WEBVTT - Chairman & CEO at Roubini Macro Associates Nouriel Roubini Talks Geopolitics, AI Takeover

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Nor Rubini.

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<v Speaker 1>No, it joins these wonderful books, all that he's done

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<v Speaker 1>for me over the years, going way way back pre

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<v Speaker 1>crisis is well, let me just get bitcoined out of

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<v Speaker 1>the way. I don't always time on it. We've had

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<v Speaker 1>not one but two of our guests emphatically stayed Rubini's right,

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<v Speaker 1>it's going to ten thousand. It's a bit dark going

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<v Speaker 1>down from sixty thousand to ten thousand.

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<v Speaker 3>I think it doesn't matter. I don't make predictions. It

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<v Speaker 3>could go significantly low, where could stay where it is.

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<v Speaker 3>But the point is that you know Bitcoin is down

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<v Speaker 3>from his peak by fifty percent. The other top ten

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<v Speaker 3>cryptocurrences are down between sixty to ninety percent. You know,

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<v Speaker 3>millennia coin and the trump coiner are down ninety seven

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<v Speaker 3>ninety nine percent, even worse than fart Coin is done

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<v Speaker 3>only ninety five.

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<v Speaker 2>Mean, well, you know it's a traded currency, so.

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<v Speaker 3>And you know the NFT index is down ninety five

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<v Speaker 3>percent from the peak. So it was a bubble as burst.

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<v Speaker 3>Whether it be Coong goes much lower and out. Who cares?

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<v Speaker 4>You were saying that you've just come off three weeks

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<v Speaker 4>of travel A where were you and B what did

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<v Speaker 4>you learn?

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<v Speaker 2>Well?

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<v Speaker 3>I spent a good amount of time between Saudi Arabia, Israel, Dubai,

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<v Speaker 3>and Abu Dhabi. I would say that foremost on people's

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<v Speaker 3>mind was the question of whether there will be another

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<v Speaker 3>conflict between Israel, US on one side, and Iran, debated

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<v Speaker 3>in Israel, in Saudi, throughout the Gulf. We don't know

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<v Speaker 3>the negotiations. I would say the Israeli view is that

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<v Speaker 3>probably it's not just a niche about nuclear bomb but

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<v Speaker 3>also about the missiles, but stick missiles and the original proxies.

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<v Speaker 3>While Trump may just cut the deal on the on

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<v Speaker 3>the nuclear bomb alone, that will live israally in a

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<v Speaker 3>weaker position. But we'll see what are going to be

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<v Speaker 3>the results of those negotiations.

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<v Speaker 4>Other than geopolitics, there's been a move just kind of

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<v Speaker 4>feeling that the US maybe has lost a little bit

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<v Speaker 4>of its exceptionalism. There are other opportunities to invest outside

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<v Speaker 4>of the US. We've seen that over the last six

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<v Speaker 4>to twelve months. Is that something you sense in your travels?

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<v Speaker 2>Oh? Yes or no?

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<v Speaker 3>What I feel is people say we don't like the

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<v Speaker 3>US in public, and then they invest in the US.

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<v Speaker 3>I mean throughout the Gulf, whether it's Saudis or Emiratis

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<v Speaker 3>or Kataris, there's an alternative to the United States.

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<v Speaker 2>And I think for a good reason.

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<v Speaker 3>You know, I've argued that, actually I'm a techno optimist

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<v Speaker 3>that US potential growth but at the end of this

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<v Speaker 3>decade is going to be four percent, not two. And

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<v Speaker 3>if you had American exceptionalism when growth was two percent

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<v Speaker 3>and the SMP was returning to twelve percent including the

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<v Speaker 3>dividends for twenty years and as like sixteen percent, if

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<v Speaker 3>growth is even only three litt alone three and a

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<v Speaker 3>half and four, then returns have to be even higher.

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<v Speaker 3>So yeah, and the short term there is now volatility,

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<v Speaker 3>but that's short time volatility. If you look in the

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<v Speaker 3>medium term with three four percent growth and will be

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<v Speaker 3>there because of technology in US is number one together

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<v Speaker 3>with China in all of the indices of the future.

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<v Speaker 3>It's not just say either about fifteen other ones. Then

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<v Speaker 3>American exceptionally is not over actually is going to be

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<v Speaker 3>reinforced over time. And there is no other place to

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<v Speaker 3>invest in the United States because China is risky and

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<v Speaker 3>uninvestable for a lot of good reasons.

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<v Speaker 1>Nor Robini. I'm with this fossed bulletproof academics. Whatever your

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<v Speaker 1>political view is, it's truly outstanding international economics. Nor Robini

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<v Speaker 1>On tariffs, I'm reading the Morgan one volume, and William

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<v Speaker 1>McKinley Trump is fixated on the gilded Age and the

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<v Speaker 1>benefits of tariffs. I don't buy it for a minute.

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<v Speaker 1>And I'm looking for McKinley's buffalo pivot where politicians walk

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<v Speaker 1>back the talk. Are we going to see in twenty

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<v Speaker 1>twenty six tariff reduction by the president in some manner

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<v Speaker 1>like a buffalo pivot?

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<v Speaker 3>Oh, it already happened in twenty and twenty five, and

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<v Speaker 3>it's going to be more of it in twenty twenty six.

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<v Speaker 3>You know, on April second, he announced average effective tariffs

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<v Speaker 3>of thirty percent, as opposed to the pre April psycond

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<v Speaker 3>liberation they three percent. But I said right away that

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<v Speaker 3>market discipline is going to force him to check it

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<v Speaker 3>out and back down. And two weeks into that announcement,

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<v Speaker 3>NASDAK was done. Twenty percent, s MP fifteen ten, new

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<v Speaker 3>treasure yieldware up eighty business points III spread up one

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<v Speaker 3>hundred and fifty.

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<v Speaker 2>The dollars had to go free fall and he.

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<v Speaker 3>Panicked, and he panic it started to do trade deal,

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<v Speaker 3>and he gave the job to Scott Besson. And guess

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<v Speaker 3>what the average US started right now is not thirty percent.

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<v Speaker 3>It's fourteen and falling. Because there is an inflation affordability crisis,

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<v Speaker 3>and every day they cut back the tariffs on aluminum, on.

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<v Speaker 2>Coffee, in hoko and whatever.

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<v Speaker 3>They're desperate and therefore they already chickened out in twenty

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<v Speaker 3>five because the market forced them do more of it

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<v Speaker 3>this year because that of course mid them election and

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<v Speaker 3>they need to try to boost the economy and reduced inflation,

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<v Speaker 3>so taffies are going down, not up.

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<v Speaker 4>Has the whole terror of discussion in ourial maybe permanently

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<v Speaker 4>or at least an intermediate term negatively impact just trade

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<v Speaker 4>the US between various partners or is this something that

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<v Speaker 4>everybody can just get past?

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<v Speaker 2>Do you think you.

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<v Speaker 3>Know there's been some short and volatility, there's been some

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<v Speaker 3>shrinkages of our inputs from the rest of the world.

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<v Speaker 3>My view is actually the US trade and current account deficit,

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<v Speaker 3>regardless of tariffs, it's going to widen because from a

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<v Speaker 3>macro point of view, the trade balance is not Experts

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<v Speaker 3>MANUS imports, it's savings MANUS investment in US is in

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<v Speaker 3>the middle of an investment boom driven by I in

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<v Speaker 3>techologes of the future. It's like an emerging market. Ifan

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<v Speaker 3>oil or something where you have an investment boom and

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<v Speaker 3>your domestic private and public savings are lower, then you

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<v Speaker 3>have a current round deficit. So our current investment is

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<v Speaker 3>going to become larger, not smaller. Even if you had

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<v Speaker 3>thirty percent tariffs, that's a microvill and it doesn't matter

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<v Speaker 3>because the info capital equity investment to finance it, FDIBC, startups,

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<v Speaker 3>you name it, porfol investment is going to finance that.

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<v Speaker 3>So not only American exception is not over. The exorbitant

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<v Speaker 3>privilege of the US dollar is not over, and even

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<v Speaker 3>the weakness of the dollar is only short term. Over

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<v Speaker 3>the midium time we four percent growth, the dollar's going

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<v Speaker 3>to be much stronger and the uros going to be

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<v Speaker 3>much weaker.

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<v Speaker 1>Are you predicting an advancing dollar from here? Does it

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<v Speaker 1>have to weaken down and then we get a bit

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<v Speaker 1>on the.

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<v Speaker 3>Dollar listen in the next few months, weekend more depending

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<v Speaker 3>on relative market policy. But I'm asking myself, I suppose

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<v Speaker 3>you are twenty thirty. At the end of this decade,

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<v Speaker 3>the US grow the four and euroson is stuck at

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<v Speaker 3>one percent real interest rates real it depends on real

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<v Speaker 3>growth rates just because the time the US to be

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<v Speaker 3>well below party.

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<v Speaker 1>This questionnaire was brilliant and I got this in Are

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<v Speaker 1>we stealing investment from other parts of American enterprise with

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<v Speaker 1>all this money going into aichechedlogy and data centers?

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<v Speaker 2>No, I don't think so.

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<v Speaker 3>I don't think so, because, first of all, to bel

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<v Speaker 3>all AI data centers, there's supply chains of construction, of

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<v Speaker 3>equipment of everything, cooling, heating system, you name it, the chips,

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<v Speaker 3>supply chains and so on, and you know, and these

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<v Speaker 3>booming capex is maintaining economic growth strong, and that's going

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<v Speaker 3>to be good for the economy and for many other sectors.

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<v Speaker 3>And secondly, it's not just the hyper skilled mark seven

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<v Speaker 3>and doing investment AI. If you have any SMP five

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<v Speaker 3>hundred firm today and you don't have an AI strategy,

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<v Speaker 3>you're dead because you could be disrupted by a competitor,

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<v Speaker 3>or by tech firm, or by whatever. So everybody's trying

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<v Speaker 3>to play with AI. Now we're not yet seeing the

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<v Speaker 3>significant increases in productivity growth. We see them at the

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<v Speaker 3>macro level, by the way, but we don't see them.

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<v Speaker 2>For every firm.

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<v Speaker 3>But profit margins for every SMP five underd firm has increased.

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<v Speaker 3>The real revenues for all SMP five hundred firms have

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<v Speaker 3>gone up since ACTIVET has been launched by fifteen percent,

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<v Speaker 3>so five percent per year. So there are these signs

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<v Speaker 3>that there is this increasing productivity growth across the economy.

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<v Speaker 3>So everybody has to have an AI strategy. So everybody's

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<v Speaker 3>doing capecs. It's not just a mayoproscalar story.

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<v Speaker 4>No real can this economy grow at four percent as

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<v Speaker 4>you suggest, with no immigration?

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<v Speaker 2>Do we need an immigration policy that allows population growth?

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<v Speaker 3>Well, we need it because we have a bottleneck of

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<v Speaker 3>skill labor. You know, TSMC is building a factory in Arizona.

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<v Speaker 3>I spoke with people in Taiwana. I said, we don't

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<v Speaker 3>have the skilled worker in Arizona. So that hundreds or

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<v Speaker 3>thousands of engineers of TSMC going there initially for a

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<v Speaker 3>few months.

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<v Speaker 2>Now they left to be there for a few years.

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<v Speaker 3>So you need a more intelligent immigration policy with more

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<v Speaker 3>H one B visa so that skill workers can work

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<v Speaker 3>in the United States. But even if we had net

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<v Speaker 3>migration that was closed to zero. I think they increases

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<v Speaker 3>in productivity growth driven. But the clouds of the future,

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<v Speaker 3>and AI is one of the fifteen of them. Everybody's

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<v Speaker 3>obsessed with. AII is just one piece of the story.

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<v Speaker 3>That are fifteen other sectors where there's a PRODUCTI growth

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<v Speaker 3>because of the technology of the future. So that's going

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<v Speaker 3>to lead to an increasing producty growth regardless of job grades.

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<v Speaker 3>That's why there is a gap between GDP and jobs

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<v Speaker 3>because there's a booming productivity growth. So that's what's already happening.

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<v Speaker 3>We don't have the workers who are cutting back on

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<v Speaker 3>that migration. We are deporting people, and growth is actually

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<v Speaker 3>accelerating rather than necelerating.

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<v Speaker 1>Nor Rabini with the folks who welcome all of you

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<v Speaker 1>across the nation, we welcome you worldwide as well, from

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<v Speaker 1>Istanbul to Tehran to Tel Aviv and then on Italy,

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<v Speaker 1>which is normal. Rubini out of a suitcase in his childhood,

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<v Speaker 1>you have a perspective over world new world like no

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<v Speaker 1>one I know because of your tumultuous childhood, and you're superior,

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<v Speaker 1>brilliant academics and Piconian.

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<v Speaker 2>And others.

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<v Speaker 1>How do you see America after this second term of

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<v Speaker 1>President Trump, do we go back to the processes for

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<v Speaker 1>example you had serving in the White House with Bill Clinton?

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<v Speaker 1>Do we go on to a new populism? How do

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<v Speaker 1>you see us after Trump?

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<v Speaker 3>You know, I think that Trump is going to be

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<v Speaker 3>more a temporary exception rather than a radical change of

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<v Speaker 3>the US. Yes, there is a little bit more popularism

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<v Speaker 3>because there are plenty of people left behind. Some of

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<v Speaker 3>them vote for the Progressive, some of them vote MAGA,

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<v Speaker 3>but there'll be the strong increasing growth. I think that

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<v Speaker 3>after midimal election, if the GOP loses the House, Trump

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<v Speaker 3>is going to be a lim duck. Anybody from Jed

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<v Speaker 3>Evans to Marco Rubio to a bunch of others going

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<v Speaker 3>to say, I want to run, great job president for

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<v Speaker 3>two terms, even in Supreme Court. It's not going to

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<v Speaker 3>allow him to run for a third term. And therefore,

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<v Speaker 3>you know, is it going to be lin duck and

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<v Speaker 3>we're going to whoever is going to be elected, maybe

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<v Speaker 3>the exception of Jed Evans, but even a Mark Ruby

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<v Speaker 3>is going to be somehow in between the traditional you know,

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<v Speaker 3>George Bush publican party and more populous one. So and

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<v Speaker 3>we have stronger economic growth. I think some of these

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<v Speaker 3>backlash against liberal democracy and free market is gonna shrink.

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<v Speaker 3>There will be some of the backlash, but I think

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<v Speaker 3>we've hired growth. Some of these concerns about in a

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<v Speaker 3>quality and other things are going to be lessened over time.

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<v Speaker 4>Nauria, with all your travels and all your contacts around

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<v Speaker 4>the world. Is the US leadership position, which it's held

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<v Speaker 4>generally interrupted since the end of World War two?

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<v Speaker 2>Is that changed?

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<v Speaker 4>Is that done?

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<v Speaker 1>Is that.

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<v Speaker 4>Is that framework no longer in place?

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<v Speaker 3>Do you think, well, you know, even our friends and

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<v Speaker 3>allies in Europe, in the Middle East, in Asia are

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<v Speaker 3>unhappy because the US is behaving like a bully, but

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<v Speaker 3>your NATO is still there. We're going to find deals

0:11:49.840 --> 0:11:52.880
<v Speaker 3>on trade and other things. And think about the Europeans.

0:11:53.520 --> 0:11:56.040
<v Speaker 3>Do they really want to use the fans tag of

0:11:56.160 --> 0:12:00.319
<v Speaker 3>China and AI of China and being the Chinese or

0:12:00.320 --> 0:12:02.400
<v Speaker 3>a bit of course not, so they have a non

0:12:02.440 --> 0:12:06.120
<v Speaker 3>option and they have to essentially spend more on the fence,

0:12:06.240 --> 0:12:10.520
<v Speaker 3>be part of NATO, buy even more American weapons. And

0:12:10.840 --> 0:12:13.000
<v Speaker 3>there are going to be two technological stacks are going

0:12:13.040 --> 0:12:15.680
<v Speaker 3>to be completely the risk because there's the a US

0:12:15.760 --> 0:12:18.120
<v Speaker 3>stack and a Chinese stack. And if you are friends

0:12:18.160 --> 0:12:20.520
<v Speaker 3>of life the US. They don't to be subject to

0:12:20.559 --> 0:12:25.280
<v Speaker 3>the spying and being within the firewall of China. So

0:12:25.720 --> 0:12:28.120
<v Speaker 3>you have Europe and friends and analyies have no choice. They

0:12:28.160 --> 0:12:30.839
<v Speaker 3>have to go with our technology. We are defens we're

0:12:30.920 --> 0:12:34.040
<v Speaker 3>on system, we are economic channels. They'll do some trade

0:12:34.080 --> 0:12:37.120
<v Speaker 3>with China, but not stuff that is really sensitive. They

0:12:37.160 --> 0:12:38.680
<v Speaker 3>have an option by going with the US.

0:12:38.800 --> 0:12:41.680
<v Speaker 1>Nora Rabini and Richard Clareday have sat in this chair

0:12:41.720 --> 0:12:44.920
<v Speaker 1>and imposing sat in the chair and others to discuss

0:12:44.920 --> 0:12:48.280
<v Speaker 1>the next chairman of the FED. Are you comfortable with

0:12:48.360 --> 0:12:51.680
<v Speaker 1>mister warrisher? Are you particularly comfortable with him that he

0:12:51.760 --> 0:12:55.760
<v Speaker 1>doesn't have the academics say of Richard Clareda, he wouldn't

0:12:55.760 --> 0:12:58.079
<v Speaker 1>know DSGE theory over the.

0:12:58.040 --> 0:13:01.280
<v Speaker 3>Head and that doesn't bother me as much. And he

0:13:01.440 --> 0:13:04.960
<v Speaker 3>wasn't a fat before and even powerless done well while

0:13:04.960 --> 0:13:09.080
<v Speaker 3>being a lawyer. I'm more concerned about these views. The

0:13:09.200 --> 0:13:11.920
<v Speaker 3>view that you can because of AI reduce the FED

0:13:11.960 --> 0:13:15.320
<v Speaker 3>funds or it is wrong because even if AI will

0:13:15.360 --> 0:13:19.040
<v Speaker 3>eventually reduce inflation, is going to increase potential growth. So

0:13:19.080 --> 0:13:23.720
<v Speaker 3>the equilibrium real our star is higher, while the nominal

0:13:23.760 --> 0:13:26.000
<v Speaker 3>because of inflation could be lower. And it's going to

0:13:26.000 --> 0:13:28.200
<v Speaker 3>be a wash between the two. So on one side,

0:13:28.200 --> 0:13:31.839
<v Speaker 3>the real growth implies high real rates. On the other side,

0:13:31.920 --> 0:13:35.120
<v Speaker 3>lower inflation implies lower nominal and it's a wash between

0:13:35.120 --> 0:13:37.720
<v Speaker 3>the two. So that doesn't justify it or fed function.

0:13:37.880 --> 0:13:41.120
<v Speaker 1>Once you included the dynamics here, I asked, do we

0:13:41.200 --> 0:13:43.839
<v Speaker 1>need two our stars because we got an American and

0:13:43.920 --> 0:13:47.280
<v Speaker 1>Oriel flat in their back. There's not part of this

0:13:47.520 --> 0:13:52.560
<v Speaker 1>AI productivity experiment. Are we living to our stars right now?

0:13:52.720 --> 0:13:55.200
<v Speaker 3>Well, we live in what everybody refers to as a

0:13:55.360 --> 0:13:59.199
<v Speaker 3>case shaped economy. The top ten twenty percent is doing

0:13:59.320 --> 0:14:03.160
<v Speaker 3>very well. About on fifty percent struggles from paycheck to paycheck.

0:14:03.200 --> 0:14:05.320
<v Speaker 3>Even if we were at full employment, at least people

0:14:05.559 --> 0:14:09.400
<v Speaker 3>have jobs. But even if you were to cut policy

0:14:09.480 --> 0:14:12.240
<v Speaker 3>rate in an economy is near full employment, you're going

0:14:12.280 --> 0:14:15.160
<v Speaker 3>to fuel only inflation and if it is gonna hold

0:14:15.200 --> 0:14:18.560
<v Speaker 3>more the working class than otherwise. So the solution is

0:14:18.600 --> 0:14:21.280
<v Speaker 3>not going to be reducing the policy rate. If you're

0:14:21.320 --> 0:14:24.280
<v Speaker 3>worried about inequality, you have to do stuff like providing

0:14:24.400 --> 0:14:27.240
<v Speaker 3>educational skills and retraining and all the things we're not

0:14:27.320 --> 0:14:29.600
<v Speaker 3>doing to make sure that those were left behind are

0:14:29.640 --> 0:14:31.720
<v Speaker 3>not left The band it's not the job of monetary body.

0:14:31.800 --> 0:14:34.880
<v Speaker 1>Your PhD advisor Jeff Say exited the book fifteen years ago,

0:14:34.920 --> 0:14:38.560
<v Speaker 1>folks predicting all of this educational failure in America. I

0:14:38.560 --> 0:14:39.520
<v Speaker 1>got twenty seconds.

0:14:39.560 --> 0:14:41.040
<v Speaker 2>When's the next Rubini book?

0:14:42.480 --> 0:14:46.960
<v Speaker 3>I usually write one every decade. Crisis Economics was twenty ten,

0:14:47.360 --> 0:14:51.040
<v Speaker 3>Mega Tread was twenty twenty two. So maybe something on

0:14:51.120 --> 0:14:52.920
<v Speaker 3>AI and how the world is going to change. But

0:14:53.680 --> 0:14:55.600
<v Speaker 3>it's going to be by the end of the decade,

0:14:55.360 --> 0:14:56.480
<v Speaker 3>not anytime soon.