1 00:00:02,240 --> 00:00:05,800 Speaker 1: Yes, the job numbers are strong and GDP did post 2 00:00:05,840 --> 00:00:09,319 Speaker 1: the fastest growth in almost four years. But Donald Trump 3 00:00:09,360 --> 00:00:12,680 Speaker 1: has repeatedly claimed that the US is enjoying the best 4 00:00:12,720 --> 00:00:16,680 Speaker 1: economy in the nation's history. Is it really? This week 5 00:00:16,680 --> 00:00:20,119 Speaker 1: on Benchmark, we talked with a pre eminent economic historian 6 00:00:20,400 --> 00:00:33,280 Speaker 1: who begs to differ. Welcome to Benchmark. I'm Scott Lanman, 7 00:00:33,400 --> 00:00:37,319 Speaker 1: an economics editor with Bloomberg News in Washington, and I'm 8 00:00:37,400 --> 00:00:42,239 Speaker 1: Daniel Moss, columnist at Bloomberg Opinion in New York. How 9 00:00:42,320 --> 00:00:45,800 Speaker 1: guest today is Robert Gordon. He's a professor at Northwestern 10 00:00:45,920 --> 00:00:50,440 Speaker 1: University and author of the acclaimed twenty sixteen book The 11 00:00:50,640 --> 00:00:54,360 Speaker 1: Rise and Fall of American Growth. Last time we had 12 00:00:54,400 --> 00:00:57,480 Speaker 1: Professor Gordon on the podcast, which was a couple of 13 00:00:57,520 --> 00:01:01,600 Speaker 1: months before the twenty sixteen election, we talked about that book. 14 00:01:02,000 --> 00:01:05,840 Speaker 1: It traces the US economy over the past two centuries. 15 00:01:06,400 --> 00:01:10,040 Speaker 1: No one can accuse him of thinking small. Gordon concluded, 16 00:01:10,480 --> 00:01:13,880 Speaker 1: we just don't have the kinds of innovations anymore, like 17 00:01:14,080 --> 00:01:20,240 Speaker 1: electricity that can supercharge the economy. Yet, at the same time, 18 00:01:20,520 --> 00:01:24,119 Speaker 1: Gordon made a prescient prediction on our show. I went 19 00:01:24,200 --> 00:01:26,920 Speaker 1: back to it and he said I quote, we are 20 00:01:27,080 --> 00:01:29,679 Speaker 1: entering a period of the next two or three years 21 00:01:29,720 --> 00:01:31,720 Speaker 1: that I think will go down in history as some 22 00:01:31,800 --> 00:01:35,000 Speaker 1: of the best years of the American economy unquote. But 23 00:01:35,120 --> 00:01:38,760 Speaker 1: the unemployment rate falling and wages going up. Now that 24 00:01:38,840 --> 00:01:42,039 Speaker 1: the economy has indeed gotten better, let's find out what 25 00:01:42,120 --> 00:01:45,840 Speaker 1: he thinks. Professor Gordon, Welcome back to Benchmark. Glad to 26 00:01:45,880 --> 00:01:48,840 Speaker 1: be here. So how would you describe the U. S 27 00:01:48,880 --> 00:01:52,640 Speaker 1: economy today? Today? The economy is in a very good position, 28 00:01:52,960 --> 00:01:56,440 Speaker 1: but it's not the best American economy we've ever seen. 29 00:01:56,960 --> 00:02:02,000 Speaker 1: So the headline numbers of unemployment, the three is the 30 00:02:02,000 --> 00:02:05,920 Speaker 1: best we've had since the year two thousand, eighteen years ago, 31 00:02:06,480 --> 00:02:09,280 Speaker 1: and it's almost the best we've had since the nine sixties. 32 00:02:09,840 --> 00:02:15,200 Speaker 1: We have moderate and low inflation. And I'll correct your 33 00:02:16,480 --> 00:02:19,480 Speaker 1: comment about GDP growth. Those of us in the know 34 00:02:20,240 --> 00:02:22,760 Speaker 1: look at the average of the two ways of measuring 35 00:02:23,320 --> 00:02:27,800 Speaker 1: the total product of our economy. One is the famous GDP, 36 00:02:27,919 --> 00:02:29,400 Speaker 1: but the other is known as g d I or 37 00:02:29,440 --> 00:02:34,160 Speaker 1: gross domestic income. That's adding up everyone's income adjusted for inflation, 38 00:02:34,320 --> 00:02:36,680 Speaker 1: instead of adding up what is produced. And if you 39 00:02:36,720 --> 00:02:39,240 Speaker 1: look at the average of g d P and g 40 00:02:39,360 --> 00:02:42,320 Speaker 1: d I over the last two quarters, we've had two 41 00:02:42,440 --> 00:02:45,680 Speaker 1: consecutive quarters of three percent growth, not four percent growth, 42 00:02:46,160 --> 00:02:49,520 Speaker 1: and so that is a qualification. And we've had those 43 00:02:50,320 --> 00:02:53,880 Speaker 1: quarters of three growth before over the last six or 44 00:02:53,919 --> 00:02:58,120 Speaker 1: seven years of the expansion, Professor Golden. That's why you're 45 00:02:58,160 --> 00:03:02,119 Speaker 1: on the show and we're just jumped lists when we 46 00:03:02,240 --> 00:03:08,040 Speaker 1: talk about trade wars, introduction of tariffs, and also the 47 00:03:08,280 --> 00:03:12,960 Speaker 1: big fiscal stimulus that was unleashed last year. Did those 48 00:03:13,000 --> 00:03:17,480 Speaker 1: things typically happen when an economy is weak, and if so, 49 00:03:17,720 --> 00:03:20,680 Speaker 1: what are the consequences of them happening when the economy 50 00:03:20,960 --> 00:03:25,560 Speaker 1: is strong? Well. The effect of trade wars is too 51 00:03:26,720 --> 00:03:30,640 Speaker 1: h raise the price of goods for consumers, raise the 52 00:03:30,680 --> 00:03:36,920 Speaker 1: price of intermediate raw materials for American companies, materials such 53 00:03:36,920 --> 00:03:40,400 Speaker 1: as steel and aluminum that have had terrots imposed on them, 54 00:03:40,960 --> 00:03:46,240 Speaker 1: thus making American firms less competitive with their foreign arrivals 55 00:03:46,440 --> 00:03:51,120 Speaker 1: and causing them to raise their prices as well. In 56 00:03:51,200 --> 00:03:57,080 Speaker 1: the end, higher prices will sap consumer's income directly, and 57 00:03:57,160 --> 00:04:00,760 Speaker 1: it will also raise the inflation rate, which will move 58 00:04:01,080 --> 00:04:05,040 Speaker 1: ever closer the days when the Federal Reserve breaks out 59 00:04:05,040 --> 00:04:09,840 Speaker 1: of its current moderate restrictive monetary policy and becomes truly restrictive. 60 00:04:10,280 --> 00:04:14,640 Speaker 1: So those those are all consequences of the terror policy, 61 00:04:14,680 --> 00:04:19,400 Speaker 1: which almost nobody approves of except for a few companies 62 00:04:19,720 --> 00:04:24,800 Speaker 1: that are directly competing with those products that are facing terrors, 63 00:04:24,839 --> 00:04:29,039 Speaker 1: such as American steel and aluminum makers. Is the U. 64 00:04:29,120 --> 00:04:34,040 Speaker 1: S economy strong enough to withstand the impact from these 65 00:04:34,240 --> 00:04:39,279 Speaker 1: trade actions or is it likely to cause significant weakness 66 00:04:39,279 --> 00:04:43,840 Speaker 1: From where we are now because of the fiscal stimulus 67 00:04:43,839 --> 00:04:47,920 Speaker 1: from the tax cuts the bipartisan budget deal, raising spending 68 00:04:48,000 --> 00:04:50,840 Speaker 1: is actually more important in terms of the stimulus to 69 00:04:50,920 --> 00:04:56,160 Speaker 1: economic growth. And also we've got enormous extra wealth in 70 00:04:56,200 --> 00:05:00,680 Speaker 1: the economy coming from the increase in the stock markets 71 00:05:00,720 --> 00:05:04,599 Speaker 1: and selection day, and that's going to trickle into consumers spending. 72 00:05:05,200 --> 00:05:08,599 Speaker 1: Even though most of it goes to the wealthy, there 73 00:05:08,600 --> 00:05:11,720 Speaker 1: still is going to be benefits across the board in 74 00:05:11,800 --> 00:05:14,440 Speaker 1: consumers spending. So the economy has a great deal of 75 00:05:14,560 --> 00:05:18,240 Speaker 1: momentum now, and I expect that momentum will continue over 76 00:05:18,279 --> 00:05:22,320 Speaker 1: the next at least board of six quarters without any 77 00:05:22,360 --> 00:05:27,120 Speaker 1: noticeable slowdown coming from terraps. Professor, you may be familiar 78 00:05:27,160 --> 00:05:31,480 Speaker 1: with a book just published by Kai Fu Lee called 79 00:05:31,600 --> 00:05:36,280 Speaker 1: AI Superpowers, China, Silicon Valley and the New World Order. 80 00:05:37,000 --> 00:05:41,039 Speaker 1: He challenges the idea that there are no great innovations 81 00:05:41,160 --> 00:05:44,040 Speaker 1: at the moment driving things forward. Have you had a 82 00:05:44,120 --> 00:05:47,120 Speaker 1: chance to look at his book. No, No, And I'm 83 00:05:47,160 --> 00:05:50,320 Speaker 1: not saying there aren't. There are lots of innovations, but 84 00:05:51,320 --> 00:05:55,040 Speaker 1: if you look at the way ordinary life is carried out, 85 00:05:55,520 --> 00:05:58,719 Speaker 1: if you look at robots and your look for robots 86 00:05:58,720 --> 00:06:03,919 Speaker 1: in your everyday life, you still are seeing restaurants, supermarkets, 87 00:06:03,960 --> 00:06:08,240 Speaker 1: and doctor's offices, and most of the places you visit 88 00:06:08,279 --> 00:06:10,880 Speaker 1: in the course of a week or a month are 89 00:06:11,000 --> 00:06:14,240 Speaker 1: pretty much carrying out their operations as they did ten 90 00:06:14,320 --> 00:06:16,440 Speaker 1: years ago. So it's not that we don't have a 91 00:06:16,480 --> 00:06:19,760 Speaker 1: lot of innovations going on. But takes the driverless car. 92 00:06:20,480 --> 00:06:22,800 Speaker 1: That's a lot of innovation, and a lot of companies 93 00:06:22,839 --> 00:06:27,680 Speaker 1: are struggling to become Numero uno in that field. But 94 00:06:27,720 --> 00:06:29,920 Speaker 1: we still aren't seeing any direct benefits of it. We 95 00:06:29,960 --> 00:06:33,960 Speaker 1: aren't seeing massive replacement of long distance struct drivers, for instance, 96 00:06:34,279 --> 00:06:38,240 Speaker 1: much less inner city truck drivers. So don't let me. 97 00:06:38,360 --> 00:06:41,000 Speaker 1: Don't ever quote me as saying there's no innovation. What 98 00:06:41,040 --> 00:06:44,960 Speaker 1: I'm interested in is the impact of innovation on productivity growth. 99 00:06:45,760 --> 00:06:48,440 Speaker 1: Can we go back to our original question and talk 100 00:06:48,480 --> 00:06:52,960 Speaker 1: about which era of US growth do you think was 101 00:06:53,279 --> 00:06:57,640 Speaker 1: better than this current era, and why this current era 102 00:06:57,800 --> 00:07:01,200 Speaker 1: may not be so great as it is. Well, the 103 00:07:01,440 --> 00:07:03,680 Speaker 1: first place to look is at the labor market. The 104 00:07:03,760 --> 00:07:06,240 Speaker 1: unemployment rate is only one indicator of the health of 105 00:07:06,240 --> 00:07:09,640 Speaker 1: the labor market. To be unemployed, we've got to look 106 00:07:09,640 --> 00:07:12,040 Speaker 1: for work. So people who are not looking for work, 107 00:07:12,040 --> 00:07:14,640 Speaker 1: who have given up on the chances of finding work, 108 00:07:14,880 --> 00:07:16,920 Speaker 1: are not count of this unemployed. There kinda is not 109 00:07:16,960 --> 00:07:20,360 Speaker 1: being in the labor force, and the percentage of those 110 00:07:20,880 --> 00:07:24,640 Speaker 1: prime age males and females aged to fifty four who 111 00:07:24,640 --> 00:07:27,720 Speaker 1: have given up looking is substantially higher than it was 112 00:07:27,760 --> 00:07:31,120 Speaker 1: back in the years of two thousands that we're going 113 00:07:31,160 --> 00:07:35,360 Speaker 1: to cut used to compare this current economy with if 114 00:07:35,360 --> 00:07:38,320 Speaker 1: we look at some other indicators of the labor market, 115 00:07:38,760 --> 00:07:42,120 Speaker 1: there are some weaknesses there as well. More of today's 116 00:07:42,200 --> 00:07:44,920 Speaker 1: unemployment is long term that is defined as people being 117 00:07:44,960 --> 00:07:47,840 Speaker 1: out of work twenty six weeks or more. And another 118 00:07:48,480 --> 00:07:51,840 Speaker 1: weakness in the labor market compared to the late nine 119 00:07:52,160 --> 00:07:55,720 Speaker 1: nineties is that people who are working part time but 120 00:07:55,840 --> 00:07:58,760 Speaker 1: would prefer full time jobs and just can't find them 121 00:07:58,840 --> 00:08:01,480 Speaker 1: are a greater percentage of the labor force then was 122 00:08:01,520 --> 00:08:04,160 Speaker 1: true back then. So those are three measures of the 123 00:08:04,240 --> 00:08:10,880 Speaker 1: labor force, primate participation, the number of people looking for 124 00:08:11,080 --> 00:08:13,960 Speaker 1: full time work who can only find part time work, 125 00:08:14,320 --> 00:08:16,480 Speaker 1: and the percentage of the total unemployed who have been 126 00:08:16,520 --> 00:08:20,679 Speaker 1: unemployed more than twenty six weeks. So that's one place 127 00:08:20,720 --> 00:08:23,520 Speaker 1: I would go to suggest that we do not have 128 00:08:23,560 --> 00:08:27,600 Speaker 1: the greatest economy of all time. And what about when 129 00:08:27,680 --> 00:08:31,840 Speaker 1: we look at other eras that may have had better economies? 130 00:08:32,000 --> 00:08:34,960 Speaker 1: What stands out to you? Well, if you go back 131 00:08:34,960 --> 00:08:38,880 Speaker 1: to the sixties, we had a much higher percentage of 132 00:08:39,520 --> 00:08:43,560 Speaker 1: um prime age males working than is true, was true 133 00:08:43,559 --> 00:08:47,800 Speaker 1: even in the late much less today. And this brings 134 00:08:47,840 --> 00:08:50,440 Speaker 1: me to the second major area of weakness, and I 135 00:08:50,520 --> 00:08:53,040 Speaker 1: think a lot of people would go here first for 136 00:08:53,080 --> 00:08:56,680 Speaker 1: the big contrast with up the current economy, and that 137 00:08:56,800 --> 00:09:00,600 Speaker 1: is the very weak performance of productivity growth. If we 138 00:09:00,640 --> 00:09:04,480 Speaker 1: look over the last eight years, productivity growth in the 139 00:09:04,520 --> 00:09:08,120 Speaker 1: total US economy has only been zero point six percent 140 00:09:08,200 --> 00:09:11,640 Speaker 1: per year. Now, that's only half of the one point 141 00:09:11,679 --> 00:09:15,720 Speaker 1: two percent that I predicted in my rather pessimistic book. 142 00:09:16,360 --> 00:09:19,600 Speaker 1: And if you look at this the last four quarters, 143 00:09:19,640 --> 00:09:23,080 Speaker 1: which is part of the Trump achievement, we have productivity 144 00:09:23,120 --> 00:09:25,760 Speaker 1: growth in the last four quarters. That's also only about 145 00:09:25,760 --> 00:09:29,840 Speaker 1: half a percent per year. That contrasts with the late 146 00:09:29,920 --> 00:09:33,680 Speaker 1: nineteen nineties when productivity was roaring ahead at close to 147 00:09:33,720 --> 00:09:37,360 Speaker 1: three percent, as it was also in the mid nineteen sixties, 148 00:09:37,760 --> 00:09:40,400 Speaker 1: and that makes a huge difference because it helps to 149 00:09:40,440 --> 00:09:43,920 Speaker 1: account for the fact that is another weakness of the economy, 150 00:09:44,280 --> 00:09:48,160 Speaker 1: and that is that not only are wages growing slowly, 151 00:09:48,200 --> 00:09:52,840 Speaker 1: barely above the rate of inflation, but real family median incomes, 152 00:09:52,880 --> 00:09:56,560 Speaker 1: the income of the person in the middle, it's hardly 153 00:09:56,559 --> 00:10:00,440 Speaker 1: growing at all and has only recently exceeded where we 154 00:10:00,480 --> 00:10:04,080 Speaker 1: were eleven years ago in two thousand and seven. So 155 00:10:04,200 --> 00:10:08,280 Speaker 1: that whole nexus of productivity growth, real wage growth, and 156 00:10:08,400 --> 00:10:12,080 Speaker 1: median family income growth is all a very distinct weakness, 157 00:10:12,120 --> 00:10:16,440 Speaker 1: just no comparison between either the sixties or the late 158 00:10:16,480 --> 00:10:19,960 Speaker 1: nineteen nineties and where we stand today. So, Professor, when 159 00:10:20,000 --> 00:10:25,240 Speaker 1: we talk about the declining participation right and the demographic 160 00:10:25,720 --> 00:10:31,920 Speaker 1: challenges behind it, specifically retiring baby boomers, project forward for 161 00:10:32,000 --> 00:10:36,040 Speaker 1: us a couple of decades, what does that mean in 162 00:10:36,160 --> 00:10:38,840 Speaker 1: terms of the American labor force? Are we going to 163 00:10:38,920 --> 00:10:46,320 Speaker 1: see much much more capital spending on automation robots things 164 00:10:46,400 --> 00:10:50,719 Speaker 1: like that. Well, the first industrial robot was introduced in 165 00:10:50,800 --> 00:10:53,839 Speaker 1: ninety one. We have a lot of robots in our 166 00:10:53,880 --> 00:10:56,280 Speaker 1: economy that people seem to think that this is a 167 00:10:56,320 --> 00:11:02,880 Speaker 1: new deal. But automated machinery operating alongside humans or replacing 168 00:11:02,960 --> 00:11:05,760 Speaker 1: humans has been part of the store of the history 169 00:11:05,760 --> 00:11:09,640 Speaker 1: of manufacturing for a long time. In Amazon warehouses, there 170 00:11:09,640 --> 00:11:12,439 Speaker 1: are robots that bring the shelves to the human packers, 171 00:11:12,920 --> 00:11:18,240 Speaker 1: and inevitably machinery will be developed in robot like human 172 00:11:18,320 --> 00:11:22,640 Speaker 1: hands UH that pick out the products to be sent 173 00:11:22,720 --> 00:11:27,360 Speaker 1: to the Amazon customers will gradually replace those workers. But 174 00:11:27,480 --> 00:11:30,319 Speaker 1: this has been true since the beginning of the Industrial 175 00:11:30,360 --> 00:11:34,600 Speaker 1: Revolution in the late eighteenth century. UM, and we've always 176 00:11:34,679 --> 00:11:37,840 Speaker 1: found new things for people to do. UM, We're not 177 00:11:37,880 --> 00:11:41,080 Speaker 1: going to have mass unemployment as a result of the 178 00:11:41,120 --> 00:12:21,160 Speaker 1: gradual introduction of not just robots but also artificial intelligence. Professor. 179 00:12:21,320 --> 00:12:23,440 Speaker 1: Looking more at the near term, you've just come back 180 00:12:23,480 --> 00:12:28,079 Speaker 1: from a conference of economists where they released a pole 181 00:12:28,240 --> 00:12:33,840 Speaker 1: showing that about half of their members expected a recession 182 00:12:34,040 --> 00:12:39,000 Speaker 1: to begin in the United States in and even a 183 00:12:39,000 --> 00:12:43,040 Speaker 1: few said it might even begin before that. Where do 184 00:12:43,160 --> 00:12:47,640 Speaker 1: you stand on when the next recession will happen well. 185 00:12:47,840 --> 00:12:51,760 Speaker 1: The momentum in the economy, the forward momentum in the 186 00:12:51,800 --> 00:12:56,120 Speaker 1: economy growing strongly, is certainly in place for the next 187 00:12:56,480 --> 00:12:58,680 Speaker 1: four to six quarters, and that takes us through the 188 00:12:58,679 --> 00:13:02,760 Speaker 1: fall of At that point we begin to lose the 189 00:13:02,840 --> 00:13:07,720 Speaker 1: underpinnings of fiscal stimulus because the bipartisan budget deal that 190 00:13:07,840 --> 00:13:12,880 Speaker 1: raised spending by three billion dollars in the two years 191 00:13:11,880 --> 00:13:16,480 Speaker 1: and nine is going to be eliminated, and certainly, if 192 00:13:16,520 --> 00:13:20,080 Speaker 1: the Democrats regained control of the House, we're not going 193 00:13:20,120 --> 00:13:24,679 Speaker 1: to see any further fiscal stimulus because the parties will 194 00:13:24,720 --> 00:13:28,000 Speaker 1: be at loggerheads between the White House, the Senate, and 195 00:13:28,040 --> 00:13:33,560 Speaker 1: the House of Representatives. So we're gonna lose the fiscal stimulus. Also, 196 00:13:33,960 --> 00:13:37,960 Speaker 1: stock market valuations are very high now, and even without 197 00:13:38,000 --> 00:13:41,640 Speaker 1: predicting a major decline in the stock market, we're going 198 00:13:41,679 --> 00:13:45,559 Speaker 1: to have far less growth in the stock market valuations 199 00:13:45,600 --> 00:13:48,720 Speaker 1: over the next two years than we have had over 200 00:13:48,720 --> 00:13:51,600 Speaker 1: the last eighteen months, and that's going to take away 201 00:13:51,640 --> 00:13:55,760 Speaker 1: another underpinning of the supercharge growth that we're enjoying now. 202 00:13:56,720 --> 00:14:01,120 Speaker 1: So without those underpinnings that have east growth this year, 203 00:14:01,559 --> 00:14:05,000 Speaker 1: we would expect grows to go back to two well 204 00:14:05,040 --> 00:14:07,400 Speaker 1: I think the real Achilles Heel of the economy is 205 00:14:08,040 --> 00:14:10,200 Speaker 1: I think that the FED is much too sanguine and 206 00:14:10,240 --> 00:14:13,320 Speaker 1: forecasting that inflation is going to remain at only two 207 00:14:13,400 --> 00:14:15,680 Speaker 1: or two point one percent through the next three years. 208 00:14:16,040 --> 00:14:20,479 Speaker 1: That's their official forecast, and many economies just find that unbelievable. 209 00:14:20,920 --> 00:14:23,720 Speaker 1: Unemployment is going to continue to fall down to three 210 00:14:23,760 --> 00:14:26,600 Speaker 1: and a half and even three It may go below 211 00:14:26,600 --> 00:14:29,160 Speaker 1: where it was that the best years of the nineteen sixties, 212 00:14:29,600 --> 00:14:32,080 Speaker 1: and we're going to have an increasing pressure of labor 213 00:14:32,120 --> 00:14:37,960 Speaker 1: shortages on wages and thus on prices. We just heard 214 00:14:38,360 --> 00:14:41,840 Speaker 1: today that Amazon is guaranteeing that everyone in its warehouses 215 00:14:41,960 --> 00:14:44,680 Speaker 1: is going to be making fifteen dollars an hour or more, 216 00:14:44,760 --> 00:14:48,320 Speaker 1: which is double the federal minimum wage. We just heard 217 00:14:48,360 --> 00:14:51,400 Speaker 1: that New York City Airports are going to guarantee all 218 00:14:51,400 --> 00:14:54,800 Speaker 1: employees the wage of nineteen dollars an hour. These are 219 00:14:54,840 --> 00:14:58,000 Speaker 1: wages that we haven't seen in this country yet, and 220 00:14:58,240 --> 00:15:01,440 Speaker 1: they're bound to be pushing up on We've got prices 221 00:15:01,480 --> 00:15:05,600 Speaker 1: going up because of labor shortages, tariffs, higher minimum wages, 222 00:15:06,080 --> 00:15:09,280 Speaker 1: and that's bound to shake up the FED. I think 223 00:15:09,400 --> 00:15:12,040 Speaker 1: the financial market is going to react to the inflation 224 00:15:12,120 --> 00:15:15,600 Speaker 1: even before the FED does, and we're going to see 225 00:15:15,640 --> 00:15:19,920 Speaker 1: a turnaround with higher ten year bond rates and lower 226 00:15:19,960 --> 00:15:24,520 Speaker 1: stock prices going into and the fall of I don't 227 00:15:24,560 --> 00:15:28,560 Speaker 1: see a financial crisis coming. I see a gradual slowing down. 228 00:15:29,240 --> 00:15:33,640 Speaker 1: And it's very possible that any recession that occurs will 229 00:15:33,680 --> 00:15:37,120 Speaker 1: be relatively mild, nothing like two thousand and seven to 230 00:15:37,240 --> 00:15:41,320 Speaker 1: two thousand and nine. Just a recession, not a great one. No, 231 00:15:41,560 --> 00:15:45,720 Speaker 1: and I don't see the very common likening, oh, the 232 00:15:45,760 --> 00:15:49,160 Speaker 1: next recession and financial crisis. We've had a lot of 233 00:15:49,160 --> 00:15:53,280 Speaker 1: recessions without financial crisis. We had no financial crisis between 234 00:15:54,120 --> 00:15:56,880 Speaker 1: and two thousand and eight, So I don't see where 235 00:15:56,880 --> 00:16:00,000 Speaker 1: the next recession needs to lead to a financial crisis. 236 00:16:00,520 --> 00:16:03,960 Speaker 1: We have a much better capitalized banking system than we 237 00:16:04,040 --> 00:16:07,000 Speaker 1: did then. We have no housing bubble, we do not 238 00:16:07,120 --> 00:16:11,360 Speaker 1: have a dot com investment bubble. Stock mark evaluations are 239 00:16:11,440 --> 00:16:17,480 Speaker 1: much less overheated than they were. Just one final note, Professor, 240 00:16:17,720 --> 00:16:23,720 Speaker 1: the revamped US Canada Mexico Trade Accord formerly called NAFTA 241 00:16:23,880 --> 00:16:26,400 Speaker 1: now to be called U S m C. I. When 242 00:16:26,400 --> 00:16:31,240 Speaker 1: we look at the broad sweep of the continents economic history, 243 00:16:31,400 --> 00:16:35,920 Speaker 1: how significant is this? Oh? I think the the changes 244 00:16:36,240 --> 00:16:38,960 Speaker 1: that are made in the new NAFTA compared to the 245 00:16:39,000 --> 00:16:42,480 Speaker 1: old NAFTA are minor enough that we can almost forget 246 00:16:42,520 --> 00:16:47,200 Speaker 1: about them. There is this important concession the Canadians made 247 00:16:47,200 --> 00:16:49,520 Speaker 1: on dairy farmers, but that's such a small part of 248 00:16:49,560 --> 00:16:53,680 Speaker 1: their economy and our economy. That's more important for Canadian 249 00:16:53,720 --> 00:16:57,880 Speaker 1: political outcomes than it is for any evolution of the 250 00:16:57,920 --> 00:17:02,440 Speaker 1: American economy. And you have at important proviso in the 251 00:17:02,520 --> 00:17:05,480 Speaker 1: deal between the United States and Mexico that about a 252 00:17:05,560 --> 00:17:08,679 Speaker 1: third of the value of automobiles sold in the United 253 00:17:08,720 --> 00:17:13,200 Speaker 1: States has to be manufactured by workers making sixteen dollars 254 00:17:13,240 --> 00:17:17,399 Speaker 1: an hour, which is unlikely to cause wages to grow 255 00:17:17,640 --> 00:17:20,119 Speaker 1: that much in Mexico because they're only around three dollars 256 00:17:20,160 --> 00:17:24,679 Speaker 1: an hour, but will cause American manufacturers to abide by 257 00:17:24,720 --> 00:17:27,439 Speaker 1: that agreement to shift the making of some kinds of 258 00:17:27,440 --> 00:17:30,639 Speaker 1: parts back into the United States, which will be a 259 00:17:30,640 --> 00:17:33,760 Speaker 1: good thing for our economy. So I see it as 260 00:17:33,960 --> 00:17:37,080 Speaker 1: all in all the positive. We escaped the big trade 261 00:17:37,080 --> 00:17:40,320 Speaker 1: war between the United States and Canada, and now we're 262 00:17:40,400 --> 00:17:42,399 Speaker 1: left with a big trade war between the U. S 263 00:17:42,440 --> 00:17:47,200 Speaker 1: and China. Do you think that instead of globalization, professor, 264 00:17:47,280 --> 00:17:52,720 Speaker 1: we're headed towards some sort of form of muscular regionalism. 265 00:17:52,760 --> 00:17:57,800 Speaker 1: I think that's way too while the generalization. After all, 266 00:17:57,880 --> 00:18:01,000 Speaker 1: we had the nations besides the United States that were 267 00:18:01,040 --> 00:18:03,639 Speaker 1: in the trans specific Partnership that have vowed to go 268 00:18:03,680 --> 00:18:06,960 Speaker 1: ahead with it. We have the European Union holding together 269 00:18:07,119 --> 00:18:13,119 Speaker 1: with the exception of Brexit, and we've got the the 270 00:18:13,200 --> 00:18:18,040 Speaker 1: push by China to invest in places ranging from Pakistan 271 00:18:18,200 --> 00:18:23,199 Speaker 1: to East Africa. All of those are elements of what 272 00:18:23,240 --> 00:18:27,240 Speaker 1: you would call continued globalization. It's just in another phase, 273 00:18:28,320 --> 00:18:32,879 Speaker 1: that's right. But the the trade war that the administration 274 00:18:32,920 --> 00:18:37,240 Speaker 1: has started, particularly with China, is going to have a 275 00:18:37,440 --> 00:18:42,639 Speaker 1: modest but noticeable effects on US inflation. And that's the 276 00:18:42,680 --> 00:18:46,560 Speaker 1: real Achilles heel of this recovery. What financial markets are 277 00:18:46,600 --> 00:18:48,560 Speaker 1: going to do when they see more inflation, and what 278 00:18:48,960 --> 00:18:51,080 Speaker 1: the FETE is going to do when it sees more inflation. 279 00:18:51,720 --> 00:18:56,959 Speaker 1: Professor Robert Gordon of Northwestern University, This has been informative, educational, 280 00:18:57,040 --> 00:18:59,720 Speaker 1: and enlightening. As always, Thank you so much for taking 281 00:18:59,720 --> 00:19:11,000 Speaker 1: the time to join us. Okay, it was my pleasure. Benchmark. 282 00:19:11,040 --> 00:19:13,120 Speaker 1: We will be back next week. Until then, you can 283 00:19:13,160 --> 00:19:16,000 Speaker 1: find us on the Bloomberg terminal Bloomberg dot com or 284 00:19:16,040 --> 00:19:20,320 Speaker 1: Bloomberg app, as well as podcast destinations such as Apple Podcasts, 285 00:19:20,480 --> 00:19:23,680 Speaker 1: Spotify or wherever you listen. We'd love it if you 286 00:19:23,760 --> 00:19:26,280 Speaker 1: took the time to rape and review the show so 287 00:19:26,400 --> 00:19:29,239 Speaker 1: more listeners can find us, and you can find us 288 00:19:29,240 --> 00:19:33,800 Speaker 1: on Twitter. Follow me at scott Landman Dan, You're at 289 00:19:34,080 --> 00:19:38,920 Speaker 1: moss Under School. Echo Benchmark is produced by toobrah forheas 290 00:19:39,000 --> 00:19:43,040 Speaker 1: the head of Bloomberg Podcasts is Francesca Levie. Thanks for listening, 291 00:19:43,119 --> 00:19:43,920 Speaker 1: See you next time.