Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Gaty Gopinath was an
Speaker 1: academic at Harvard. She was known within the racket, we
Speaker 1: all knew that, but found immense acclaim As the former
Speaker 1: deputy Managing Director of the International Monetary Fund, she brought
Speaker 1: an academic gravitas to it that was just absolutely wonderful.
Speaker 1: As they do, they wanted her to stay at IMF.
Speaker 1: She had to return to Harvard. Professor Gopinath joins us
Speaker 1: in this time of international turmoil, geta thank you so
Speaker 1: much for joining this morning.
Speaker 2: What was it like.
Speaker 1: Your first day back at Harvard? You go from Gorgieva
Speaker 1: in four hundred PhDs telling you what to do with
Speaker 1: the IMF? What was it like in front of the
Speaker 1: kids at Harvard the first day? Hi?
Speaker 2: Tom, always I was miss speaking to you, So it's
Speaker 2: great to kick off with you. Know this kind of
Speaker 2: a question that I don't usually get from anybody else.
Speaker 1: Well, what was it like? I mean, did you Stanley
Speaker 1: Fisher says that that Samuelson used to throw chalk? What
Speaker 1: did you do with the dumb students after the fancy
Speaker 1: people at the IMF?
Speaker 2: It's actually been going great. I am enjoying very much
Speaker 2: being back at Harvard. And it also helps to be
Speaker 2: able to be able to speak a little more freely
Speaker 2: than one does when when you're when you're at the IMF.
Speaker 2: So I'm enjoying this moment a lot. And also I
Speaker 2: love working with the students and getting back into research
Speaker 2: and something I did miss.
Speaker 1: Well, that's where I wanted to go. The research of
Speaker 1: say Rudy Dornbush back ages and ages or can ro
Speaker 1: go Off and others, is there is a cycle to
Speaker 1: financial upset, a cycle to financial contagion with the private
Speaker 1: credit percolation, and again a war is tangible. Are we
Speaker 1: at another inflection point where we see crisis in finance?
Speaker 2: The troubles in a with private credit were actually there
Speaker 2: even without the right current war in Iran, we were
Speaker 2: seeing signs of distress in terms of loan defaults. I mean,
Speaker 2: this has always been an incredibly opaque sector. And when
Speaker 2: we're worried about where we could see another crisis coming
Speaker 2: around the corner, it was about this huge growth and
Speaker 2: non bank financial institutions that now own over fifty percent
Speaker 2: of the world's assets, and especially in a private credit,
Speaker 2: private equity hedge funds which are highly leveraged and valuations
Speaker 2: that are stretched. So it is a combination that really
Speaker 2: can get you know, things can get pretty tenuous if
Speaker 2: we have major shocks of the kind we're looking at
Speaker 2: right now. And as I said, we've just had the
Speaker 2: biggest oil shock in history. And you know, thankfully our
Speaker 2: economies are not as dependent on oil as was in
Speaker 2: the nineteen seventies, and therefore we could weather more of
Speaker 2: it now than we did back then. But this is
Speaker 2: a huge, major event to the global economy.
Speaker 3: I want to bounce off what you were just saying
Speaker 3: about the war and its effect on the global economy,
Speaker 3: because even a long war, would that have a limited
Speaker 3: consequence for global GDP or will there be longer term
Speaker 3: damage done?
Speaker 2: A lot depends upon how long oil prices stay high. Right,
Speaker 2: had come down to oround eighty five yesterday and now
Speaker 2: then it shot back up to one hundred and now
Speaker 2: covering around ninety six. So you know, coming into twenty
Speaker 2: twenty six, the assumption was that twenty twenty six would
Speaker 2: be a year when oil prices would average sixty five
Speaker 2: dollars a barrel. Right, I think in the best case scenario,
Speaker 2: we're looking at it averaging now seventy five dollars a barrel,
Speaker 2: which just from the oil channel shaves off about zero
Speaker 2: point one two point two percentage point of global growth.
Speaker 2: But this continues, and I don't think this will requires
Speaker 2: We're not talking necessarily that everything gets sorted out in
Speaker 2: a week. But if this continues well past a few weeks,
Speaker 2: and we're looking at now average for the year hitting
Speaker 2: eighty five, now that's beginning to shave off like zero
Speaker 2: point three percentage point to global growth point four percentage point,
Speaker 2: and global inflation starts going up by fifty basis point
Speaker 2: sixty basis points. So this needs a solution relatively soon.
Speaker 2: Otherwise we're all looking at countries around the world dealing
Speaker 2: with many countries dealing with statuflationary shocks.
Speaker 3: What about emerging economies, they would be vulnerable here to
Speaker 3: persistent high energy prices, right.
Speaker 2: Emerging markets have especially the ones of course that are importers.
Speaker 2: I mean other countries who are exporters benefit from the
Speaker 2: higher oil prices. But the ones that are importers, and
Speaker 2: these include you know, India, many of the East Asian economies.
Speaker 2: Of course, China also is a big importer of energy.
Speaker 2: Do they have big strategic reserves, so they're kind of
Speaker 2: a little more insulated. But yes, so they tend to
Speaker 2: be importers. They also are much more energy dependent. Their
Speaker 2: economic output is much more energy dependent than the rich
Speaker 2: nations of the world are. And we've also seen the
Speaker 2: dollar appreciate. So it's a combination of oil prices going
Speaker 2: up and the dollar appreciating, and that's leading to really scarcity.
Speaker 2: I mean, we seen rationing in many emerging countries around
Speaker 2: the world. It's not that you can simply pass through
Speaker 2: very high point prices.
Speaker 1: An exceptional day for Bloomberg Surveillance. Edward Morse was with
Speaker 1: us earlier. Charles Canter of Newburger Berman as well. In
Speaker 1: our We're Honored with Gutik Openhath, where there's the former
Speaker 1: International Monetary Fund Deputy Managing Director holding court at Harvard
Speaker 1: Economics after her sojourn of public service. Gita, I look
Speaker 1: at where we are, and my answer is currency is
Speaker 1: the litmus paper of the system. Are the traditional dynamics
Speaker 1: of foreign ext change in play now or is there
Speaker 1: a new regime we have to get used to.
Speaker 2: I think this episode has told us that the traditional
Speaker 2: regime sustains. There have been a lot of questions about
Speaker 2: the dollars dominance and whether we've seen some sort of
Speaker 2: financial decision making shifts sufficiently in the world that things
Speaker 2: are going to behave differently. But what we saw right
Speaker 2: at the onset of the war, whether there was a
Speaker 2: Hue spike and uncertainty, was it the dollar strength and
Speaker 2: relates to pretty much all other currencies in the world.
Speaker 2: Capital flows to emerging markets didn't. You didn't see a
Speaker 2: whole scale reversal, but you saw lesser flows going into
Speaker 2: emerging markets and their currency is depreciated. The US stock
Speaker 2: market held it better than other countries also because I
Speaker 2: mean frankly, US being a bigger net energy exporter makes
Speaker 2: it less of a slight creationy shop for the US
Speaker 2: than for many other countries.
Speaker 1: In the world. Doctor Copinett, I think of my great
Speaker 1: mentor at LC Meg to say, who we lost recently,
Speaker 1: the work of Ragarajan at Chicago and your work as well.
Speaker 1: And India is a balance and full crome point between
Speaker 1: all these global tensions. Is there a new India now
Speaker 1: or is it a traditional relationship in India with China,
Speaker 1: with Russia and with America.
Speaker 2: I think the word is complicated. It's really complicated at
Speaker 2: this point in time. What good news is that India's
Speaker 2: economy is growing strongly from internal demand and from internal
Speaker 2: sources or that's pushing growth, you know, the build out
Speaker 2: on infrastructure, the digital payment system. There is good growth
Speaker 2: momentum coming from within India. What they have had to do,
Speaker 2: which I think is actually positive over the last year,
Speaker 2: is to go out and make more trade deals with
Speaker 2: other countries. They just did that with the European Union,
Speaker 2: but they also did that previously with the UK. I
Speaker 2: think that's a good thing. I think it helps for
Speaker 2: India to bring its tap a freight down and they're
Speaker 2: going to have to keep this up. It's a complicated world.
Speaker 2: It's people are unsure about who their friends are and
Speaker 2: for how.
Speaker 1: Long right now. Second headline coming out of Iran. This
Speaker 1: is from some form of Iran TV. This is published
Speaker 1: on the Bloomberg It's not speculation quote. Iran says it
Speaker 1: began new wave of missile launches on Israel. Buttre's up
Speaker 1: against the headline of about twenty years ago. Brent crude
Speaker 1: ninety eight dollars thirty two cents. Alexis Christopherus with Gidy
Speaker 1: Gopinett of Harvard.
Speaker 3: So, you know, what about the beneficiaries or the winners.
Speaker 3: And I guess I hate to use the word winners
Speaker 3: in war because I don't think there're any winners in war.
Speaker 3: But when you're talking about large net energy exporters outside
Speaker 3: the Gulf, are they going to be benefiting? And I'm
Speaker 3: thinking Norway, you know, Russia, of course, Canada, Yes.
Speaker 2: Certainly, these absolutely, these countries benefit from oil being at
Speaker 2: one hundred dollars a barrel. That's a huge windfall that
Speaker 2: you know, it's very helpful. And I would say for
Speaker 2: Russia right now, this is great because they could really
Speaker 2: use the money that they're getting from their oil sales.
Speaker 2: When oil was at sixty five dollars a barrel, it
Speaker 2: was getting really hard for their economy and you could
Speaker 2: see the strains. One hundred dollars a barrel helps them.
Speaker 1: Now.
Speaker 2: That said, if this now morphs into a more broader
Speaker 2: financial crisis because of growth dropping everywhere, inflation going up,
Speaker 2: we're already it's kind of clear we're moving into a
Speaker 2: much more tighter monetary policies stance everywhere in the world
Speaker 2: relative to what it would have been in the absence
Speaker 2: of this massive oil price shock. You know that combination
Speaker 2: is never good for the world as a whole, for
Speaker 2: pretty much all countries.
Speaker 1: Can I do an audible?
Speaker 2: Please do?
Speaker 1: I'm going to do a terrible time audible with geta Gopinath.
Speaker 1: So we're on stage in Marrakesh and there's like planes
Speaker 1: flying over. It's a tent. There's like eight hundred one
Speaker 1: thousand people in there. You know, Geita is there. I
Speaker 1: think I can't remember the details. I think substituting for uh,
Speaker 1: the managing director because she had to go see the
Speaker 1: King of Morocco or whatever. In Christine Laguard's there and
Speaker 1: a bunch of other worthies And I never got this
Speaker 1: question into Geita gopinazh. So we're going to do it
Speaker 1: right now. Get to gopinaz You came out of Princeton
Speaker 1: Holding Court at Harvard, Ken, Rogoff, and BERNANKI did part
Speaker 1: of your PhD. I want you to explain the impact
Speaker 1: of the Nobel Laureate Claudia Golden on economics. You and
Speaker 1: I never got to talk about this. We're going to
Speaker 1: do it this morning. Tell me what Professor Golden did
Speaker 1: in labor economics, in our behavior in our society that
Speaker 1: was so important.
Speaker 2: Claudia, who won the Nobel Prize for her work recently
Speaker 2: and was long over you, basically total brought us, I'm sorry,
Speaker 2: brought us gender economics, which is to basically point out
Speaker 2: out that there are salient differences between how women and
Speaker 2: men participate in the labor force, what they get paid,
Speaker 2: why they get paid differently, the importance of family and
Speaker 2: child rearing, which has an impact on women, and it's
Speaker 2: hugely important because for multiple reasons, besides the fact that
Speaker 2: we all want to live in a society where you
Speaker 2: get rewarded for your skills and talents at a fair level,
Speaker 2: we're in a situation where worldwide fertility rates have come
Speaker 2: down and you cannot fix that problem without recognizing that
Speaker 2: it is tied to how women engage with the labor
Speaker 2: force and what it takes. And if by having a
Speaker 2: child you are restricted and that impedes you because you
Speaker 2: get very little support from your partner to be able
Speaker 2: to engage in work. You know, the incentives to do
Speaker 2: that get damp, and so you know it's her contributions
Speaker 2: have been tremendous and Tom, I think we have to
Speaker 2: keep in mind that for a long time. It was
Speaker 2: not cool to be working on you know, gender issues.
Speaker 2: When I say a long time is when Claudia was
Speaker 2: much younger. At that time, as an economist, you wanted
Speaker 2: to be working on you know, monetary policy, macro policy,
Speaker 2: those were the big topics to focus on. So for
Speaker 2: Claudia to go against the wind and say no, I'm
Speaker 2: actually going to work about gender and women in the workplace, right,
Speaker 2: that was a huge you know, stepping out of line
Speaker 2: and courders to help for that.
Speaker 1: One quick question, get to go. But as we got
Speaker 1: to go with the rant in the news. But I
Speaker 1: have to ask, are you letting your students use AI?
Speaker 1: Is AI constructives tool in the classroom?
Speaker 2: Yes? Right now I'm teaching a class to pH d
Speaker 2: students and I think that they should absolutely use AI
Speaker 2: in a particular way. But at the same time, I
Speaker 2: want to make sure that they're also developing their own
Speaker 2: cognitive skills. I think the risk is that we're going
Speaker 2: to outsource everything to a smarter friend and in the
Speaker 2: end don't learn anything. So we have to strike the
Speaker 2: balance right one.
Speaker 1: Hundred percent agree. Thank you so much for that. Professor
Speaker 1: Gopinath at Harvard University Republic Service for India and America.
Speaker 1: Noted at the International Monetary Fund