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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Even if you didn't

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Speaker 1: read the eight hundred and thirty pages, it had a

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Speaker 1: lovely purple lavender cover and you could walk around campus

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Speaker 1: toating your Obsfeld and rogueoff and you get cool points

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Speaker 1: just for that. Joining us now. One of the foundation

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Speaker 1: academics we have on our International Macroeconomics Maurice Sobsfeld. He's

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Speaker 1: with the Peterson Institute with Posen and Blanchard. He is

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Speaker 1: at Berkeley forever and always, professor. Thank you so much

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Speaker 1: for joining us. What I see in percolating right now,

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Speaker 1: Maurice Sobsfeld, is real tensions about supply lines falling apart,

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Speaker 1: supply lines fragile because of tariffs, the interstitial, the interstitual

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Speaker 1: wiring of our trade system. Is it broken.

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Speaker 2: It's not broken yet, but it's understrained. It's understrained because

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Speaker 2: of tariffs. It's understrained because of geopolitical tensions. It's understrained

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Speaker 2: because of the trade war. And we can see this

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Speaker 2: in the threats flying back between President Trump and China

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Speaker 2: right now over everything from shipping to rar earth to

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Speaker 2: cooking oil.

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Speaker 1: There just seems to be two Americas, one affected by

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Speaker 1: goods and trade worry and angst in another a financial boom,

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Speaker 1: like Morgan Stanley, Can we exist like this?

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Speaker 2: Well, you know, the US economy has become increasingly financialized

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Speaker 2: over the decades, and you know, at some level, the

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Speaker 2: US is the world's banker at this point. And interestingly,

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Speaker 2: finance hasn't seen the kind of backlash that we've seen

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Speaker 2: against trade. You know, trade is blamed for deficits with

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Speaker 2: other countries, it's blamed for the declient of manufacturing. You know,

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Speaker 2: we don't see people wanting.

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Speaker 3: To curb financial transactions.

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Speaker 2: Quite the contrary, we're seeing deregulation stable coins and the like.

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Speaker 2: So there really really is a divorce between those two sectors.

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Speaker 2: And you know the question I have is can that

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Speaker 2: go on forever?

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Speaker 3: Yeah?

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Speaker 2: Or will the trade tensions eventually feed into the financial sphere.

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Speaker 4: I think they will, And Professor, that's kind of where

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Speaker 4: we are right now. The folks that are supporting tariffs,

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Speaker 4: they say, we are not seeing the economy slow down.

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Speaker 4: We recently had a very strong third quarter GDP print.

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Speaker 4: We are not seeing a material increase in inflation data,

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Speaker 4: although we are now lacking data because of the shutdown.

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Speaker 4: So again, the supporters of terriffts are saying, we're just

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Speaker 4: not seeing those economic headwinds coming from tariffs. So my

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Speaker 4: question to you is is it just a matter of

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Speaker 4: time or are corporations adapting?

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Speaker 3: Oh? I think it's a matter of time.

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Speaker 2: There is some adaptation, of course, as corporations look for

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Speaker 2: cheaper suppliers.

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Speaker 3: But you know, just sort of a look at what

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Speaker 3: we've seen. We have not seen any.

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Speaker 2: Material fall in the dollar prices that foreign countries charge

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Speaker 2: for US. We've seen some limited increase in consumer prices

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Speaker 2: of imported goods and close substitutes for those imported goods, but.

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Speaker 3: Not enough to offset the tariff.

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Speaker 2: But we've also seen substantial revenue coming into the treasury

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Speaker 2: from tariffs, which is being paid by our importers.

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Speaker 3: So how do you square that circle.

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Speaker 2: You square it with with a hit to profitability and

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Speaker 2: with the observation that firms have been swallowing these tariffs

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Speaker 2: to some extent while they wait for tariff policy to

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Speaker 2: stabilize and figure out what it's going to be going forward.

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Speaker 2: Now that we kind of know where we are with

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Speaker 2: tariffs to some extent, I think firms are going to

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Speaker 2: be adjusting by passing those cost increases.

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Speaker 1: On Professor Obsfeld synthesize here say the work of Douglass

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Speaker 1: are when at Dartmouth with down the hall from you

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Speaker 1: at Berkeley, Barry Kengreen, and this whole trade up set

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Speaker 1: and the risk to the dollar. This goes back to Obsfeld, Rogueoff,

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Speaker 1: and frankly back to Mundell. I'm assuming you don't have

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Speaker 1: a fear of the gloom crew on the dollar. Is

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Speaker 1: that correct?

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Speaker 3: The gloom crew?

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Speaker 2: You know, I'm worried long term about the status of

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Speaker 2: the dollar. I think they're very strong forces keeping the

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Speaker 2: dollar in the prime position it's in in global markets

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Speaker 2: as the world's currency. But foreign countries are increasingly worried

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Speaker 2: about the kind of worse of punitive actions that this

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Speaker 2: administration has been taken to enforce its will globally, not

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Speaker 2: just in the trade sphere, but looking at issues like

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Speaker 2: internal politics. You know, we see this across the board,

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Speaker 2: for positive and negative. The Treasury right now is bailing

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Speaker 2: out Argentina for largely political reasons. So I think I

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Speaker 2: think the bottom line is that that foreign countries no

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Speaker 2: longer trust the US as a responsible steward of the

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Speaker 2: global economy, are going to seek to decouple and insure

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Speaker 2: themselves against policy volatility emanating from right here.

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Speaker 1: Maurice, I gotta go to breaking news. Paul, Can I

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Speaker 1: ask a rude question of Professor Absfeld? Yeah, professor and

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Speaker 1: Eiching Green question for you, Maurice Absfeld on gold at

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Speaker 1: four dollars announce? What would berries?

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Speaker 2: I'm not going to speak for Barry, my good and

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Speaker 2: longtime friend, but I think he would say that. I

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Speaker 2: guess I am speaking for him. Let me speak for myself.

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Speaker 2: Barry and I agree about a lot of things, not everything.

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Speaker 2: You know, gold is a bell weather of fear, and

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Speaker 2: the escalation in its price is far beyond what you

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Speaker 2: would expect to see coming from inflationary fears.

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Speaker 3: Although I think that's part of the picture.

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Speaker 2: I think it betokens a shift into something that is

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Speaker 2: perceived as safer than the dollar and not subject to

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Speaker 2: extra territorial action by the US. I mean, you know,

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Speaker 2: we've seen the escalation in price. We've also seen increasing

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Speaker 2: purchases of gold by emerging market central banks. A lot

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Speaker 2: of that is China, but not all of it is China, Okay,

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Speaker 2: So that I think tells us something about the fear

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Speaker 2: out there. And you know, the escalation and bitcoin prices

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Speaker 2: is a similar phenomenon.

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Speaker 1: Professor, you got to leave it there too short a visit.

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Speaker 1: Thank you so much. Thank you to you and the

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Speaker 1: Peterson Institute, Adam Posen, Professor Blanchard and others for just

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Speaker 1: great support of what we do. Marie Sobsfeld Forever from

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Speaker 1: the University of California at Berkeley,