720 --> 0:05:23.359
<v Speaker 2>the anecdotal side of things. Then you're getting these forecasts,

0:05:23.360 --> 0:05:26.560
<v Speaker 2>these data from the institutions themselves. Could you just walk

0:05:26.640 --> 0:05:30.360
<v Speaker 2>us through what the IMF said, it's chief economists said

0:05:30.400 --> 0:05:33.599
<v Speaker 2>about how it's thinking about the path forward here for

0:05:33.600 --> 0:05:34.440
<v Speaker 2>the global economy.

0:05:34.760 --> 0:05:39.559
<v Speaker 5>The IMF chief economists laid out basically four major risk

0:05:39.720 --> 0:05:41.760
<v Speaker 5>areas that they're looking at.

0:05:41.880 --> 0:05:45.000
<v Speaker 6>Besides straight tensions, I want to quickly flag four other

0:05:45.279 --> 0:05:46.200
<v Speaker 6>downside risks.

0:05:46.520 --> 0:05:49.159
<v Speaker 5>Now, the IMF is kind of like the lifeguard, you know,

0:05:49.200 --> 0:05:50.600
<v Speaker 5>they sort of blow the whistle when you get a

0:05:50.640 --> 0:05:52.640
<v Speaker 5>little bit too far out beyond the waves, or you

0:05:52.680 --> 0:05:54.880
<v Speaker 5>get too close to a riptide. They sort of this

0:05:54.920 --> 0:05:57.520
<v Speaker 5>is what they do. And they pointed to the AI

0:05:57.640 --> 0:05:59.560
<v Speaker 5>boom and they said, you know, this looks a lot

0:05:59.600 --> 0:06:01.800
<v Speaker 5>like the com bubble of twenty five years ago.

0:06:01.920 --> 0:06:04.520
<v Speaker 6>It was the Internet then, it is AI now.

0:06:04.880 --> 0:06:10.000
<v Speaker 5>They pointed to the erosion of credibility and institutions, which

0:06:10.040 --> 0:06:13.440
<v Speaker 5>is a way of saying, you know, Donald Trump is

0:06:13.640 --> 0:06:16.159
<v Speaker 5>chipping away at the Fed's credibility when it tells it

0:06:16.200 --> 0:06:17.440
<v Speaker 5>to lower interest rates.

0:06:17.600 --> 0:06:19.960
<v Speaker 6>We are seeing rising pressures on central banks.

0:06:20.120 --> 0:06:23.160
<v Speaker 5>They also talked about the rise of government debt and

0:06:23.200 --> 0:06:26.640
<v Speaker 5>how there needs to be more fiscal buffers.

0:06:26.440 --> 0:06:29.880
<v Speaker 6>In too many countries, insufficient progress has been made to

0:06:29.960 --> 0:06:31.560
<v Speaker 6>rebuild fiscal space.

0:06:31.640 --> 0:06:34.960
<v Speaker 5>And just generally they look at the tone the breakdown

0:06:35.080 --> 0:06:39.680
<v Speaker 5>in global integration as a risk overall that could sort

0:06:39.720 --> 0:06:45.600
<v Speaker 5>of create this permanent or structural headwind to growth potential

0:06:45.640 --> 0:06:48.400
<v Speaker 5>over the longer term. So instead of growing, you know,

0:06:48.560 --> 0:06:50.839
<v Speaker 5>at a healthy three to three and a half to

0:06:50.920 --> 0:06:53.960
<v Speaker 5>four percent clip, we're looking at three two and a

0:06:54.000 --> 0:06:56.479
<v Speaker 5>half to three percent over the medium to longer term.

0:06:56.640 --> 0:06:59.479
<v Speaker 6>The tariff shock is here, and it is further dimming

0:06:59.839 --> 0:07:02.280
<v Speaker 6>already weak growth prospects.

0:07:02.480 --> 0:07:05.520
<v Speaker 5>So those are the main sort of themes that the IMF,

0:07:06.160 --> 0:07:09.400
<v Speaker 5>the lifeguard of the global economy, is raising and wants

0:07:09.440 --> 0:07:13.920
<v Speaker 5>governments to adopt sort of policies that are aware of

0:07:13.960 --> 0:07:14.520
<v Speaker 5>those risks.

0:07:14.840 --> 0:07:17.160
<v Speaker 1>I think there's like this direct link that you can

0:07:17.280 --> 0:07:19.680
<v Speaker 1>draw between the fact that the government is shut down

0:07:19.800 --> 0:07:23.920
<v Speaker 1>right now for who knows how long, and the fact

0:07:23.960 --> 0:07:27.000
<v Speaker 1>that all of these sort of institutions is Brendan described

0:07:27.080 --> 0:07:31.680
<v Speaker 1>like the erosion underneath them. There is this erosion, and

0:07:32.160 --> 0:07:34.960
<v Speaker 1>that is why there's so much concern about the stability

0:07:35.280 --> 0:07:39.280
<v Speaker 1>of these entities, because the political will to support them

0:07:39.640 --> 0:07:41.640
<v Speaker 1>does not exist. And I don't think it's just a

0:07:41.760 --> 0:07:44.720
<v Speaker 1>US story either. I think around the world you would

0:07:44.760 --> 0:07:48.600
<v Speaker 1>see the same sort of attacks on either independent or

0:07:48.720 --> 0:07:51.520
<v Speaker 1>multilateral institutions. I think it's happening everywhere.

0:07:51.600 --> 0:07:53.760
<v Speaker 2>Tracy, let me pick up on that and Joe suggesting

0:07:53.760 --> 0:07:56.080
<v Speaker 2>it's not just a US story. But we do see

0:07:56.080 --> 0:07:59.080
<v Speaker 2>the US playing this incredibly outsized role in determining the

0:07:59.160 --> 0:08:02.200
<v Speaker 2>course of the global economy right now. And I wonder

0:08:02.200 --> 0:08:04.760
<v Speaker 2>what you make of that. Is that novelists you see

0:08:04.800 --> 0:08:07.200
<v Speaker 2>it when it comes to what the US is pioneering

0:08:07.200 --> 0:08:09.840
<v Speaker 2>in terms of trade policy, and it's tariffs that's put

0:08:09.880 --> 0:08:12.400
<v Speaker 2>in place. How much determinisment has about the future of

0:08:12.440 --> 0:08:13.640
<v Speaker 2>the global economy, I.

0:08:13.560 --> 0:08:15.160
<v Speaker 4>Mean, I think it has an enormous amount.

0:08:15.280 --> 0:08:15.440
<v Speaker 3>Right.

0:08:15.480 --> 0:08:18.960
<v Speaker 4>Trump is kind of realizing that if you're important enough

0:08:19.000 --> 0:08:22.720
<v Speaker 4>in the global financial system and to drive hard enough

0:08:22.760 --> 0:08:25.000
<v Speaker 4>of a bargain, you can basically get what you want.

0:08:25.160 --> 0:08:29.000
<v Speaker 4>But we are seeing more and more countries potentially trying

0:08:29.040 --> 0:08:32.240
<v Speaker 4>to solve some of their problems or maybe achieve some

0:08:32.280 --> 0:08:36.160
<v Speaker 4>of their strategic targets by doing it unilaterally. Right, and again,

0:08:36.800 --> 0:08:38.920
<v Speaker 4>the US is kind of the poster child for this.

0:08:39.040 --> 0:08:43.240
<v Speaker 4>So take a look at Argentina. Milay was in town

0:08:43.440 --> 0:08:48.880
<v Speaker 4>to finalize the twenty billion dollar swap slash bailout that

0:08:48.920 --> 0:08:53.000
<v Speaker 4>he's getting from the US. Argentina has gotten many many

0:08:53.000 --> 0:08:57.320
<v Speaker 4>bailouts from the IMF. Previously, I'd lost count I know,

0:08:57.360 --> 0:08:59.679
<v Speaker 4>I tried to count them up and I stopped when

0:08:59.720 --> 0:09:02.920
<v Speaker 4>I went past twenty. So there we go, Argentina serial

0:09:02.960 --> 0:09:07.840
<v Speaker 4>defaulter Cereal Bailey. But now the US is stepping in

0:09:07.960 --> 0:09:09.920
<v Speaker 4>and saying like, all right, well, we're going to use

0:09:10.080 --> 0:09:12.720
<v Speaker 4>the US Treasury to give you this twenty billion dollar

0:09:13.080 --> 0:09:16.000
<v Speaker 4>What is essentially alone, and we're not going to tie

0:09:16.080 --> 0:09:19.240
<v Speaker 4>any conditions to it because you are a strategic ally

0:09:19.440 --> 0:09:22.120
<v Speaker 4>of ours. And in fact, Trump actually said this week,

0:09:22.800 --> 0:09:24.920
<v Speaker 4>not only are we not tying conditions to it, the

0:09:24.960 --> 0:09:27.680
<v Speaker 4>only real condition we seem to have with it is

0:09:27.720 --> 0:09:32.920
<v Speaker 4>that Malay actually wins the midterms, which is highly, highly

0:09:33.559 --> 0:09:38.800
<v Speaker 4>unusual in the way America sort of exercises its international influence.

0:09:38.880 --> 0:09:40.880
<v Speaker 4>So I think we're probably going to see more of that.

0:09:41.040 --> 0:09:43.720
<v Speaker 2>Gran What do people at the IMF make of this? Here?

0:09:43.760 --> 0:09:47.160
<v Speaker 2>You have the US effectively going alone after seeing the

0:09:47.160 --> 0:09:50.080
<v Speaker 2>IMF get burned over and over again. What are these

0:09:50.160 --> 0:09:52.680
<v Speaker 2>global policy makers make of what the US is doing here?

0:09:52.880 --> 0:09:54.640
<v Speaker 5>Yeah, I think you see a lot of sort of

0:09:55.120 --> 0:09:59.000
<v Speaker 5>strained attempts at putting on a brave face with what

0:09:59.040 --> 0:10:03.440
<v Speaker 5>the US is doing, and you hear policymakers say things like, well,

0:10:03.800 --> 0:10:05.839
<v Speaker 5>you know, the US has a huge economy, but it's

0:10:05.880 --> 0:10:08.720
<v Speaker 5>really only fifteen percent of global trade, and the rest

0:10:08.760 --> 0:10:12.160
<v Speaker 5>of global trade is happening at a fairly robust rate

0:10:12.200 --> 0:10:15.320
<v Speaker 5>without the US. I think what you're seeing is, on

0:10:15.400 --> 0:10:19.400
<v Speaker 5>one hand, the sort of shock at what's happening and

0:10:19.520 --> 0:10:23.320
<v Speaker 5>the upending of the global order, and an effort to

0:10:23.440 --> 0:10:26.320
<v Speaker 5>hold together the order that has kept it, you know,

0:10:26.840 --> 0:10:30.400
<v Speaker 5>globalization moving for decades.

0:10:30.040 --> 0:10:35.920
<v Speaker 2>Now coming up the markets AI and how these international

0:10:36.000 --> 0:10:39.120
<v Speaker 2>organizations view their future at a time when they face

0:10:39.280 --> 0:10:51.400
<v Speaker 2>so much hostility. This week, as meetings got underway at

0:10:51.440 --> 0:10:54.480
<v Speaker 2>the International Monetary Fund, the World Bank, and the Institute

0:10:54.480 --> 0:10:57.720
<v Speaker 2>of International Finance, the trade war between the US and

0:10:57.800 --> 0:11:01.520
<v Speaker 2>China escalated. That spooked in Ess, who it seemed had

0:11:01.559 --> 0:11:04.359
<v Speaker 2>gotten pretty used to all the back and forths and skirmishes.

0:11:04.960 --> 0:11:07.240
<v Speaker 2>I asked Joe and Tracy why this moment had such

0:11:07.240 --> 0:11:09.040
<v Speaker 2>a profound impact on the markets.

0:11:09.400 --> 0:11:12.080
<v Speaker 1>There are probably two things that have driven the market higher.

0:11:12.360 --> 0:11:16.200
<v Speaker 1>Which is one is AI we all know about, and

0:11:16.600 --> 0:11:19.760
<v Speaker 1>that is an industry that is an investment mega trend

0:11:19.840 --> 0:11:23.160
<v Speaker 1>that does not seem to be particularly sensitive to tariffs.

0:11:23.360 --> 0:11:25.640
<v Speaker 1>And then I think people had sort of forgotten about tariffs,

0:11:25.640 --> 0:11:28.520
<v Speaker 1>and you know, the idea that it all gets smoothed

0:11:28.520 --> 0:11:30.320
<v Speaker 1>out in the end wasn't that big of a deal.

0:11:30.360 --> 0:11:33.080
<v Speaker 1>It's sort of minor. It doesn't really affect the growth areas.

0:11:33.320 --> 0:11:35.720
<v Speaker 1>But I think you could argue that, yes, we did

0:11:35.840 --> 0:11:38.360
<v Speaker 1>have a lot of volatility last week, but in the

0:11:38.360 --> 0:11:41.160
<v Speaker 1>grand scheme of things, not that much so. I think

0:11:41.200 --> 0:11:44.120
<v Speaker 1>it was just sort of like under the conditions in

0:11:44.160 --> 0:11:46.920
<v Speaker 1>which there's so much enthusiasm, so much specuative money, so

0:11:47.040 --> 0:11:51.720
<v Speaker 1>much hot money flowing into risky assets, the reminder that yes,

0:11:51.800 --> 0:11:54.160
<v Speaker 1>trade is a live issue. Many of these things haven't

0:11:54.160 --> 0:11:58.200
<v Speaker 1>been settled to us is vulnerable still to the cutoff

0:11:58.320 --> 0:12:01.160
<v Speaker 1>of various things such as rare earth metalism and so forth.

0:12:01.600 --> 0:12:03.640
<v Speaker 1>I would say it gave people a little time for

0:12:03.640 --> 0:12:04.040
<v Speaker 1>a breather.

0:12:04.360 --> 0:12:05.480
<v Speaker 4>I thought you were going to say it was a

0:12:05.520 --> 0:12:06.440
<v Speaker 4>healthy correction, Joe.

0:12:06.480 --> 0:12:09.560
<v Speaker 1>It was a healthy if we're on TV, that's what

0:12:09.920 --> 0:12:12.600
<v Speaker 1>is a healthy. We needed that, we needed this correction.

0:12:12.880 --> 0:12:15.160
<v Speaker 1>This is very healthy, Yeah, Tracy.

0:12:15.160 --> 0:12:17.480
<v Speaker 2>When you look at the agenda for the IF meeting,

0:12:17.480 --> 0:12:19.800
<v Speaker 2>the IMF meeting, World Bank meeting, there are a lot

0:12:19.800 --> 0:12:22.400
<v Speaker 2>of mentions of AI, of artificial intelligence, and there is

0:12:22.480 --> 0:12:25.520
<v Speaker 2>kind of this infusion of more skepticism, or if not

0:12:25.559 --> 0:12:28.600
<v Speaker 2>more skepticism, at least a sense that all of this

0:12:28.679 --> 0:12:30.719
<v Speaker 2>money has been spent, is being spent and it has

0:12:30.760 --> 0:12:34.040
<v Speaker 2>to amount to something sooner rather than later. Yeah, are

0:12:34.040 --> 0:12:35.200
<v Speaker 2>we talking about it differently?

0:12:35.320 --> 0:12:37.520
<v Speaker 4>You need to see actual cash flows at some point.

0:12:37.720 --> 0:12:40.120
<v Speaker 4>I mean, I think what's really changed is people are

0:12:40.120 --> 0:12:42.760
<v Speaker 4>starting to get more nervous about some of the very

0:12:42.800 --> 0:12:46.440
<v Speaker 4>intricate and complex financing arrangements that we're seeing, you know,

0:12:46.480 --> 0:12:49.600
<v Speaker 4>stuff where like in video sells chips to so and

0:12:49.640 --> 0:12:51.480
<v Speaker 4>so and then they use that money to make a

0:12:51.520 --> 0:12:53.520
<v Speaker 4>loan to so and so, and then they send.

0:12:53.280 --> 0:12:54.160
<v Speaker 2>That money back to her.

0:12:54.559 --> 0:12:57.960
<v Speaker 4>It's very circular, very incestuous, and it's the kind of

0:12:58.040 --> 0:13:01.520
<v Speaker 4>thing that's going to remind people of you know, previous bubbles.

0:13:01.520 --> 0:13:05.520
<v Speaker 4>So that's happening. What I would say is there is

0:13:05.559 --> 0:13:09.599
<v Speaker 4>still so much enthusiasm out there about the future potential

0:13:09.760 --> 0:13:12.240
<v Speaker 4>of AI, and the vast majority of investors that you

0:13:12.280 --> 0:13:15.240
<v Speaker 4>speak to will say something like, oh yeah, sure, it

0:13:15.320 --> 0:13:17.920
<v Speaker 4>might be frothy now. You know, maybe some of these

0:13:17.960 --> 0:13:23.240
<v Speaker 4>financing arrangements you know, are pumping up values or concealing

0:13:23.559 --> 0:13:27.080
<v Speaker 4>real cash flow and things like that. But we know

0:13:27.240 --> 0:13:29.240
<v Speaker 4>this is going to be the next big thing. We

0:13:29.360 --> 0:13:32.360
<v Speaker 4>know they are going to be winners emerging from the space.

0:13:32.400 --> 0:13:34.200
<v Speaker 4>In the same way that even though we had the

0:13:34.280 --> 0:13:37.800
<v Speaker 4>dot com bubble burst, we had winners that emerged from

0:13:37.800 --> 0:13:40.320
<v Speaker 4>that early era of the Internet and went on to

0:13:40.520 --> 0:13:43.040
<v Speaker 4>make a lot of money. So I think everyone is

0:13:43.080 --> 0:13:45.240
<v Speaker 4>sort of diving in on the assumption that they can

0:13:45.280 --> 0:13:48.680
<v Speaker 4>either get out first before everyone else, or they're the

0:13:48.679 --> 0:13:51.480
<v Speaker 4>ones that are going to be able to identify the real,

0:13:51.920 --> 0:13:54.320
<v Speaker 4>true winning players in all of this.

0:13:54.720 --> 0:13:59.640
<v Speaker 1>We haven't had that moment yet where some big corporate

0:13:59.640 --> 0:14:02.480
<v Speaker 1>and or someone says, you know what, we are not

0:14:02.520 --> 0:14:06.160
<v Speaker 1>getting an ROI from this. No one has ever said

0:14:06.480 --> 0:14:09.800
<v Speaker 1>in a major way, you know what, this is not productive.

0:14:09.880 --> 0:14:12.480
<v Speaker 1>If there is like a bubble, if people are getting

0:14:12.520 --> 0:14:15.679
<v Speaker 1>out over their skis, it would end in theory at

0:14:15.679 --> 0:14:18.160
<v Speaker 1>that moment that some really big investor says, you know what,

0:14:18.520 --> 0:14:20.520
<v Speaker 1>this is like a this is just a thing that

0:14:20.600 --> 0:14:23.920
<v Speaker 1>predicts the next word and doesn't really do much. That

0:14:23.960 --> 0:14:27.360
<v Speaker 1>hasn't happened yet. And so there's that faith, and there's

0:14:27.440 --> 0:14:29.720
<v Speaker 1>the ongoing investment, and there's that fear of missing out,

0:14:29.960 --> 0:14:32.440
<v Speaker 1>and so far that aspect of it hasn't really changed.

0:14:32.560 --> 0:14:34.640
<v Speaker 2>Brendan. There's still some blindness, I guess that we have

0:14:34.720 --> 0:14:37.000
<v Speaker 2>about what this is going to mean for the economy.

0:14:37.240 --> 0:14:40.240
<v Speaker 2>As you kind of dig through what's in the IMP's

0:14:40.320 --> 0:14:42.720
<v Speaker 2>latest forecast, the kind of commentary around it, are we

0:14:42.760 --> 0:14:46.560
<v Speaker 2>any closer to maybe not knowing but having a sense

0:14:46.600 --> 0:14:48.640
<v Speaker 2>of what this is going to mean for productivity. If

0:14:48.640 --> 0:14:50.720
<v Speaker 2>all that's promised comes to pass.

0:14:50.520 --> 0:14:53.520
<v Speaker 5>You know, we can theorize that all of this investment

0:14:53.560 --> 0:14:57.120
<v Speaker 5>that's going into data centers and all the capacity that

0:14:57.200 --> 0:14:59.840
<v Speaker 5>needs to be built up, you know, will create a

0:15:00.040 --> 0:15:04.600
<v Speaker 5>productivity boomlet at least no one really knows. It sounds

0:15:04.640 --> 0:15:07.280
<v Speaker 5>great on paper, and for the US to lead that.

0:15:07.560 --> 0:15:09.920
<v Speaker 5>Donald Trump is very proud to be part of it

0:15:10.640 --> 0:15:13.680
<v Speaker 5>and invites it. But what he really needs to do

0:15:13.800 --> 0:15:16.840
<v Speaker 5>is create the blue collar you know, the sort of

0:15:17.320 --> 0:15:22.480
<v Speaker 5>romanticized version of factory jobs that he promised his base,

0:15:23.120 --> 0:15:27.360
<v Speaker 5>and we've yet to see that. Politically, what matters more

0:15:27.400 --> 0:15:31.400
<v Speaker 5>than anything right now is factory expansions in the US

0:15:31.480 --> 0:15:34.320
<v Speaker 5>between now and next November, and we'll know the answer

0:15:34.320 --> 0:15:36.320
<v Speaker 5>to those sooner than we will know the answer to

0:15:36.360 --> 0:15:38.120
<v Speaker 5>the productivity impact of AI.

0:15:38.560 --> 0:15:40.720
<v Speaker 2>Tracy, I can't resist asking you about something else that's

0:15:40.720 --> 0:15:43.080
<v Speaker 2>in the backdrop here, and that is the earnings that

0:15:43.080 --> 0:15:45.240
<v Speaker 2>we've gotten from the big banks this week, and there

0:15:45.480 --> 0:15:48.240
<v Speaker 2>are more to come from regional, smaller banks in the

0:15:48.240 --> 0:15:51.080
<v Speaker 2>coming days. But we've seen them beat a lot of

0:15:51.120 --> 0:15:54.680
<v Speaker 2>analyst expectations. Goldman had a record quarter, Morgan Stanley had

0:15:54.680 --> 0:15:57.600
<v Speaker 2>a record quarter. It's because of trading, but it's because

0:15:57.600 --> 0:15:59.800
<v Speaker 2>of deal making as well, And I'm curious how you

0:15:59.840 --> 0:16:02.960
<v Speaker 2>think about that and what it says about the environment

0:16:03.000 --> 0:16:06.440
<v Speaker 2>we're in. We're seeing these institutions doing so well here

0:16:06.680 --> 0:16:08.360
<v Speaker 2>in the third quarter of twenty twenty five.

0:16:09.040 --> 0:16:11.120
<v Speaker 4>Mostly what it says is that in a period of

0:16:11.160 --> 0:16:13.760
<v Speaker 4>sluggish growth, or in a period where you are anticipating

0:16:13.840 --> 0:16:17.640
<v Speaker 4>further sluggish growth, one way to actually grow your way

0:16:17.680 --> 0:16:22.320
<v Speaker 4>out of that is acquisitions, right, buy more companies, get bigger,

0:16:22.520 --> 0:16:25.400
<v Speaker 4>have more pricing power. This has been the sort of

0:16:25.440 --> 0:16:30.120
<v Speaker 4>dominant theme of I guess late stage American corporate capitalism

0:16:30.160 --> 0:16:32.800
<v Speaker 4>for a while now. We saw that for the past

0:16:32.800 --> 0:16:37.680
<v Speaker 4>few years. Immediately after the pandemic, people were trying their

0:16:37.720 --> 0:16:40.160
<v Speaker 4>best to get pricing power in the market. Then they

0:16:40.240 --> 0:16:43.440
<v Speaker 4>raise prices. Maybe they sell fewer items, but they make

0:16:43.520 --> 0:16:46.240
<v Speaker 4>that up in terms of the pricing, and it seemed

0:16:46.240 --> 0:16:47.800
<v Speaker 4>to work out well for a lot of them. We

0:16:47.880 --> 0:16:51.440
<v Speaker 4>had record corporate profits. So I'm not really surprised that

0:16:51.520 --> 0:16:55.160
<v Speaker 4>we're seeing a continuation of that strategy. What it means

0:16:55.200 --> 0:16:59.760
<v Speaker 4>for overall inflation, especially when the Trump administration has been

0:16:59.760 --> 0:17:02.960
<v Speaker 4>telling people that tariffs aren't going to cause your prices

0:17:02.960 --> 0:17:07.800
<v Speaker 4>to rise the foreign countries pay them. I think we're gonna.

0:17:07.520 --> 0:17:11.640
<v Speaker 1>See It does feel like when we had the initial

0:17:11.680 --> 0:17:15.080
<v Speaker 1>sort of Trump rally right after the election, one of

0:17:15.119 --> 0:17:17.159
<v Speaker 1>the hopes was like, oh, we're going to see like

0:17:17.400 --> 0:17:18.680
<v Speaker 1>Wall Street deregulation.

0:17:18.840 --> 0:17:19.000
<v Speaker 2>Right.

0:17:19.040 --> 0:17:20.600
<v Speaker 1>This is like one of if you think about like

0:17:20.800 --> 0:17:22.600
<v Speaker 1>the pillars of the stool or the legs of the

0:17:22.600 --> 0:17:24.440
<v Speaker 1>stool of why there was this boom, It's like, Okay,

0:17:24.440 --> 0:17:27.439
<v Speaker 1>we're gonna get tax cuts, We're gonna get deregulation. It

0:17:27.480 --> 0:17:31.160
<v Speaker 1>feels like the deregulation component is being delivered upon when

0:17:31.200 --> 0:17:34.040
<v Speaker 1>you look at all of this deal making activity, when

0:17:34.080 --> 0:17:37.920
<v Speaker 1>you look at sort of the enthusiasm with various things

0:17:37.960 --> 0:17:41.600
<v Speaker 1>related to fintech and crypto, in which it doesn't really

0:17:41.640 --> 0:17:44.080
<v Speaker 1>feel like there's any rules anymore at all, and if

0:17:44.080 --> 0:17:46.200
<v Speaker 1>you broke the rules in the past, they're probably not

0:17:46.280 --> 0:17:49.360
<v Speaker 1>gonna do anything about it. This sort of the animal

0:17:49.480 --> 0:17:53.639
<v Speaker 1>spirits and the deregulation element of this, that part seems

0:17:53.640 --> 0:17:56.960
<v Speaker 1>to be a real vindication of that thesis.

0:17:57.359 --> 0:18:00.200
<v Speaker 2>I think of how contemptuous President Trump is about out

0:18:00.560 --> 0:18:04.680
<v Speaker 2>international organizations, how much he's made an effort to undermine them.

0:18:04.760 --> 0:18:06.760
<v Speaker 2>We had Scott Best at the Treasury Sectory come to

0:18:06.800 --> 0:18:08.760
<v Speaker 2>the IMF a few months ago and say we're not

0:18:08.760 --> 0:18:10.760
<v Speaker 2>going to effectively, we're not going to burn this place down,

0:18:10.760 --> 0:18:13.359
<v Speaker 2>but we want to make some significant changes to it. Brendon,

0:18:13.400 --> 0:18:15.720
<v Speaker 2>let me put the last question to you, in light

0:18:15.760 --> 0:18:18.160
<v Speaker 2>of all of that hostility, if that's the right word,

0:18:18.600 --> 0:18:20.680
<v Speaker 2>how do you think the IMF and the World Bank

0:18:20.800 --> 0:18:24.640
<v Speaker 2>and the if these institutions think about their future. Yes,

0:18:24.680 --> 0:18:26.520
<v Speaker 2>in the near term, but the medium term as well.

0:18:26.720 --> 0:18:29.399
<v Speaker 5>What we've seen in the past six months is the

0:18:29.520 --> 0:18:33.280
<v Speaker 5>US kind of going at things unilaterally, saying, look, we're

0:18:33.280 --> 0:18:36.040
<v Speaker 5>in this for ourselves. You guys, can you know, whether

0:18:36.080 --> 0:18:39.320
<v Speaker 5>we're talking about NATO or whether we're talking about trade,

0:18:39.880 --> 0:18:42.640
<v Speaker 5>you know, you're on your own basically, and we'll take

0:18:42.680 --> 0:18:44.600
<v Speaker 5>care of ourselves and you're going to have to learn

0:18:44.640 --> 0:18:47.400
<v Speaker 5>to do the same for yourself. And I think what

0:18:47.480 --> 0:18:51.360
<v Speaker 5>we're going to see in the months ahead is there

0:18:51.359 --> 0:18:53.240
<v Speaker 5>aren't going to be times when the US is going

0:18:53.280 --> 0:18:55.879
<v Speaker 5>to need its traditional allies. We're seeing it with China

0:18:55.920 --> 0:18:59.280
<v Speaker 5>and rare Erse right now. Scott Bessett was saying, you know,

0:18:59.359 --> 0:19:02.200
<v Speaker 5>we need a cord dated response to counter what China

0:19:02.240 --> 0:19:04.800
<v Speaker 5>is trying to do with controlling rare earths, and so

0:19:05.560 --> 0:19:07.639
<v Speaker 5>you know, can you have it both ways? Can you

0:19:07.840 --> 0:19:11.240
<v Speaker 5>put tariffs on your allies them not retaliate and then

0:19:11.400 --> 0:19:13.720
<v Speaker 5>ask them to cooperate with you when you need them to.

0:19:13.800 --> 0:19:16.240
<v Speaker 5>And I think we're going to find out, and this

0:19:16.320 --> 0:19:18.720
<v Speaker 5>applies to whether it's the IMF, the World Bank, or

0:19:18.720 --> 0:19:22.040
<v Speaker 5>the World Trade Organization or any of these multilateral institutions.

0:19:22.480 --> 0:19:24.520
<v Speaker 5>We're going to find out if the US can really

0:19:24.560 --> 0:19:28.320
<v Speaker 5>have it both ways because economies like the European Union,

0:19:28.520 --> 0:19:31.119
<v Speaker 5>they're taking note of all this and they will bake

0:19:31.240 --> 0:19:34.720
<v Speaker 5>that into their calculus as to Okay, well you want

0:19:34.760 --> 0:19:37.280
<v Speaker 5>us to cooperate, now, how about giving us a little

0:19:37.280 --> 0:19:39.199
<v Speaker 5>bit of relief on tariffs. So there's going to be

0:19:39.640 --> 0:19:42.800
<v Speaker 5>this kind of push and pull between unilateralism and the

0:19:42.840 --> 0:19:45.679
<v Speaker 5>old vestiges of multilateralism I think going forward.

0:19:46.520 --> 0:19:48.600
<v Speaker 2>Brendan, Joe Tracy, thank you very much, and I'm looking

0:19:48.600 --> 0:19:49.640
<v Speaker 2>forward to debt Con nine.

0:19:50.720 --> 0:19:52.560
<v Speaker 1>Thanks for having us, Thanks so much.

0:19:52.680 --> 0:19:53.240
<v Speaker 5>Thanks David.

0:19:59.240 --> 0:20:01.720
<v Speaker 2>This is the Big Take from Bloomberg News. I'm David Gerra.

0:20:02.040 --> 0:20:04.560
<v Speaker 2>To get more from the Big Take and unlimited access

0:20:04.600 --> 0:20:08.040
<v Speaker 2>to all of Bloomberg dot com, subscribe today at Bloomberg

0:20:08.080 --> 0:20:11.880
<v Speaker 2>dot com slash podcast offer. If you'd like this episode,

0:20:12.040 --> 0:20:14.160
<v Speaker 2>make sure to follow and review The Big Take wherever

0:20:14.200 --> 0:20:16.720
<v Speaker 2>you listen to podcasts. It helps people find the show.

0:20:17.200 --> 0:20:19.240
<v Speaker 2>Thanks for listening. We'll be back tomorrow