Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Right now, many of the most prominent and powerful people
Speaker 2: in economics and finance are in Washington. The World Bank
Speaker 2: and the International Monetary Fund are holding their annual meetings,
Speaker 2: and so is the Institute of International Finance. It's a
Speaker 2: who's who of central bankers and finance ministers and a
Speaker 2: chance for them to coordinate how they respond to big
Speaker 2: issues in the global economy. On the sidelines, Treasury Secretary
Speaker 2: Scott Bessett tried to rally support from US allies and
Speaker 2: condemn China for proposing new export restrictions on critical minerals.
Speaker 3: This should be a clear sign to our allies that
Speaker 3: we must work together, and work together we will. There
Speaker 3: will be a series of meetings this week during World
Speaker 3: Bank IMF week, and.
Speaker 2: We are all on It's a moment for policymakers to
Speaker 2: take stock of the global economy and what's driving in.
Speaker 2: Andrew Bailey, the Governor of the Bank of England, is
Speaker 2: one of them.
Speaker 3: We've got to look at productivity growth and I think
Speaker 3: we have to say what's the next likely general purpose technology? Well,
Speaker 3: it's related to AI. It seems to me.
Speaker 2: Who else has been making the pilgrimage to Washington this week.
Speaker 2: Bloomberg reporters and editors from all over the world, including
Speaker 2: Brendan Murray, who heads up our coverage of global trade,
Speaker 2: along with Joe Wisenthal and Tracy Alloway, hosts of Odd Lots,
Speaker 2: and they've been watching the dynamics between President Trump and
Speaker 2: other world leaders, many of whom are still trying to
Speaker 2: strike trade deals with the US.
Speaker 4: President Trump is kind of realizing that if you're important
Speaker 4: enough in the global financial system, and you drive hard
Speaker 4: enough of a bargain, you can basically get what you want.
Speaker 2: Tracy and Joe say, these meetings are taking place at
Speaker 2: a time when big multilateral institutions, including the World Bank
Speaker 2: and the IMF, are under threat, and at a time
Speaker 2: when the US capital is in disarray. The federal government
Speaker 2: is shut down.
Speaker 1: I think this is like this direct link that you
Speaker 1: can draw between the fact that the government is shut
Speaker 1: down right now for who knows how long, and the
Speaker 1: fact that all of these sort of institutions underneath them
Speaker 1: there's this erosion, and that is why there's so much
Speaker 1: concern about the stability of these entities.
Speaker 2: I'm David Gerrett, and this is the big take from
Speaker 2: Bloomberg News Today on the show, a look at the
Speaker 2: health of the economy and global markets, with Tracy Alloway
Speaker 2: and Joe Wisenthal of Odd Lots and Bloomberg's Brendan Murray
Speaker 2: what they're hearing at panels and lectures and on the
Speaker 2: sidelines of these big meetings about what the future holds
Speaker 2: for the economy and the international financial system and for
Speaker 2: the IMF, the World Bank, and the IIF themselves. Bloomberg's
Speaker 2: Brendan Murray is spending this week in Washington, in DC's
Speaker 2: Foggy Bottom neighborhood, which is home to the World Bank
Speaker 2: and the International Monetary Fund. I asked him what he's
Speaker 2: been hearing at their annual meetings.
Speaker 5: So basically, all the main topics that are affecting the
Speaker 5: world economy are on the agenda here. I would describe
Speaker 5: the mood as sort of cautiously optimistic so far, with
Speaker 5: the caveat that we haven't seen the worst of what
Speaker 5: people think might happen in the situation that we're in,
Speaker 5: with tariffs being completely unpredictable, rising government debt, and all
Speaker 5: the other financial strains that are coming to bear on
Speaker 5: some of these economies. So there's a lot of concern
Speaker 5: that we're seeing sort of a slow burn happen rather
Speaker 5: than a sudden shock to the global economy.
Speaker 2: As we move from the IMF toif Tracy is cautious
Speaker 2: optimism ruling the day. There at that meeting as well.
Speaker 4: Well, I wasn't something called Debt Con which is held
Speaker 4: every year over at Georgetown. It features a lot of
Speaker 4: sought debt con bt coo N. This was Debt Con
Speaker 4: eight from Crase you were wondering.
Speaker 2: Must be.
Speaker 4: But it features a lot of you know, policymakers, officials,
Speaker 4: sovereign debt lawyers, those types of people. And there were
Speaker 4: a couple of people from the IMF there, and I
Speaker 4: asked them to give me some sort of on the
Speaker 4: ground color of what they were hearing in their own meetings,
Speaker 4: and they said that everyone was kind of surprised by
Speaker 4: how optimistic Crystallina Georgieva, the director, sounded in her sort
Speaker 4: of opener where they upgraded the economic outlook for the
Speaker 4: world and basically said, you know, things are looking pretty
Speaker 4: resilient so far. We've managed to weather all these tariffs
Speaker 4: quite well. But they were telling me that a few
Speaker 4: days before there was a curtain raiser by one of
Speaker 4: the deputy directors, and he struck a very very different tone,
Speaker 4: more quietly behind closed doors, and it was a little
Speaker 4: bit more dire, a little bit more passive. I don't
Speaker 4: if you can be a little bit more dire, certainly
Speaker 4: more pessimistic than what we heard in the official you know,
Speaker 4: economic projection update. So take of that what you will.
Speaker 2: Right, let's talk a bit about the economy sort of.
Speaker 2: Brennan will turn to you first. I've covered these meetings
Speaker 2: before and they're kind of this interesting prism through which
Speaker 2: you can get a sense of how the global economy
Speaker 2: is doing and what people think about it. So there's
Speaker 2: the anecdotal side of things. Then you're getting these forecasts,
Speaker 2: these data from the institutions themselves. Could you just walk
Speaker 2: us through what the IMF said, it's chief economists said
Speaker 2: about how it's thinking about the path forward here for
Speaker 2: the global economy.
Speaker 5: The IMF chief economists laid out basically four major risk
Speaker 5: areas that they're looking at.
Speaker 6: Besides straight tensions, I want to quickly flag four other
Speaker 6: downside risks.
Speaker 5: Now, the IMF is kind of like the lifeguard, you know,
Speaker 5: they sort of blow the whistle when you get a
Speaker 5: little bit too far out beyond the waves, or you
Speaker 5: get too close to a riptide. They sort of this
Speaker 5: is what they do. And they pointed to the AI
Speaker 5: boom and they said, you know, this looks a lot
Speaker 5: like the com bubble of twenty five years ago.
Speaker 6: It was the Internet then, it is AI now.
Speaker 5: They pointed to the erosion of credibility and institutions, which
Speaker 5: is a way of saying, you know, Donald Trump is
Speaker 5: chipping away at the Fed's credibility when it tells it
Speaker 5: to lower interest rates.
Speaker 6: We are seeing rising pressures on central banks.
Speaker 5: They also talked about the rise of government debt and
Speaker 5: how there needs to be more fiscal buffers.
Speaker 6: In too many countries, insufficient progress has been made to
Speaker 6: rebuild fiscal space.
Speaker 5: And just generally they look at the tone the breakdown
Speaker 5: in global integration as a risk overall that could sort
Speaker 5: of create this permanent or structural headwind to growth potential
Speaker 5: over the longer term. So instead of growing, you know,
Speaker 5: at a healthy three to three and a half to
Speaker 5: four percent clip, we're looking at three two and a
Speaker 5: half to three percent over the medium to longer term.
Speaker 6: The tariff shock is here, and it is further dimming
Speaker 6: already weak growth prospects.
Speaker 5: So those are the main sort of themes that the IMF,
Speaker 5: the lifeguard of the global economy, is raising and wants
Speaker 5: governments to adopt sort of policies that are aware of
Speaker 5: those risks.
Speaker 1: I think there's like this direct link that you can
Speaker 1: draw between the fact that the government is shut down
Speaker 1: right now for who knows how long, and the fact
Speaker 1: that all of these sort of institutions is Brendan described
Speaker 1: like the erosion underneath them. There is this erosion, and
Speaker 1: that is why there's so much concern about the stability
Speaker 1: of these entities, because the political will to support them
Speaker 1: does not exist. And I don't think it's just a
Speaker 1: US story either. I think around the world you would
Speaker 1: see the same sort of attacks on either independent or
Speaker 1: multilateral institutions. I think it's happening everywhere.
Speaker 2: Tracy, let me pick up on that and Joe suggesting
Speaker 2: it's not just a US story. But we do see
Speaker 2: the US playing this incredibly outsized role in determining the
Speaker 2: course of the global economy right now. And I wonder
Speaker 2: what you make of that. Is that novelists you see
Speaker 2: it when it comes to what the US is pioneering
Speaker 2: in terms of trade policy, and it's tariffs that's put
Speaker 2: in place. How much determinisment has about the future of
Speaker 2: the global economy, I.
Speaker 4: Mean, I think it has an enormous amount.
Speaker 3: Right.
Speaker 4: Trump is kind of realizing that if you're important enough
Speaker 4: in the global financial system and to drive hard enough
Speaker 4: of a bargain, you can basically get what you want.
Speaker 4: But we are seeing more and more countries potentially trying
Speaker 4: to solve some of their problems or maybe achieve some
Speaker 4: of their strategic targets by doing it unilaterally. Right, and again,
Speaker 4: the US is kind of the poster child for this.
Speaker 4: So take a look at Argentina. Milay was in town
Speaker 4: to finalize the twenty billion dollar swap slash bailout that
Speaker 4: he's getting from the US. Argentina has gotten many many
Speaker 4: bailouts from the IMF. Previously, I'd lost count I know,
Speaker 4: I tried to count them up and I stopped when
Speaker 4: I went past twenty. So there we go, Argentina serial
Speaker 4: defaulter Cereal Bailey. But now the US is stepping in
Speaker 4: and saying like, all right, well, we're going to use
Speaker 4: the US Treasury to give you this twenty billion dollar
Speaker 4: What is essentially alone, and we're not going to tie
Speaker 4: any conditions to it because you are a strategic ally
Speaker 4: of ours. And in fact, Trump actually said this week,
Speaker 4: not only are we not tying conditions to it, the
Speaker 4: only real condition we seem to have with it is
Speaker 4: that Malay actually wins the midterms, which is highly, highly
Speaker 4: unusual in the way America sort of exercises its international influence.
Speaker 4: So I think we're probably going to see more of that.
Speaker 2: Gran What do people at the IMF make of this? Here?
Speaker 2: You have the US effectively going alone after seeing the
Speaker 2: IMF get burned over and over again. What are these
Speaker 2: global policy makers make of what the US is doing here?
Speaker 5: Yeah, I think you see a lot of sort of
Speaker 5: strained attempts at putting on a brave face with what
Speaker 5: the US is doing, and you hear policymakers say things like, well,
Speaker 5: you know, the US has a huge economy, but it's
Speaker 5: really only fifteen percent of global trade, and the rest
Speaker 5: of global trade is happening at a fairly robust rate
Speaker 5: without the US. I think what you're seeing is, on
Speaker 5: one hand, the sort of shock at what's happening and
Speaker 5: the upending of the global order, and an effort to
Speaker 5: hold together the order that has kept it, you know,
Speaker 5: globalization moving for decades.
Speaker 2: Now coming up the markets AI and how these international
Speaker 2: organizations view their future at a time when they face
Speaker 2: so much hostility. This week, as meetings got underway at
Speaker 2: the International Monetary Fund, the World Bank, and the Institute
Speaker 2: of International Finance, the trade war between the US and
Speaker 2: China escalated. That spooked in Ess, who it seemed had
Speaker 2: gotten pretty used to all the back and forths and skirmishes.
Speaker 2: I asked Joe and Tracy why this moment had such
Speaker 2: a profound impact on the markets.
Speaker 1: There are probably two things that have driven the market higher.
Speaker 1: Which is one is AI we all know about, and
Speaker 1: that is an industry that is an investment mega trend
Speaker 1: that does not seem to be particularly sensitive to tariffs.
Speaker 1: And then I think people had sort of forgotten about tariffs,
Speaker 1: and you know, the idea that it all gets smoothed
Speaker 1: out in the end wasn't that big of a deal.
Speaker 1: It's sort of minor. It doesn't really affect the growth areas.
Speaker 1: But I think you could argue that, yes, we did
Speaker 1: have a lot of volatility last week, but in the
Speaker 1: grand scheme of things, not that much so. I think
Speaker 1: it was just sort of like under the conditions in
Speaker 1: which there's so much enthusiasm, so much specuative money, so
Speaker 1: much hot money flowing into risky assets, the reminder that yes,
Speaker 1: trade is a live issue. Many of these things haven't
Speaker 1: been settled to us is vulnerable still to the cutoff
Speaker 1: of various things such as rare earth metalism and so forth.
Speaker 1: I would say it gave people a little time for
Speaker 1: a breather.
Speaker 4: I thought you were going to say it was a
Speaker 4: healthy correction, Joe.
Speaker 1: It was a healthy if we're on TV, that's what
Speaker 1: is a healthy. We needed that, we needed this correction.
Speaker 1: This is very healthy, Yeah, Tracy.
Speaker 2: When you look at the agenda for the IF meeting,
Speaker 2: the IMF meeting, World Bank meeting, there are a lot
Speaker 2: of mentions of AI, of artificial intelligence, and there is
Speaker 2: kind of this infusion of more skepticism, or if not
Speaker 2: more skepticism, at least a sense that all of this
Speaker 2: money has been spent, is being spent and it has
Speaker 2: to amount to something sooner rather than later. Yeah, are
Speaker 2: we talking about it differently?
Speaker 4: You need to see actual cash flows at some point.
Speaker 4: I mean, I think what's really changed is people are
Speaker 4: starting to get more nervous about some of the very
Speaker 4: intricate and complex financing arrangements that we're seeing, you know,
Speaker 4: stuff where like in video sells chips to so and
Speaker 4: so and then they use that money to make a
Speaker 4: loan to so and so, and then they send.
Speaker 2: That money back to her.
Speaker 4: It's very circular, very incestuous, and it's the kind of
Speaker 4: thing that's going to remind people of you know, previous bubbles.
Speaker 4: So that's happening. What I would say is there is
Speaker 4: still so much enthusiasm out there about the future potential
Speaker 4: of AI, and the vast majority of investors that you
Speaker 4: speak to will say something like, oh yeah, sure, it
Speaker 4: might be frothy now. You know, maybe some of these
Speaker 4: financing arrangements you know, are pumping up values or concealing
Speaker 4: real cash flow and things like that. But we know
Speaker 4: this is going to be the next big thing. We
Speaker 4: know they are going to be winners emerging from the space.
Speaker 4: In the same way that even though we had the
Speaker 4: dot com bubble burst, we had winners that emerged from
Speaker 4: that early era of the Internet and went on to
Speaker 4: make a lot of money. So I think everyone is
Speaker 4: sort of diving in on the assumption that they can
Speaker 4: either get out first before everyone else, or they're the
Speaker 4: ones that are going to be able to identify the real,
Speaker 4: true winning players in all of this.
Speaker 1: We haven't had that moment yet where some big corporate
Speaker 1: and or someone says, you know what, we are not
Speaker 1: getting an ROI from this. No one has ever said
Speaker 1: in a major way, you know what, this is not productive.
Speaker 1: If there is like a bubble, if people are getting
Speaker 1: out over their skis, it would end in theory at
Speaker 1: that moment that some really big investor says, you know what,
Speaker 1: this is like a this is just a thing that
Speaker 1: predicts the next word and doesn't really do much. That
Speaker 1: hasn't happened yet. And so there's that faith, and there's
Speaker 1: the ongoing investment, and there's that fear of missing out,
Speaker 1: and so far that aspect of it hasn't really changed.
Speaker 2: Brendan. There's still some blindness, I guess that we have
Speaker 2: about what this is going to mean for the economy.
Speaker 2: As you kind of dig through what's in the IMP's
Speaker 2: latest forecast, the kind of commentary around it, are we
Speaker 2: any closer to maybe not knowing but having a sense
Speaker 2: of what this is going to mean for productivity. If
Speaker 2: all that's promised comes to pass.
Speaker 5: You know, we can theorize that all of this investment
Speaker 5: that's going into data centers and all the capacity that
Speaker 5: needs to be built up, you know, will create a
Speaker 5: productivity boomlet at least no one really knows. It sounds
Speaker 5: great on paper, and for the US to lead that.
Speaker 5: Donald Trump is very proud to be part of it
Speaker 5: and invites it. But what he really needs to do
Speaker 5: is create the blue collar you know, the sort of
Speaker 5: romanticized version of factory jobs that he promised his base,
Speaker 5: and we've yet to see that. Politically, what matters more
Speaker 5: than anything right now is factory expansions in the US
Speaker 5: between now and next November, and we'll know the answer
Speaker 5: to those sooner than we will know the answer to
Speaker 5: the productivity impact of AI.
Speaker 2: Tracy, I can't resist asking you about something else that's
Speaker 2: in the backdrop here, and that is the earnings that
Speaker 2: we've gotten from the big banks this week, and there
Speaker 2: are more to come from regional, smaller banks in the
Speaker 2: coming days. But we've seen them beat a lot of
Speaker 2: analyst expectations. Goldman had a record quarter, Morgan Stanley had
Speaker 2: a record quarter. It's because of trading, but it's because
Speaker 2: of deal making as well, And I'm curious how you
Speaker 2: think about that and what it says about the environment
Speaker 2: we're in. We're seeing these institutions doing so well here
Speaker 2: in the third quarter of twenty twenty five.
Speaker 4: Mostly what it says is that in a period of
Speaker 4: sluggish growth, or in a period where you are anticipating
Speaker 4: further sluggish growth, one way to actually grow your way
Speaker 4: out of that is acquisitions, right, buy more companies, get bigger,
Speaker 4: have more pricing power. This has been the sort of
Speaker 4: dominant theme of I guess late stage American corporate capitalism
Speaker 4: for a while now. We saw that for the past
Speaker 4: few years. Immediately after the pandemic, people were trying their
Speaker 4: best to get pricing power in the market. Then they
Speaker 4: raise prices. Maybe they sell fewer items, but they make
Speaker 4: that up in terms of the pricing, and it seemed
Speaker 4: to work out well for a lot of them. We
Speaker 4: had record corporate profits. So I'm not really surprised that
Speaker 4: we're seeing a continuation of that strategy. What it means
Speaker 4: for overall inflation, especially when the Trump administration has been
Speaker 4: telling people that tariffs aren't going to cause your prices
Speaker 4: to rise the foreign countries pay them. I think we're gonna.
Speaker 1: See It does feel like when we had the initial
Speaker 1: sort of Trump rally right after the election, one of
Speaker 1: the hopes was like, oh, we're going to see like
Speaker 1: Wall Street deregulation.
Speaker 2: Right.
Speaker 1: This is like one of if you think about like
Speaker 1: the pillars of the stool or the legs of the
Speaker 1: stool of why there was this boom, It's like, Okay,
Speaker 1: we're gonna get tax cuts, We're gonna get deregulation. It
Speaker 1: feels like the deregulation component is being delivered upon when
Speaker 1: you look at all of this deal making activity, when
Speaker 1: you look at sort of the enthusiasm with various things
Speaker 1: related to fintech and crypto, in which it doesn't really
Speaker 1: feel like there's any rules anymore at all, and if
Speaker 1: you broke the rules in the past, they're probably not
Speaker 1: gonna do anything about it. This sort of the animal
Speaker 1: spirits and the deregulation element of this, that part seems
Speaker 1: to be a real vindication of that thesis.
Speaker 2: I think of how contemptuous President Trump is about out
Speaker 2: international organizations, how much he's made an effort to undermine them.
Speaker 2: We had Scott Best at the Treasury Sectory come to
Speaker 2: the IMF a few months ago and say we're not
Speaker 2: going to effectively, we're not going to burn this place down,
Speaker 2: but we want to make some significant changes to it. Brendon,
Speaker 2: let me put the last question to you, in light
Speaker 2: of all of that hostility, if that's the right word,
Speaker 2: how do you think the IMF and the World Bank
Speaker 2: and the if these institutions think about their future. Yes,
Speaker 2: in the near term, but the medium term as well.
Speaker 5: What we've seen in the past six months is the
Speaker 5: US kind of going at things unilaterally, saying, look, we're
Speaker 5: in this for ourselves. You guys, can you know, whether
Speaker 5: we're talking about NATO or whether we're talking about trade,
Speaker 5: you know, you're on your own basically, and we'll take
Speaker 5: care of ourselves and you're going to have to learn
Speaker 5: to do the same for yourself. And I think what
Speaker 5: we're going to see in the months ahead is there
Speaker 5: aren't going to be times when the US is going
Speaker 5: to need its traditional allies. We're seeing it with China
Speaker 5: and rare Erse right now. Scott Bessett was saying, you know,
Speaker 5: we need a cord dated response to counter what China
Speaker 5: is trying to do with controlling rare earths, and so
Speaker 5: you know, can you have it both ways? Can you
Speaker 5: put tariffs on your allies them not retaliate and then
Speaker 5: ask them to cooperate with you when you need them to.
Speaker 5: And I think we're going to find out, and this
Speaker 5: applies to whether it's the IMF, the World Bank, or
Speaker 5: the World Trade Organization or any of these multilateral institutions.
Speaker 5: We're going to find out if the US can really
Speaker 5: have it both ways because economies like the European Union,
Speaker 5: they're taking note of all this and they will bake
Speaker 5: that into their calculus as to Okay, well you want
Speaker 5: us to cooperate, now, how about giving us a little
Speaker 5: bit of relief on tariffs. So there's going to be
Speaker 5: this kind of push and pull between unilateralism and the
Speaker 5: old vestiges of multilateralism I think going forward.
Speaker 2: Brendan, Joe Tracy, thank you very much, and I'm looking
Speaker 2: forward to debt Con nine.
Speaker 1: Thanks for having us, Thanks so much.
Speaker 5: Thanks David.
Speaker 2: This is the Big Take from Bloomberg News. I'm David Gerra.
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