WEBVTT - The Risks of a Prolonged Iran War 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business app. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.040 us live on YouTube. 0:00:27.400 --> 0:00:31.400 Katy Gopinath was an academic at Harvard. She was known 0:00:31.480 --> 0:00:35.160 within the racket we all knew that, but found immense 0:00:35.320 --> 0:00:39.840 acclaim As the former deputy Managing Director of the International 0:00:40.120 --> 0:00:44.000 Monetary Fund, she brought an academic gravitas to it that 0:00:44.159 --> 0:00:47.919 was just absolutely wonderful. As they do, they wanted her 0:00:47.960 --> 0:00:51.360 to stay at IMF, she had to return to Harvard. 0:00:51.479 --> 0:00:56.000 Professor Gopinath joins us in this time of international turmoil. 0:00:56.680 --> 0:00:59.200 Geta thank you so much for joining this morning. What 0:00:59.280 --> 0:01:02.160 was it like your first day back at Harvard? You 0:01:02.200 --> 0:01:05.560 go from gorgy Eva in four hundred PhDs telling you 0:01:05.680 --> 0:01:07.920 what to do with the IMF. What was it like 0:01:08.000 --> 0:01:11.000 in front of the kids at Harvard the first day? 0:01:12.400 --> 0:01:15.319 Hi, Tom, Always I always miss speaking to you, so 0:01:15.360 --> 0:01:17.720 it's great to kick off with you know this kind 0:01:17.720 --> 0:01:20.160 of a question that I don't usually get from anybody else. 0:01:21.280 --> 0:01:23.720 What was it like I mean, did you Stanley Fisher 0:01:23.760 --> 0:01:28.560 says that that Samuelson used to throw chuck. What did 0:01:28.600 --> 0:01:31.479 you do with the dumb students after the fancy people 0:01:31.520 --> 0:01:32.319 at the IMF. 0:01:34.280 --> 0:01:35.839 It's actually been going great. 0:01:36.080 --> 0:01:39.840 I am enjoying very much being back at Harvard. And 0:01:39.920 --> 0:01:43.399 it also helps to be able to be able to 0:01:43.640 --> 0:01:45.920 speak a little more freely than one does when you're 0:01:45.959 --> 0:01:49.400 when you're at the IMF. So I'm enjoying this moment 0:01:49.400 --> 0:01:52.400 a lot. And also I love working with the students 0:01:52.520 --> 0:01:56.840 and getting back into research and something I did miss well, that's. 0:01:56.720 --> 0:01:59.520 Where I wanted to go. The research of say Rudy 0:01:59.560 --> 0:02:03.840 Dorn back ages and ages or can roll gooff and others? 0:02:04.160 --> 0:02:09.360 Is there is a cycle to financial upset, a cycle 0:02:09.440 --> 0:02:14.320 to financial contagion with the private credit percolation, and again 0:02:14.520 --> 0:02:18.960 a war is tangible. Are we at another inflection point 0:02:19.120 --> 0:02:21.280 where we see crisis in finance? 0:02:22.800 --> 0:02:26.400 The troubles in a with private credit were actually there 0:02:26.480 --> 0:02:32.160 even without the right current war in Iran, we were 0:02:32.200 --> 0:02:36.600 seeing signs of distress in terms of loan defaults. I mean, 0:02:36.680 --> 0:02:40.480 this has always been an incredibly opaque sector and when 0:02:40.600 --> 0:02:43.920 we worried about where we could see another crisis coming 0:02:43.960 --> 0:02:46.760 around the corner. It was about this huge growth and 0:02:46.840 --> 0:02:50.560 non bank financial institutions that now own over fifty percent 0:02:50.680 --> 0:02:53.560 of the world's assets, and especially in a private credit 0:02:53.600 --> 0:02:58.040 private equity hedge funds which are highly leveraged, and valuations 0:02:58.200 --> 0:03:03.359 that are stretched. So it is a combination that really 0:03:03.919 --> 0:03:06.680 can get you know, things can get pretty tenuous if 0:03:07.160 --> 0:03:09.600 we have major shocks of the kind we're looking at 0:03:09.680 --> 0:03:11.960 right now. And as I said, we've just had the 0:03:12.120 --> 0:03:17.200 biggest oil shock in history. And you know, thankfully our 0:03:17.200 --> 0:03:19.760 economies are not as dependent on oil as it was 0:03:19.800 --> 0:03:23.640 in the nineteen seventies and therefore we could weather more 0:03:23.639 --> 0:03:25.200 of it now than we did back then. 0:03:25.720 --> 0:03:28.680 But this is a huge, major event to the global economy. 0:03:29.200 --> 0:03:31.760 I want to bounce off what you were just saying 0:03:31.800 --> 0:03:34.480 about the war and its effect on the global economy, 0:03:34.480 --> 0:03:37.280 because even a long war, would that have a limited 0:03:37.360 --> 0:03:41.480 consequence for global GDP or will there be longer term 0:03:41.560 --> 0:03:42.320 damage done? 0:03:44.440 --> 0:03:49.200 A lot depends upon how long oil prices stay high. Right, 0:03:49.560 --> 0:03:52.440 it had come down to around eighty five yesterday and 0:03:52.640 --> 0:03:55.440 then shot back up to one hundred and now hovering. 0:03:55.120 --> 0:03:56.120 Around ninety six. 0:03:56.600 --> 0:03:59.720 So you know, coming into twenty twenty six, the assumption 0:03:59.880 --> 0:04:02.200 was that twenty twenty six would be a year when 0:04:02.320 --> 0:04:06.320 oil prices would average sixty five dollars a barrel. I 0:04:06.360 --> 0:04:08.640 think in the best case scenario, we're looking at it 0:04:08.720 --> 0:04:12.000 averaging now seventy five dollars a barrel, which just from 0:04:12.040 --> 0:04:14.800 the oil channel shaves off about zero point one two 0:04:14.800 --> 0:04:18.480 point two percentage point of global growth. But this continues, 0:04:18.520 --> 0:04:21.480 and I don't think this requires you're not talking necessarily 0:04:21.520 --> 0:04:23.760 that everything gets sorted out in a week. 0:04:23.800 --> 0:04:24.560 But if this. 0:04:24.600 --> 0:04:27.680 Continues well past a few weeks, and we're looking at 0:04:28.080 --> 0:04:31.880 now average for the year hitting eighty five, now that's 0:04:32.320 --> 0:04:34.880 beginning to shay off like point three percentage point of 0:04:34.920 --> 0:04:36.960 global growth point four percentage point. 0:04:37.160 --> 0:04:39.760 And global inflation starts. 0:04:39.360 --> 0:04:42.480 Going up by fifty basis points sixty basis points. 0:04:42.800 --> 0:04:46.719 So this needs a solution relatively soon. 0:04:47.120 --> 0:04:49.960 Otherwise we're all looking at countries around the world dealing 0:04:50.000 --> 0:04:52.560 with many countries dealing with statulationary shocks. 0:04:52.880 --> 0:04:56.440 What about emerging economies, They would be vulnerable here to 0:04:56.600 --> 0:04:58.480 persistent high energy prices. 0:04:58.600 --> 0:05:04.359 Right, Emerging markets have, especially the ones of course that 0:05:04.440 --> 0:05:08.760 are importers, I mean other countries who are exporters benefit 0:05:08.760 --> 0:05:11.480 from the higher oil prices. But the ones that are importers, 0:05:12.120 --> 0:05:15.640 and these include you know, India, many of the East 0:05:15.680 --> 0:05:16.680 Asian economies. 0:05:16.720 --> 0:05:19.800 Of course, China also is a big importer of energy, 0:05:19.839 --> 0:05:20.280 though they have. 0:05:20.240 --> 0:05:23.400 Big strategic reserves so they're kind of a little more insulated. 0:05:23.760 --> 0:05:27.080 But yes, so they they tend to be importers. They 0:05:27.200 --> 0:05:31.440 also are much more energy dependent. Their economic output is 0:05:31.520 --> 0:05:34.640 much more energy dependent than the rich nations of the 0:05:34.680 --> 0:05:38.080 world are. And we've also seen the dollar appreciate. So 0:05:38.120 --> 0:05:40.680 it's a combination of oil prices going up and the 0:05:40.760 --> 0:05:43.960 dollar appreciating, and that's leading to really scarcity. I mean, 0:05:43.960 --> 0:05:47.640 we've see rationing in many emerging countries around the world. 0:05:47.640 --> 0:05:49.479 It's not just you can simply pass through very high 0:05:49.480 --> 0:05:50.240 point prices. 0:05:50.320 --> 0:05:53.640 An exceptional day for Bloomberg Surveillance. Edward Morse was with 0:05:53.800 --> 0:05:57.279 us earlier Charles Canter of Newburg or Burman as well 0:05:57.360 --> 0:06:01.159 in our getic openhaz where there's the when we're International 0:06:01.480 --> 0:06:06.240 Monetary Fund Deputy Managing Director, Holding Court at Harvard Economics 0:06:06.800 --> 0:06:11.160 after her sojourn of public service, Gita, I look at 0:06:11.200 --> 0:06:14.480 where we are and my answer is currency is the 0:06:14.520 --> 0:06:18.800 litmus paper of the system. Are there traditional dynamics of 0:06:18.920 --> 0:06:22.760 foreign exchange in play now or is there a new 0:06:22.839 --> 0:06:24.480 regime we have to get used to. 0:06:25.600 --> 0:06:29.040 I think this episode has told us that the traditional 0:06:29.240 --> 0:06:33.920 regime sustains. There have been a lot of questions about 0:06:33.960 --> 0:06:37.760 the dollar's dominance and whether we've seen some sort of 0:06:37.800 --> 0:06:41.360 financial decision making shifts sufficiently in the world that things 0:06:41.400 --> 0:06:41.760 are going. 0:06:41.640 --> 0:06:42.480 To behave differently. 0:06:42.600 --> 0:06:45.719 But what we saw right at the onset of the war, 0:06:45.800 --> 0:06:48.279 when there was a huge spike and uncertainty, was it 0:06:48.320 --> 0:06:50.520 the dollar strength and relates to pretty much all other 0:06:50.520 --> 0:06:54.919 currencies in the world. Capital flows to emerging markets. You 0:06:54.920 --> 0:06:58.080 didn't see a whole scale reversal, but you saw less 0:06:58.080 --> 0:07:01.599 of flows going into emerging markets their currency is depreciated. 0:07:02.600 --> 0:07:06.039 The US stock market held a better than other countries 0:07:06.040 --> 0:07:09.480 also because I mean frankly, US being a bigger net 0:07:09.680 --> 0:07:11.920 energy export and makes it lesser for a slight creation 0:07:12.160 --> 0:07:14.320 shop with the US than for many other countries in 0:07:14.360 --> 0:07:14.720 the world. 0:07:14.920 --> 0:07:18.840 Doctor Gopenet. I think of my great mentor at LC 0:07:19.280 --> 0:07:23.280 Megduan Desai, who we lost recently, the work of Ragharajin 0:07:23.360 --> 0:07:27.880 at Chicago and your work as well, and India is 0:07:27.920 --> 0:07:32.120 a balance and fullcome point between all these global tensions. 0:07:32.520 --> 0:07:35.080 Is there a new India now or is it a 0:07:35.120 --> 0:07:40.000 traditional relationship with India, with China, with Russia and with America. 0:07:41.520 --> 0:07:44.240 I think the word is complicated. It's really complicated at 0:07:44.240 --> 0:07:45.080 this point in time. 0:07:45.920 --> 0:07:46.840 What good news is. 0:07:46.760 --> 0:07:52.120 That India's economy is growing strongly from internal demand and 0:07:52.160 --> 0:07:56.080 from internal sources or that's pushing growth, the build out 0:07:56.080 --> 0:08:01.240 and infrastructure, the digital payment system. There is good growth 0:08:01.280 --> 0:08:05.200 momentum coming from within India. What they had to do, 0:08:05.280 --> 0:08:07.680 which I think is actually positive over the last year, 0:08:08.000 --> 0:08:10.280 is to go out and make more trade deals with 0:08:10.320 --> 0:08:13.400 other countries. They just did that with the European Union, 0:08:13.480 --> 0:08:15.560 but they also they did that previously with the UK. 0:08:16.040 --> 0:08:16.880 I think that's a good thing. 0:08:16.920 --> 0:08:19.560 I think it helps for India to bring its start 0:08:19.560 --> 0:08:21.760 off right down and they're going to have to keep 0:08:21.800 --> 0:08:22.160 this up. 0:08:22.200 --> 0:08:23.400 It's a complicated world. 0:08:23.520 --> 0:08:27.920 It's people are unsure about who their friends are and 0:08:28.000 --> 0:08:28.640 for how long. 0:08:29.240 --> 0:08:31.640 Right now, a second headline coming out of Iran. This 0:08:31.680 --> 0:08:35.120 is from some form of Iran TV. This is published 0:08:35.160 --> 0:08:38.520 on the Bloomberg It's not speculation quote. Iran says it 0:08:38.559 --> 0:08:42.160 began new wave of missile launches on Israel butcher stuff 0:08:42.200 --> 0:08:45.079 against the headline of about twenty years ago, Brentcurd ninety 0:08:45.080 --> 0:08:49.160 eight dollars thirty two cents, Alexis Christopherus with Gidy gopinat 0:08:49.280 --> 0:08:49.840 of Harvard. 0:08:50.440 --> 0:08:53.920 So, you know, what about the beneficiaries or the winners? 0:08:53.960 --> 0:08:55.600 And I guess I hate to use the word winners 0:08:55.600 --> 0:08:57.440 in war because I don't think there any winners in war. 0:08:57.520 --> 0:09:01.199 But when you're talking about large net energy exporters outside 0:09:01.320 --> 0:09:05.280 the Gulf, are they going to be benefiting? And I'm 0:09:05.280 --> 0:09:08.880 thinking Norway, you know, Russia, of course, Canada. 0:09:09.880 --> 0:09:14.839 Yes, certainly, these absolutely, these countries benefit from oil being 0:09:15.240 --> 0:09:18.520 at one hundred dollars a barrel. That's a huge windfall 0:09:19.000 --> 0:09:21.240 that you know, it's very helpful. And I would say 0:09:21.280 --> 0:09:24.280 for Russia right now, this is great because they could 0:09:24.320 --> 0:09:28.280 really use the money that they're getting from their oil sales. 0:09:28.320 --> 0:09:30.400 When oil was at sixty five dollars a barrel, it 0:09:30.440 --> 0:09:32.439 was getting really hard for their economy and you could 0:09:32.480 --> 0:09:33.280 see the strains. 0:09:33.559 --> 0:09:35.440 One hundred dollars a barrel helps them. 0:09:35.600 --> 0:09:35.760 Now. 0:09:35.800 --> 0:09:38.439 That said, if this now morphs into. 0:09:38.320 --> 0:09:45.559 A more broader financial crisis because of growth dropping everywhere, 0:09:46.040 --> 0:09:49.680 inflation going up, we're already it's kind of clear we're 0:09:49.679 --> 0:09:54.000 moving into a much more tighter monetary policies stance everywhere 0:09:54.000 --> 0:09:55.760 in the world relative to what it would have been 0:09:55.800 --> 0:10:00.360 in the absence of this massive oil price shock. You 0:10:00.400 --> 0:10:03.400 know that combination is never good for it, for the 0:10:03.400 --> 0:10:05.840 world as a whole, for pretty much all countries. 0:10:06.160 --> 0:10:07.240 Can I do an audible? 0:10:07.400 --> 0:10:07.880 Please do? 0:10:08.040 --> 0:10:10.800 I'm going to do a terrible time keen audible with 0:10:10.880 --> 0:10:14.240 geta Gopineth. So we're on stage in Marrakesh and there's 0:10:14.280 --> 0:10:17.400 like planes flying over. It's a tent. There's like eight hundred, 0:10:17.400 --> 0:10:20.719 one thousand people in there, and you know, Gita is there. 0:10:20.760 --> 0:10:23.600 I think I can't remember the details. I think substituting 0:10:23.640 --> 0:10:26.720 for the managing director because she had to go see 0:10:26.720 --> 0:10:29.200 the King of Morocco or whatever. In Christine la Guard's 0:10:29.200 --> 0:10:31.640 there and a bunch of other worthies and I never 0:10:31.720 --> 0:10:34.640 got this question into Geita. Gopinez, Oh, we'll do it now. 0:10:34.679 --> 0:10:37.680 So we're going to do it right now. Get to Gopinath. 0:10:37.800 --> 0:10:40.199 You came out of Princeton Holding Court at Harvard, Ken 0:10:40.280 --> 0:10:43.600 Rogoff and BERNANKI did part of your PhD. I want 0:10:43.640 --> 0:10:48.199 you to explain the impact of the Nobel Laureate Claudia 0:10:48.280 --> 0:10:52.240 Golden on economics. You and I never got to talk 0:10:52.280 --> 0:10:55.160 about this. We're going to do it this morning. Tell 0:10:55.200 --> 0:10:59.959 me what Professor Golden did in labor economics in our bay, 0:11:00.000 --> 0:11:03.319 behavior in our society that was so important. 0:11:05.600 --> 0:11:09.960 Claudia, who won the Nobel Prize for her work recently 0:11:10.040 --> 0:11:15.280 and was long overdue, basically told brought us, I'm sorry, 0:11:15.559 --> 0:11:20.360 brought us gender economics, which is to basically point out 0:11:20.480 --> 0:11:26.960 that there are salient differences between how women and men 0:11:27.160 --> 0:11:31.560 participate in the labor force, what they get paid, why 0:11:31.600 --> 0:11:37.040 they get paid differently, the importance of family and child rearing, 0:11:37.080 --> 0:11:42.400 which has an impact on women, and it's hugely important 0:11:42.480 --> 0:11:45.400 because for multiple reasons, besides the fact that we all 0:11:45.440 --> 0:11:48.520 want to live in a society where you get rewarded 0:11:48.840 --> 0:11:53.080 for your skills and talents at a fair level. We're 0:11:53.120 --> 0:11:56.680 in a situation where worldwide fertility rates have come down, 0:11:57.600 --> 0:12:02.680 and you cannot fix that problem without recognizing that it 0:12:02.800 --> 0:12:07.400 is tied to how women engage with the labor force 0:12:07.440 --> 0:12:08.200 and what it takes. 0:12:08.200 --> 0:12:12.040 And if if by having a child, you are. 0:12:11.840 --> 0:12:14.559 Restricted and that impedes you because you get very little 0:12:14.559 --> 0:12:17.240 support from your partner to be able to engage in 0:12:17.280 --> 0:12:21.280 the in work, you know, the incentives to do that 0:12:21.440 --> 0:12:26.520 get dampened, So you know it's her contributions have been 0:12:26.559 --> 0:12:28.679 tremendous and Tom, I think we have to keep in 0:12:28.679 --> 0:12:31.160 mind that for a long time, it was not cool 0:12:31.200 --> 0:12:34.320 to be working on you know, gender issues. When I 0:12:34.320 --> 0:12:36.760 say a long time is when when Claudia was much 0:12:36.800 --> 0:12:40.160 younger at that time, as an economist, you wanted to 0:12:40.200 --> 0:12:43.800 be working on you know, monetary policy, macro policy, those 0:12:43.840 --> 0:12:47.960 were the topics to focus on. So for Claudia to 0:12:48.120 --> 0:12:50.120 go against the wind and say no, I'm actually going 0:12:50.200 --> 0:12:54.560 to work about gender and women in the workplace, that 0:12:54.960 --> 0:12:57.320 was huge, you know, stepping out of line. 0:12:57.440 --> 0:12:59.000 And courderse to her for that. 0:12:58.840 --> 0:13:01.079 One quick questioning and as we got to go or 0:13:01.120 --> 0:13:03.079 they ran in the news. But I have to ask, 0:13:03.320 --> 0:13:06.240 are you letting your students use AI? Is AI a 0:13:06.320 --> 0:13:09.760 constructive tool in the classroom? 0:13:10.600 --> 0:13:10.840 Yes? 0:13:11.280 --> 0:13:14.439 Right now I'm teaching a class to PhD students and 0:13:14.720 --> 0:13:17.760 I think that they should absolutely use AI in a 0:13:17.800 --> 0:13:20.320 particular way. But at the same time, I want to 0:13:20.360 --> 0:13:24.000 make sure that they're also developing their own cognitive skills. 0:13:24.040 --> 0:13:25.800 I think the risk is that we're going to outsource 0:13:25.880 --> 0:13:29.760 everything to a smarter friend and in the end dot 0:13:29.840 --> 0:13:30.480 learn anything. 0:13:30.520 --> 0:13:32.880 So we have to strike the balance right one. 0:13:32.800 --> 0:13:35.160 Hundred percent agree. Thank you so much for that, Professor 0:13:35.240 --> 0:13:38.880 Gopeneth at Harvard University, or Public Service for India and 0:13:38.920 --> 0:13:44.760 America noted at the International Monetary Fund. Stay with us 0:13:45.000 --> 0:13:48.199 more from Bloomberg Surveillance coming up after this. 0:13:55.480 --> 0:13:59.040 You're listening to the Bloomberg Surveillance Podcast. Catch us live 0:13:59.120 --> 0:14:02.280 weekday afternoon from seven to ten am Eastern Listen on 0:14:02.360 --> 0:14:05.760 Apple Karplay and Android Otto with the Bloomberg Business app, 0:14:05.920 --> 0:14:07.800 or watch us live on YouTube. 0:14:08.000 --> 0:14:10.840 All of the people we speak to on hydrocarbons, including 0:14:10.880 --> 0:14:16.120 Stuart Wallace's building out Bloomberg's hydrocarbon commodity expertise at Bloomberg 0:14:16.160 --> 0:14:19.120 News over the decades. All of this has to do 0:14:19.200 --> 0:14:23.200 with informed, different and nuanced opinion. Francisco Blanche with us 0:14:23.240 --> 0:14:25.960 the other day from Bank of America. Jeff Curry, I 0:14:26.000 --> 0:14:30.000 saw wander into Bloomberg, iconic at Goldman Sachs and all. 0:14:30.040 --> 0:14:32.880 Standing on top of these good people is Edward Moore, 0:14:33.040 --> 0:14:36.760 Senior Advisor at Hartree at the Council on Foreign Relations. 0:14:37.000 --> 0:14:40.040 In his public service to the nation, what is the 0:14:40.080 --> 0:14:44.960 biggest thing doctor Morris, Americans now including the President, get 0:14:45.080 --> 0:14:49.320 wrong about the shores of Iran and their military capability 0:14:50.040 --> 0:14:53.520 to disrupt oil. What's the thing we most get wrong. 0:14:53.640 --> 0:14:57.320 So a couple of things that work together, this decentralized 0:14:57.360 --> 0:15:03.200 decision making, given our billity need to impact internal communications 0:15:03.440 --> 0:15:05.800 within the government. And then there are a couple of 0:15:05.800 --> 0:15:09.200 one hundred small sites along the Iranian coast where people 0:15:09.240 --> 0:15:12.520 have the capacity to interrupt shipping in the golf, whether 0:15:12.640 --> 0:15:16.320 it's through putting mines in or sending off small drones. 0:15:16.760 --> 0:15:18.920 And that really makes the job very difficult. 0:15:19.040 --> 0:15:22.360 When you help build out Yemen's ability to do hybridcarbons, 0:15:22.360 --> 0:15:25.960 you've driven many of those roads. I read yesterday as 0:15:26.000 --> 0:15:32.040 an amateur of three independence class mind sweeper military boats 0:15:32.040 --> 0:15:34.720 and bearn for the US Army and all of it's 0:15:34.840 --> 0:15:37.360 US Navy, I should say, And it all sounds like 0:15:37.400 --> 0:15:40.240 it's going to take days and weeks to get a 0:15:40.280 --> 0:15:43.360 path through the gulf of our moods. Are you looking 0:15:43.400 --> 0:15:46.480 at days and weeks or dare I say months to 0:15:46.560 --> 0:15:47.360 open up the gulf? 0:15:47.520 --> 0:15:50.200 Well, that's the uncertainty, and we don't know whether it's 0:15:50.240 --> 0:15:53.120 days or week, So whether it's months and we don't 0:15:53.120 --> 0:15:55.040 know whether that months will turn into a kind of 0:15:55.080 --> 0:15:59.600 permanent damage because there's a regime in place and it 0:16:00.160 --> 0:16:04.160 look like it's going to roll over overnight. So it 0:16:04.200 --> 0:16:06.760 is a big uncertainty. I say the probabilities are higher 0:16:06.760 --> 0:16:09.320 that it's sooner rather than later. But by sooner, I 0:16:09.360 --> 0:16:11.440 don't mean the end of this month, I mean sometime 0:16:11.560 --> 0:16:14.080 within the next within the next month. 0:16:14.880 --> 0:16:17.720 We know that the IEA is now tapping these reserves, 0:16:17.800 --> 0:16:21.360 right the member countries agreeing yesterday unanimously to do this. 0:16:22.000 --> 0:16:23.360 The US is going to kick in one hundred and 0:16:23.400 --> 0:16:25.760 seventy two million barrels. But you know what, it didn't 0:16:25.800 --> 0:16:28.400 too much for the oil markets and for the price 0:16:28.440 --> 0:16:30.920 of oil. Why is that? Why didn't it appease them? 0:16:31.120 --> 0:16:35.800 Well, look at what's happening there. They're putting maybe four 0:16:35.800 --> 0:16:38.680 million barrels a day into the market for a limited 0:16:38.720 --> 0:16:41.760 number of days, and the world is already seen two 0:16:41.840 --> 0:16:47.760 things happening. One is that the upwards of sixteen eighteen 0:16:47.800 --> 0:16:50.400 million barrels a day that was coming through the straight 0:16:50.440 --> 0:16:53.800 up horm moves is now down to ten, so we're 0:16:53.800 --> 0:16:57.840 not replacing. And the longer the time waits, the less 0:16:57.960 --> 0:16:59.960 important that little drop in the bucket. 0:17:00.240 --> 0:17:02.240 And it's important to mention it's not that we don't 0:17:02.280 --> 0:17:04.600 have the oil. We're still flush with oil. We just 0:17:04.640 --> 0:17:07.879 have nowhere to store the oil. Is that really the problem. 0:17:08.400 --> 0:17:11.000 No, the problem is that we have the oil. We 0:17:11.080 --> 0:17:14.159 have an open market. We allow our oil to be 0:17:14.359 --> 0:17:17.760 exported to whichever country or a party other than those 0:17:17.800 --> 0:17:20.760 sanctions that want it. This is true of gasoline and 0:17:20.840 --> 0:17:23.160 ethane and all of the product line, and it's true 0:17:23.200 --> 0:17:28.240 of crude oil. So if you are in the need 0:17:28.280 --> 0:17:29.960 of crude oil, you're going to go to the US 0:17:30.040 --> 0:17:32.080 to ask for it and bidding up the price. So 0:17:32.640 --> 0:17:35.840 although with the largest exporter of crudent product in the world, 0:17:35.880 --> 0:17:39.760 were the largest producer of that and natural gas, we 0:17:39.840 --> 0:17:41.520 are beholden to the global market. 0:17:41.800 --> 0:17:44.840 Edward Morse with this, folks, Senior advisor, Heartreet Partners. We 0:17:44.920 --> 0:17:47.080 willcome all of you on YouTube and all of our 0:17:47.440 --> 0:17:50.920 other ways to listen to us around the world. Subscribe 0:17:50.920 --> 0:17:55.119 to Bloomberg Podcast. A good conversation here with doctor Morse. Okay, 0:17:55.160 --> 0:17:58.440 my knowledge of this is I rewatched Lawrence of Arabia 0:17:58.520 --> 0:18:03.080 three times, read most of Dan Jurgen's surprise. I think 0:18:03.160 --> 0:18:07.000 most of it Okay, I read Albert Hardi on the 0:18:07.040 --> 0:18:10.800 Arab people, and that what are they thinking in Riod 0:18:11.160 --> 0:18:14.720 right now? The royal family of the Saudis, the royal 0:18:14.840 --> 0:18:19.240 family had cutter, the Zayads, the mock tombs in Dubai. 0:18:19.600 --> 0:18:21.840 What are these royal families thinking? 0:18:22.200 --> 0:18:25.080 I must intrude in this a little bit to note 0:18:25.440 --> 0:18:27.439 that Dan Jurgen and I have been very good friends 0:18:27.480 --> 0:18:30.119 since we were in graduate school, and I had the 0:18:30.119 --> 0:18:33.440 pleasure of reading the original manuscript to give him. People 0:18:33.800 --> 0:18:36.679 that was double the size of the printed version. So 0:18:36.720 --> 0:18:37.679 it took a little bit of ti. 0:18:38.560 --> 0:18:41.359 I mean, we used to John Tucker remembers this ed Mortz. 0:18:41.440 --> 0:18:44.879 We used to walk around with the prize paperback. It 0:18:44.960 --> 0:18:46.720 was like a girl bag. It was just like to 0:18:46.800 --> 0:18:49.560 be cool. You didn't read it. What was it like 0:18:49.600 --> 0:18:53.040 when you first read an absolutely definitive book. 0:18:53.359 --> 0:18:56.600 Well, the history that he did was just truly extraordinary. 0:18:56.680 --> 0:18:59.840 So it became the one place to go if you 0:18:59.840 --> 0:19:02.680 want to understand where Oyl Markers came from and where 0:19:02.680 --> 0:19:03.000 they're going. 0:19:03.080 --> 0:19:05.800 Okay, but folks, in all my travels over there, you 0:19:05.800 --> 0:19:07.720 know you do background reading in that. Thank you to 0:19:07.760 --> 0:19:11.159 the University of Durham and England for definitive work. The 0:19:11.200 --> 0:19:15.280 first Mercedes dealership in Abu Dhabi. There were no roads. 0:19:15.480 --> 0:19:18.840 They're driving the Mercedes around on the sands. The tribal 0:19:18.960 --> 0:19:23.960 structure that Alfred Harani wrote about definitively in one volume 0:19:24.320 --> 0:19:29.359 Ed Morris and how these royal families are responding to Persia. 0:19:28.760 --> 0:19:31.960 Well, they're responding in the longer term in the short run. 0:19:32.119 --> 0:19:35.680 So you know, people had been saying that nobody in 0:19:35.720 --> 0:19:38.400 the Gulf wanted the US to do this. That's absolutely untrue. 0:19:38.720 --> 0:19:41.760 There are significant reports that indicate that members of the 0:19:41.840 --> 0:19:45.320 royal families of a lot of those countries were encouraging 0:19:45.400 --> 0:19:48.760 the US to do what it did. So that's one element. 0:19:48.840 --> 0:19:52.000 They were sitting, you know, quietly and not in front 0:19:52.000 --> 0:19:55.879 of a microphone, but actually encouraging the US to do 0:19:55.920 --> 0:19:59.479 what they were doing. They are different in terms of 0:19:59.560 --> 0:20:03.000 their str ructure. So we've got two big countries, Saudi 0:20:03.040 --> 0:20:06.639 Arabia and the UAE, that either have diversified their economies 0:20:06.680 --> 0:20:10.119 a lot or are in the process of diversifying. And 0:20:10.160 --> 0:20:14.399 the intriguing thing on the Saudi side is that just 0:20:14.520 --> 0:20:17.520 in the month of January they gave signals that they 0:20:17.560 --> 0:20:20.600 were going back and looking at the original twenty thirty plan, 0:20:21.040 --> 0:20:24.520 and they're finding ways to accelerate the diversification of the economy. 0:20:24.760 --> 0:20:28.600 They're doing it by going into critical minerals, mining other 0:20:28.640 --> 0:20:32.320 things at home, going into AI for the world, and 0:20:32.400 --> 0:20:34.840 attracting investment from the private sector in a way they 0:20:34.880 --> 0:20:41.440 never have. So they are happy and unhappy about what's 0:20:41.480 --> 0:20:44.760 happened over the last month, but they're happy to see 0:20:45.200 --> 0:20:49.960 the decapitation of the regime, the reduction in the authority 0:20:50.000 --> 0:20:54.160 and the power of the central government, and they're hopeful 0:20:54.280 --> 0:20:56.479 about change over time, Doctor Moore. 0:20:56.520 --> 0:20:57.920 So I want to go back to something you said 0:20:57.960 --> 0:21:01.280 earlier in the conversation that there could be permanent damage 0:21:01.320 --> 0:21:04.560 to the Strait of Hormuz. We see this unprecedented attack 0:21:04.600 --> 0:21:07.840 on that understruction or the infrastructure of the street. What 0:21:07.840 --> 0:21:08.840 would that look like? 0:21:08.960 --> 0:21:09.600 What would what. 0:21:09.520 --> 0:21:11.679 Would permanent damage to the street look like? 0:21:12.000 --> 0:21:15.840 Well, by permanent, I meant something going forward, where we 0:21:15.920 --> 0:21:19.520 already know that the Iranians have restricted lanes of the 0:21:19.560 --> 0:21:24.400 Gulf were transit. They're allowing a number of sanctioned vessels 0:21:24.440 --> 0:21:29.560 to go through. They've increased their own exports, but given 0:21:29.960 --> 0:21:32.639 the number of weapons they have on the coast, given 0:21:33.440 --> 0:21:38.440 the nature of those weapons to intrude and interrupt transit 0:21:38.520 --> 0:21:41.840 through the Strait, this is a long term threat. It's 0:21:41.840 --> 0:21:43.760 not something that's going to be over even if there's 0:21:43.760 --> 0:21:44.399 a treece. 0:21:44.800 --> 0:21:47.000 Good Morning, ninety to nine. F Aupp in Boston jays 0:21:47.080 --> 0:21:50.280 up there. He's clipping coupons. It's just a municipal bond guy. 0:21:50.640 --> 0:21:53.560 But he sends in a really smart question. Can you 0:21:53.680 --> 0:21:57.320 ask doctor Morris what we're going to do with carg Island. 0:21:57.600 --> 0:21:59.720 This is not it's not like Love Island, but this 0:21:59.760 --> 0:22:02.359 is a little island right off the coast of Iran, 0:22:02.440 --> 0:22:05.600 directly east of Kuwait. Have you been there, Dr Morrison? 0:22:06.200 --> 0:22:08.720 You've been to car guy? Yes, this is great. I 0:22:08.720 --> 0:22:12.920 mean there's not like a four Seasons or a Marriott 0:22:12.960 --> 0:22:14.840