WEBVTT - Davos Special: Trump Is Against Capitalism, Roubini Says 0:00:00.120 --> 0:00:02.920 Brought you by Bank of America, Mary Lynch. Investing in 0:00:03.000 --> 0:00:07.840 local communities, economies and a sustainable future. That's the power 0:00:08.080 --> 0:00:12.360 of global connections, Mary Lynch, Pierce Fenner, and Smith Incorporated 0:00:12.760 --> 0:00:27.400 member s I p C. Welcome to the Bloomberg Surveillance Podcast. 0:00:27.840 --> 0:00:31.520 I'm Tom Keene with David Gura. Daily we bring you 0:00:31.560 --> 0:00:36.600 insight from the best in economics, finance, investment, and international relations. 0:00:37.040 --> 0:00:41.600 Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot Com, and 0:00:41.680 --> 0:00:49.280 of course on the Bloomberg This is arguably the most 0:00:49.320 --> 0:00:53.480 interesting economic interview in the history of Bloomberg Surveillance, Bloomberg 0:00:53.560 --> 0:00:56.160 on the economy, including the work that we've done with 0:00:56.200 --> 0:00:59.040 Bloomberg News over the years. These two have battled with 0:00:59.200 --> 0:01:02.320 many battles over the years, and today they said collegially 0:01:02.680 --> 0:01:08.360 looking forward to American economics from Harvard University and from 0:01:08.400 --> 0:01:12.520 Colombia University. Joseph Stiglet's it is a change world from 0:01:12.520 --> 0:01:15.440 when you two went at it decades ago. Let me 0:01:15.480 --> 0:01:18.600 first go to you, Professor Rogolf. What do you need 0:01:18.640 --> 0:01:22.440 to observe from the Trump cabinet and those within this 0:01:22.560 --> 0:01:27.360 new administration to soften the rhetoric of our new president. 0:01:27.680 --> 0:01:29.679 I don't even know how to say that. I mean, 0:01:29.920 --> 0:01:31.679 we haven't want to say that he listens to them. 0:01:31.720 --> 0:01:34.319 I mean, I think he has appointed some adults, you know, 0:01:34.400 --> 0:01:37.680 in the cabinet, the Secretary of State, at the Secretary 0:01:37.720 --> 0:01:40.480 of Defense. But you know, is he someone who's going 0:01:40.560 --> 0:01:43.200 to listen to them? This his behavior going to be erratic, 0:01:43.959 --> 0:01:47.200 not so much looking at the policies as the whole temperament. 0:01:47.440 --> 0:01:49.680 Do they look like, you know, they're going to be 0:01:49.920 --> 0:01:54.560 a rational administration? You have been a harsh critic of 0:01:54.680 --> 0:01:58.680 conservative economics and of the politics and the rhetoric of 0:01:58.720 --> 0:02:01.680 the president, like not what you want to see from 0:02:01.680 --> 0:02:06.520 the administration. How should Democrats progresses in a liberal world 0:02:06.720 --> 0:02:10.640 respond to the Trump presidency. I think they have to 0:02:10.680 --> 0:02:13.800 stand together and say, this is not normal. Uh, it 0:02:13.919 --> 0:02:17.560 is not normal Uh in the United States, where we've 0:02:17.560 --> 0:02:26.600 been combating racism, bigotry, uh, uh, misogyny for decades, to 0:02:26.680 --> 0:02:32.840 have a president who so openly expresses those kinds of views. Uh. 0:02:32.880 --> 0:02:36.480 And in many ways, that's the number one issue. UH 0:02:37.360 --> 0:02:41.560 strongly agree with that. Uh. It's also a very big 0:02:41.600 --> 0:02:45.600 issue to me is the rule of law, including the 0:02:45.639 --> 0:02:50.400 international rule of law. Uh, if you want, Uh, there 0:02:50.400 --> 0:02:53.840 are more companies to invest in the United States. Uh. 0:02:54.160 --> 0:02:58.960 You change the tax law, you change the regulatory system. 0:02:59.000 --> 0:03:01.960 I might disagree about how you do that, but you 0:03:02.040 --> 0:03:08.679 don't go after individual company companies. That's smacks of authoritarianism fascism. 0:03:08.840 --> 0:03:11.560 But Professor sig, this is not normal. But he was 0:03:11.600 --> 0:03:15.280 elected on a democratic platform, and he was elected. What 0:03:15.440 --> 0:03:19.760 he had a minority, he does not have a legitimacy 0:03:19.760 --> 0:03:24.960 of and there was interference from Russia, but he wasn't elected. 0:03:25.000 --> 0:03:28.600 What will the world look like in four years? Uh, 0:03:29.120 --> 0:03:34.480 looks be clear. We don't know because there is a 0:03:34.639 --> 0:03:37.480 very you know, we know what he said. I think 0:03:37.480 --> 0:03:41.960 we have to take treats seriously what he said as 0:03:42.000 --> 0:03:47.120 if and if he does anything like what he has 0:03:47.160 --> 0:03:51.880 said and anything like some of his economic advisors who 0:03:52.240 --> 0:03:57.320 are very strong protectionists. Uh, we will see a very 0:03:57.320 --> 0:03:59.640 different world. I know what you're gonna say, and you 0:03:59.720 --> 0:04:03.280 say the dreaded F word, fascism. We're Bill Gross a 0:04:03.280 --> 0:04:06.760 week ago or so talk about the Mussolini industrial policy 0:04:06.800 --> 0:04:10.480 of Italy? Can rogoff? Are there tilts towards that? Is 0:04:10.480 --> 0:04:14.640 there a zero sum attitude here? That signals have changed 0:04:14.720 --> 0:04:18.440 America where there has to be a global response to 0:04:18.560 --> 0:04:22.680 Trump economics. Is this fascism light? Well, I think it's 0:04:22.720 --> 0:04:25.280 President Obama said we need to give him a chance. 0:04:25.839 --> 0:04:28.120 We want him to do well. The whole world wants 0:04:28.160 --> 0:04:29.800 him to do well. So I don't think we have 0:04:29.880 --> 0:04:32.000 want to have a reaction, you know, before he's actually 0:04:32.040 --> 0:04:34.880 at a policy. But if we're talking about the threats 0:04:34.880 --> 0:04:39.279 to institutions, I'd start with the fat um. Okay, simply, 0:04:39.400 --> 0:04:41.640 there are a couple of vacancies. They're probably a couple 0:04:41.720 --> 0:04:45.760 other governors who might step down, and then certainly Fisher 0:04:45.760 --> 0:04:47.800 and Yelling are probably likely to leave. He's gonna get 0:04:47.839 --> 0:04:51.400 to point the fet but more importantly, will he respect 0:04:51.400 --> 0:04:54.480 their independence. There are lots of ways Congress can bring 0:04:54.520 --> 0:04:57.280 pressure to bear. The president can look at what Nixon did, 0:04:57.440 --> 0:04:59.520 Arthur Burns, that's why we had the great inflation of 0:04:59.560 --> 0:05:02.640 the seven Is I see the Trump presidency is actually 0:05:02.640 --> 0:05:06.280 having strong growth the first couple of years partly inertia, 0:05:06.640 --> 0:05:10.479 partly deregulation, partly stimulus, but after that it could be 0:05:10.600 --> 0:05:14.560 high inflation, a classics mass. Right. If if so, let's 0:05:14.560 --> 0:05:17.440 spend one minute on defend Does Donald Trump really want 0:05:17.520 --> 0:05:19.640 higher rates, which is what he's been asking for, and 0:05:19.640 --> 0:05:22.440 tweets if you're in charge, how can you want higher 0:05:22.640 --> 0:05:27.560 me in no ways in the construction industry. I know 0:05:27.760 --> 0:05:31.480 this is a good example of the mystery of Trump 0:05:31.480 --> 0:05:35.480 because he said something during the election that, as King said, 0:05:35.560 --> 0:05:39.520 is totally the opposite of what anybody in the construction 0:05:39.560 --> 0:05:43.800 industry normally believes. And he wants a boost to the 0:05:43.839 --> 0:05:48.880 economy and high interest rates will be even worse for 0:05:48.960 --> 0:05:51.599 the dollar in terms of a high exchange rate that 0:05:51.600 --> 0:05:53.680 he's worried. In the time that we have left with you, 0:05:53.839 --> 0:05:56.159 with this historic moment, with the two of you together, 0:05:56.240 --> 0:05:59.279 let me start with you, Professor stig Lets. We need 0:05:59.320 --> 0:06:02.680 an inter national advocacy. Now. Can the i m F 0:06:03.160 --> 0:06:07.640 be that institution with Madame Legarde after Madame Legarde, someone 0:06:07.680 --> 0:06:10.200 like Robert rog And running the new I m of 0:06:10.240 --> 0:06:13.279 Who knows, But what would you like to see out 0:06:13.279 --> 0:06:17.000 of our international institutions, particularly the i m F. Well, 0:06:17.200 --> 0:06:20.560 I hope and I assume that they will be a 0:06:20.640 --> 0:06:23.479 very strong advocate of the international rule of law, that 0:06:23.520 --> 0:06:27.520 there are certain rules that we have agreed upon and 0:06:27.560 --> 0:06:31.560 the way the international system works. Uh. The w t 0:06:31.680 --> 0:06:35.520 O is particularly important because the area where he has 0:06:35.560 --> 0:06:39.360 been most explicit in threatening the international rule of law 0:06:39.960 --> 0:06:44.680 is a unilateral kind of protectionism. Uh. And so we 0:06:44.720 --> 0:06:47.800 need a voice to say this is not the direction 0:06:47.880 --> 0:06:50.800 to go, and then there will be cases brought if 0:06:50.839 --> 0:06:55.040 he actually goes and does those things. Uh. And we 0:06:55.080 --> 0:06:57.600 are there, we ought to be support for for what 0:06:57.640 --> 0:07:00.159 they adjudicate. I guess the problem is at all of 0:07:00.160 --> 0:07:05.080 these organizations, Professor Rogoff, are considered elitist or they're they're 0:07:05.120 --> 0:07:07.440 considered to go to the ones that have enjoyed all 0:07:07.480 --> 0:07:10.280 the benefits of globalization. Is it not the markets that 0:07:10.320 --> 0:07:12.640 at the end of the day will really be the 0:07:12.680 --> 0:07:16.400 president's checks and balance. Well, of course, but I just 0:07:16.440 --> 0:07:17.960 speaking of the I m F. I mean, I do 0:07:18.040 --> 0:07:21.480 think Christine Leguard has been very sensitive to inequality in 0:07:21.520 --> 0:07:25.160 these issues which are really not so obviously within the 0:07:25.200 --> 0:07:28.080 IMPS permit. But at the end of the day, this 0:07:28.160 --> 0:07:32.080 is a political issue. It's a technocratic institution. Professor rogo 0:07:32.120 --> 0:07:33.840 If you're a great phrase which I stole for the 0:07:34.080 --> 0:07:36.960 for my book title years ago, flying on one engine 0:07:37.240 --> 0:07:40.400 were now flow without question. Flying on one engine now, 0:07:40.440 --> 0:07:44.960 at least within our political economics, How do these international 0:07:45.120 --> 0:07:51.120 organizations assist a new world order. Given the turmoil within America, well, 0:07:51.160 --> 0:07:54.080 I think they could be challenged very quickly with problems 0:07:54.080 --> 0:07:57.800 and emerging markets. If US interest rates rise. We live 0:07:57.800 --> 0:08:00.080 in a world where by many measures, the dollar are 0:08:00.080 --> 0:08:03.440 it's more influential than ever help me capital out close. 0:08:03.520 --> 0:08:06.320 We could see problems even in the context of a 0:08:06.400 --> 0:08:10.000 growing UUs and Europe. But Professor Siglitz, is this about inequality. 0:08:10.040 --> 0:08:13.080 I had a pretty spirited session with the Madonna le Guard, 0:08:13.240 --> 0:08:16.040 Very Dad and Larry Summers and a lot of people 0:08:16.040 --> 0:08:17.800 on the panel. We're saying that actually, this is not 0:08:18.280 --> 0:08:21.800 populism isn't fed from inequality. It's fed from people feeling 0:08:21.960 --> 0:08:24.360 left out that they're not being taken care of. And 0:08:24.400 --> 0:08:27.800 this goes back to taking control back, which could be immigration. Actually, 0:08:28.960 --> 0:08:32.800 I think, uh, at the bottom a lot of this 0:08:32.960 --> 0:08:34.920 is the fact that you say, in the United States, 0:08:35.240 --> 0:08:39.320 the bottom of hex stagnant incomes for a quarter century. 0:08:40.040 --> 0:08:43.520 If their incomes have been growing, they would be more 0:08:43.600 --> 0:08:48.839 accepting of immigration, They would be you know, their attitudes 0:08:48.960 --> 0:08:53.360 towards these changes would be totally different. So the fact is, yes, 0:08:53.400 --> 0:08:56.360 things are out of their control, but not only are 0:08:56.360 --> 0:08:58.120 they out of the control. They've been going in the 0:08:58.160 --> 0:09:01.600 wrong direct distinctive different of your two economics, I would 0:09:01.600 --> 0:09:04.720 respectfully suggest, as Joe, you're taking a more broader view, 0:09:05.360 --> 0:09:07.320 and I would say, can you have more of a 0:09:07.440 --> 0:09:12.200 rigor within your analysis? Coalesce those two views right now? 0:09:12.400 --> 0:09:15.679 The economic advice this president is going to get, what 0:09:15.800 --> 0:09:18.280 flavor of advice does it need need to be? Does 0:09:18.280 --> 0:09:21.600 it need to be broader? Stiglets? Let me just say 0:09:21.840 --> 0:09:25.160 we're both so much closer to reality that he might 0:09:25.280 --> 0:09:30.080 get it wouldn't matter. What matter? When would you accept 0:09:30.120 --> 0:09:34.199 the job as governor of the FED? Professor Stiglets, Uh, 0:09:34.600 --> 0:09:37.400 I think of the answer is yes. I think it's 0:09:37.520 --> 0:09:41.800 very important for anybody who is willing to, you know, 0:09:42.040 --> 0:09:44.000 say I'm not going to be you know, the FED 0:09:44.080 --> 0:09:47.360 has a kind of independence. Uh. If I got appointed, 0:09:47.800 --> 0:09:51.560 I would exercise that. And if he tries to fire me, 0:09:52.200 --> 0:09:57.680 that's that's life. Yeah, very it's unfair because you have 0:09:57.800 --> 0:10:01.000 very little time. But how do you redefine globalization to 0:10:01.040 --> 0:10:06.440 include good question? Well, you know, what we have to 0:10:06.480 --> 0:10:11.160 understand is that globalization has represented a fundamental change of 0:10:11.280 --> 0:10:14.200 many the rules of the game in ways that have 0:10:14.360 --> 0:10:18.280 disadvantaged large groups of our population think about that way. 0:10:18.480 --> 0:10:21.319 So what we have to do is rewrite those rules 0:10:21.360 --> 0:10:25.400 in ways that undo some of that. So, for instance, 0:10:25.559 --> 0:10:29.680 one example is UH workers in the United States are 0:10:29.800 --> 0:10:35.000 threatened by their bargaining power is weaker. What we've done 0:10:35.000 --> 0:10:39.720 simultaneously is weakened unions and weaken their bargaining power in 0:10:39.760 --> 0:10:43.960 the workplace. If we, instead of weakening it further said, 0:10:44.040 --> 0:10:47.400 let's try to help them unionize. You know, it won't 0:10:47.480 --> 0:10:52.160 fully undo the force of globalization, but at least that 0:10:52.320 --> 0:10:55.120 gives them a little bit more sense of control. Professor 0:10:55.840 --> 0:10:58.079 let me just point to the work of another in 0:10:58.080 --> 0:11:01.880 outbol Price Winner other than Sticklets, who's here at the forum, 0:11:01.920 --> 0:11:04.280 Anga Steten, who has read and that you know, you 0:11:04.360 --> 0:11:06.640 have to be careful when you're talking about inequality because 0:11:06.679 --> 0:11:09.559 if you think of the whole world, this has arguably 0:11:09.640 --> 0:11:12.280 been the best thirty years in history. This is a 0:11:12.440 --> 0:11:14.720 question of you know, how do you treat people within 0:11:14.840 --> 0:11:18.040 borders versus across borders. And I will say the tax 0:11:18.080 --> 0:11:20.880 cut is really hard for me to understand if we're 0:11:20.880 --> 0:11:24.360 trying to address inequality, Professor Rogo, Professor sticks, this has 0:11:24.400 --> 0:11:26.960 been wonderful for us in the decades we've been here 0:11:28.160 --> 0:11:43.439 a great, great moment as well, Neil Robinias where this 0:11:43.640 --> 0:11:46.520 New York University. I was talking to our executive producer 0:11:46.600 --> 0:11:50.240 Rachel Worsban about a conversation with Roubini in two thousand 0:11:50.280 --> 0:11:53.480 five or two thousand six, if they claimed Belvedere Hotel here, 0:11:54.160 --> 0:11:57.120 Professor Rubini and I laid out the financial crisis of 0:11:57.160 --> 0:11:59.840 the next thirty six months. It wasn't that easy back 0:12:00.000 --> 0:12:02.640 in neurial. But what we got wrong, and what you've 0:12:02.760 --> 0:12:06.520 mentioned in your book and throughout this crisis, we get 0:12:06.520 --> 0:12:09.440 the amplitude wrong. We get the scope the size of 0:12:09.480 --> 0:12:12.560 these moves all of us. What are we getting wrong 0:12:12.679 --> 0:12:16.200 right now about the amplitudes we will see under President 0:12:16.240 --> 0:12:20.400 Trudge Trump. Well, the markets are happy sincetell action because 0:12:20.440 --> 0:12:22.520 of course it's gonna be physical. Steamer is going to 0:12:22.600 --> 0:12:26.040 increase growth in the short run. Is cutting taxes mostly 0:12:26.120 --> 0:12:30.400 for the rich, capital gains, income taxes, corporate taxes, estate taxes, 0:12:30.440 --> 0:12:33.480 gonna slash all sorts of regulation. I think the resk 0:12:33.600 --> 0:12:36.240 that are enterprised by the market is that the fiscal 0:12:36.280 --> 0:12:39.160 steamulus has already led the signal of it to a 0:12:39.280 --> 0:12:41.760 rising long rates doubling of the year and a sharp 0:12:41.840 --> 0:12:45.080 price of the US dollar. Donald Trump says, yes, said 0:12:45.080 --> 0:12:48.440 one thousand jobs in Indiana carrier, but the appreciation of 0:12:48.480 --> 0:12:50.800 the dollar based on the FED model is going to 0:12:50.880 --> 0:12:52.720 read that but next year and have two four hundred 0:12:52.760 --> 0:12:55.360 thousand jobs lost in manufacturing. And if the dollar is 0:12:55.360 --> 0:12:57.800 going to strength that further and longer, it's going higher 0:12:57.920 --> 0:13:00.959 because the fiscal steamless is excessive in an economy that 0:13:01.120 --> 0:13:03.880 is close to full employment, forcing the FED to tighten 0:13:04.000 --> 0:13:08.080 faster and sooner. Stronger dollar hiring interested in a crowd out. 0:13:08.120 --> 0:13:12.400 The recovery gonna damage economic growth. So paradoxically, supply side 0:13:12.400 --> 0:13:15.920 trickle downe instead of helping the white working class that voted, 0:13:15.960 --> 0:13:17.920 I mean, it's going to force them to become very 0:13:17.920 --> 0:13:21.640 protectionist and even more so against trade, globalization, and migration. 0:13:21.840 --> 0:13:24.520 So if inconsistency between trickle down on one side and 0:13:24.559 --> 0:13:27.240 protection is on the other side, this is basically a 0:13:27.280 --> 0:13:30.440 working assumption of what we've seen in policies. How did 0:13:30.520 --> 0:13:32.360 we miss this? We were in there, you know, I've 0:13:32.360 --> 0:13:34.559 been here seventy two hours and all I keep I'm 0:13:34.600 --> 0:13:37.320 thinking is are we missing something? Because twelve months ago 0:13:37.600 --> 0:13:41.360 we completely missed Brexit. We completely missed Donald Trump. Are 0:13:41.360 --> 0:13:45.599 we looking at things wrong? Well? Often what said the 0:13:45.800 --> 0:13:49.160 commercial wisdom in Davos is a contrarian dicator. In two 0:13:49.200 --> 0:13:51.200 thousand and six and seven was predicting a roup of 0:13:51.200 --> 0:13:54.600 financial crisis. People were thinking it was a lunatic lassary. 0:13:54.640 --> 0:13:57.000 By the way, it was the panic about China generally, 0:13:57.000 --> 0:14:00.160 February asking me back to thousand and eight. I said, no, 0:14:00.280 --> 0:14:01.880 it's not gonna be back to thousand and eight. Is 0:14:01.920 --> 0:14:05.520 gonna be temporary phenomenon. But at that time, nobody predicted Brexit, 0:14:05.600 --> 0:14:09.240 nobody predicted Trump, nobody predicted that rent is losing Italy. 0:14:09.280 --> 0:14:12.959 And there's this massive backlash populist against globalization because here 0:14:12.960 --> 0:14:15.200 we have, of course the top one percent elites who 0:14:15.200 --> 0:14:16.880 are not in touch with what's going on in the 0:14:16.880 --> 0:14:19.240 rest of the world. So how big do you think 0:14:19.280 --> 0:14:22.720 the wave of populism will be? How will it reach France? 0:14:22.920 --> 0:14:25.720 Will it even reach if not, it is Netherlands and 0:14:25.720 --> 0:14:30.240 possibly touched Germany. I think it's going to increase throughout 0:14:30.280 --> 0:14:31.920 the world. The first of all in Europe. There is 0:14:31.960 --> 0:14:35.960 a meaningful chance that lepan might win in France. I 0:14:35.960 --> 0:14:39.320 think the Poles are wrong. There's a stigma to say 0:14:39.360 --> 0:14:42.560 that you're voting for Lepan because her father is a 0:14:42.640 --> 0:14:45.600 neo Nazi. She was a neo fascist herself, so the 0:14:45.640 --> 0:14:48.080 same way which a stigma to say are voting for Brexit, 0:14:48.240 --> 0:14:50.880 for Trump or against Rentzy. I think the Poles in 0:14:50.920 --> 0:14:54.800 France around. Secondly, Philon is a toucher right near liberalists 0:14:54.840 --> 0:14:58.160 in a country where essentially the Colombic policies are all populished, 0:14:58.200 --> 0:15:01.080 and even lepan is having a an agenda is actually 0:15:01.080 --> 0:15:03.880 appealing to the left, to socialist and comedy. So in 0:15:03.920 --> 0:15:08.000 a second round where there is Philon against Lepan, many 0:15:08.080 --> 0:15:10.000 on the left might decide to vote for Lepan. And 0:15:10.000 --> 0:15:11.920 if she's elected at the end of Europe and the 0:15:11.920 --> 0:15:14.960 Eurozone is a risk initially when there will be election, 0:15:15.280 --> 0:15:18.120 Chinquest is committed to come to power and never a 0:15:18.120 --> 0:15:20.720 friend of on the euro Those are important risks. You 0:15:20.760 --> 0:15:25.320 mentioned neo fascism with miss Lepan. Yeah, does Mr Trump 0:15:25.440 --> 0:15:30.040 have elements of neo fascism to his discourse while living 0:15:30.040 --> 0:15:33.560 aside you know is bashing the press and also the thing. 0:15:34.120 --> 0:15:38.520 Net Felts was Professor Economics, Columbia, Nobel Prize winner, free 0:15:38.520 --> 0:15:42.200 market supporter, He said that he is bashing of businesses 0:15:42.240 --> 0:15:45.560 in stelling businesses where they should be producing, located so on, 0:15:45.880 --> 0:15:48.800 reminds him of the corporate is that was in Nazi 0:15:48.880 --> 0:15:52.080 Germany and in fascist Italy. We are not yet there, 0:15:52.120 --> 0:15:56.400 but this is trying to micromanage economic activity. Going against 0:15:56.400 --> 0:15:59.760 market is a paradox. Yesterday, President Jimpin, who is nominally 0:15:59.760 --> 0:16:02.520 they either of a communist country, has said, I mean 0:16:02.480 --> 0:16:04.680 in favor of free trade and globalization. What the leader 0:16:04.720 --> 0:16:07.160 of the biggest catalist country in the world, Donald Trump, 0:16:07.240 --> 0:16:09.800 is saying things that against capitalism. That's a part of 0:16:09.800 --> 0:16:13.880 the mail. Each front rate economist has a different style 0:16:14.000 --> 0:16:16.760 of different cases. You have been one of our great 0:16:17.200 --> 0:16:21.280 hinging old world analysis with the New World of America. 0:16:21.600 --> 0:16:24.000 But after what you've seen in the last twelve months, 0:16:24.200 --> 0:16:28.640 is America becoming part of an old world mentality? Well, 0:16:28.680 --> 0:16:33.240 it's becoming in the sense that unfortunately globalization as winners 0:16:33.280 --> 0:16:36.680 and losers, and we've forgotten that the losers are many, 0:16:36.960 --> 0:16:40.080 not just the white blue colors, but also increasingly white 0:16:40.080 --> 0:16:43.840 color workers are displaced by trade, migration and globalization and 0:16:43.880 --> 0:16:46.200 the policies of the last time twenty years. I have 0:16:46.280 --> 0:16:49.320 not dealt with those who are losing from globalization, and Trump, 0:16:49.360 --> 0:16:52.440 even if it's a silver spoon born billionaire, has come 0:16:52.520 --> 0:16:55.560 to rally for these people. Even if it's economic policies 0:16:55.600 --> 0:16:59.200 frankly on taxation and regulation on labor are not gonna 0:16:59.360 --> 0:17:02.440 help a white working class that voted for him. Therefore, 0:17:02.640 --> 0:17:04.360 is gonna have to give them some red meat. What's 0:17:04.400 --> 0:17:07.560 gonna be red meat? Bashing migration, building a wall, and 0:17:07.600 --> 0:17:10.040 becoming very protectionist. But that's not going to help the 0:17:10.160 --> 0:17:13.399 working class, right, But on the paradox, right, so that 0:17:13.560 --> 0:17:17.560 you know, bashing and building walls and the US becoming 0:17:17.600 --> 0:17:22.040 more inward looking walls, China trying to save globalization in 0:17:22.040 --> 0:17:27.399 intern aspects to sit automatically paradox lead to conflicts between 0:17:27.400 --> 0:17:30.520 the two nations. Well, it certainly can lead to trade 0:17:30.520 --> 0:17:35.679 tensions and currency wars. Well, you know, eventually tensions can 0:17:35.760 --> 0:17:38.919 lead also towards China could be accused of being a 0:17:38.960 --> 0:17:42.359 currency manipulator. You might try to slap pariffs against China, 0:17:42.600 --> 0:17:45.399 and that eventually could lead to retaliation in many in 0:17:45.440 --> 0:17:48.280 different ways. And then there's the political dimension states that 0:17:48.400 --> 0:17:51.360 have been done by Trump and his surrogates about Taiwan, 0:17:51.680 --> 0:17:55.000 about the side China see about Korea may lead actually 0:17:55.000 --> 0:17:58.120 to build up of military tensions as well. Mr Trump's 0:17:58.200 --> 0:18:02.440 lead advisor on a sperient bar of Uk Irvine, has 0:18:02.480 --> 0:18:06.280 a tone about China which is about them. It was 0:18:06.320 --> 0:18:11.800 reverential here yesterday for presidency as well. What tone would 0:18:11.800 --> 0:18:16.360 you advise for the Trump administration given Trump's domestic politics, 0:18:16.600 --> 0:18:19.240 and yet they have to project to China. How should 0:18:19.240 --> 0:18:21.960 they project? Well, whatever it is, an outside there is 0:18:22.040 --> 0:18:24.879 running for the presidency, whether it was RNA, Reagan or 0:18:24.920 --> 0:18:29.000 Big Clinton or Bush. Before the election, the Bush China 0:18:29.119 --> 0:18:33.120 say no democracy, no human rights, and fair trade, dumping 0:18:33.240 --> 0:18:35.840 your name, the currency manipulation. Once they come to power, 0:18:35.880 --> 0:18:38.840 they realize you cannot bully China is the second largest 0:18:38.840 --> 0:18:42.240 economy in the world soon enough the first largest, is 0:18:42.280 --> 0:18:45.520 a major political and geopolitical power, and you have to 0:18:45.520 --> 0:18:48.200 engage China. The idea you're gonna bully China, I don't 0:18:48.200 --> 0:18:51.320 think it's consistent. So either they understand that and they 0:18:51.359 --> 0:18:53.639 start to have a constructive dialogue with China. But a 0:18:53.720 --> 0:18:55.919 plenty of things you can sell about China to opening 0:18:56.000 --> 0:18:58.679 up to trade, to foreign entirety investment, fair trade, you 0:18:58.760 --> 0:19:01.320 name it, or if you're gonna challenge China on the 0:19:01.359 --> 0:19:04.640 economic or trading or sides in aggressive way, then there's 0:19:04.640 --> 0:19:06.720 going to be conflict. All right, But so we've we've 0:19:06.720 --> 0:19:09.960 been what ten minutes talking about risk and possible conflicts. 0:19:09.960 --> 0:19:11.560 Why are the markets up or they do a big 0:19:11.560 --> 0:19:15.199 correction because they're in Lolaland Well, the markets went up 0:19:15.240 --> 0:19:17.840 after the election because one, you have a phisical team's 0:19:17.880 --> 0:19:20.960 gonna boost growth in the short run. Secondly, the tax 0:19:21.000 --> 0:19:22.680 cats are all going to go to the corporate and 0:19:22.720 --> 0:19:25.720 the relative that is income taxes, corporate taxes, state taxes, 0:19:25.760 --> 0:19:29.440 coublic things taxes, and there's doing a slash regulation on environment, 0:19:29.520 --> 0:19:34.159 on trade, on financial sector, on pharma, on your name it, 0:19:34.400 --> 0:19:37.000 on labor. And therefore the markets going up. I think 0:19:37.000 --> 0:19:40.119 the markets are underprising that the fiscal steam was accessive. 0:19:40.240 --> 0:19:42.320 It's gonna lead to a tight in the financial condition. 0:19:42.560 --> 0:19:44.840 Longer returned dollars going to lead them to trade wards 0:19:45.000 --> 0:19:47.960 and profection is gonna damage growth and economy and their 0:19:48.000 --> 0:19:51.120 food market down the line. So a huge correction you're expecting. 0:19:51.320 --> 0:19:54.240 I expected over time there will be a huge correction, Yes, 0:19:54.359 --> 0:19:57.399 over time, alright, new or rebellion on particularly good form 0:19:57.560 --> 0:20:08.440 I think brought you by Bank of America, Mary Lynch, 0:20:08.560 --> 0:20:12.800 dedicated to bringing our clients insights and solutions to meet 0:20:12.840 --> 0:20:16.320 the challenges of a transforming world. That's the power of 0:20:16.359 --> 0:20:22.199 global connections, Mary Lynch, Pierce fennerin Smith Incorporated, Member s 0:20:22.240 --> 0:20:28.000 I p C. Before we bringing Robert Shiller. Tom, let 0:20:28.000 --> 0:20:29.399 me see one of your favorite words and ask you 0:20:29.440 --> 0:20:32.800 about the zeitgeist in Davos. So what are you feeling 0:20:32.800 --> 0:20:34.440 today on the second day of your world that cond 0:20:34.440 --> 0:20:36.879 informs any meaning very different than the first day. It 0:20:36.960 --> 0:20:40.960 is always true that this these meetings shift and I 0:20:40.960 --> 0:20:44.800 would shift from the certitude of everyone speaking of populism 0:20:44.840 --> 0:20:48.640 to the reality David Gura of uncertainty and something I've 0:20:48.640 --> 0:20:52.280 never thought of before, folks, and that is the uncertainty 0:20:52.320 --> 0:20:56.119 of the uncertainty. I'm not quite sure mathematically what that means, 0:20:56.160 --> 0:21:00.399 but that is the feeling up here, conversation to converse station. 0:21:00.680 --> 0:21:03.480 The other thing on a real basis, David is yesterday 0:21:03.960 --> 0:21:06.760 was completely dwarfed by the speech by the President of 0:21:06.840 --> 0:21:11.200 China in London, the Prime Minister of the United Kingdom, 0:21:11.240 --> 0:21:14.600 and today is a much more normal day of sharp discourse. 0:21:14.800 --> 0:21:18.439 Francine Laquise panel early this morning, David Girl was on 0:21:18.640 --> 0:21:22.280 fire and animated Larry Summers. Yeah, Larry Summers was fired up. 0:21:22.880 --> 0:21:24.359 Before you bring our next guest, let me read a 0:21:24.359 --> 0:21:27.080 tweet from him, Robert Schiller tweeting this morning most interesting 0:21:27.119 --> 0:21:29.240 things so far at Davos, Patrick Brown, I believe a 0:21:29.280 --> 0:21:33.280 Stanford biochemist speaks on coming veggie synthetic meat. Will all 0:21:33.320 --> 0:21:36.080 be vegetarians because it's cheaper. There's there's a lot on 0:21:36.119 --> 0:21:38.760 the menu as it were there in Davos. Well, there 0:21:38.760 --> 0:21:40.960 are two or three different Davos. But David, I would 0:21:40.960 --> 0:21:43.959 suggest the panel I looked at was Living to one hundred, 0:21:44.080 --> 0:21:45.760 which was a panel they had. I'm not sure I 0:21:45.800 --> 0:21:49.560 want to car there was a battle of getting out there. 0:21:49.600 --> 0:21:51.960 He has not one hundred, but he has aged in 0:21:52.000 --> 0:21:57.320 the world of seen all in economics laureate from Yale University. Uh, 0:21:57.440 --> 0:21:59.639 Robert Schiller, It's wonderful to have you. I know, David 0:21:59.640 --> 0:22:02.200 Girls got a bunch of questions for you as well. 0:22:02.280 --> 0:22:06.399 Describe uncertainty for our audience worldwide. Everybody learns it an 0:22:06.480 --> 0:22:09.679 econ one one. Carl Case at Wellesley taught it for 0:22:09.800 --> 0:22:13.560 years of late Carl Case, what is uncertainty. Well, the 0:22:13.600 --> 0:22:17.320 traditional definition was given by Frank Knight at University of 0:22:17.440 --> 0:22:21.080 Chicago professor in a book called Risk and Uncertainty. I 0:22:21.080 --> 0:22:26.399 think risk, he said, is measurable probabilities, where you know, 0:22:26.480 --> 0:22:31.080 flipping a clients fifty fifty chance, you know it's uncertainty 0:22:31.240 --> 0:22:33.880 is in you don't even know what's being tossed. Yeah, 0:22:33.880 --> 0:22:36.879 I couldn't possibly come up with a probability number. But 0:22:37.040 --> 0:22:40.440 I think uncertainty maybe has slightly different meaning now than 0:22:40.520 --> 0:22:46.240 Frank Knights. I think maybe it's, uh, it's the pervasiveness 0:22:46.359 --> 0:22:50.760 of the UH, the new Trump administration and the Brexit 0:22:50.880 --> 0:22:55.720 action UH bringing up it's sort of nighty and uncertainty. 0:22:55.760 --> 0:22:58.879 But it's also just a sense that the whole world 0:22:59.040 --> 0:23:01.679 is changing. Even up the valley. We have a jargon 0:23:01.720 --> 0:23:05.080 alert Robert Schiller, folks talking about Frank Knight in the 0:23:05.160 --> 0:23:09.920 classic paper David Gura of nine and when you hear Green, 0:23:10.000 --> 0:23:12.840 Spann or Schuller speak of nighty and k and I 0:23:12.960 --> 0:23:16.679 g H nighty and uncertainty, there's a certain character and 0:23:16.800 --> 0:23:20.240 heritage to that from another time and place. David Robert 0:23:20.240 --> 0:23:22.560 Shiller give us a sense here of how much of 0:23:22.560 --> 0:23:24.399 the focus at Davis, how much of the focus at 0:23:24.400 --> 0:23:26.960 the annual meeting is on Trump pomics, on defining what 0:23:27.000 --> 0:23:29.399 it is, on on getting a sense of what it's 0:23:29.440 --> 0:23:32.680 going to consist of once he's inaugurated on Friday. Well, 0:23:32.680 --> 0:23:36.080 it's always amazed me how much attention Donald Trump gets. Uh. 0:23:36.119 --> 0:23:39.240