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Now, are Michael McKee an important conversation with the President of the Boston Fed, Susan Collins.
I'm Michael McKee, the international economics and Policy correspondent for Bloomberg, and we are at the Boston Federal Reserve Bank today.
They're holding their sixty eighth.
Annual Economics conference, and we're joined by the President of the Boston Fed, Susan Collins. Thank you very much for being with us today.
It's delighted to be here. Thanks for being at the Boston Fed.
It's great. We tell everybody. It's a beautiful day. But it's thirty nine degrees so winter is finally hit here.
The seasons are wonderful.
Oh, speaking of winter, December eighteenth, you have another FED meeting, and at this point there seem to be some questions about whether or not the Fed will be cutting rates again, because this week we got some firm inflation news retail sales were okay, but not particularly strong at this point.
Are you thinking that.
We should see a cut or is it better to pause and wait?
So I think it's important to say there's no preset path. I do see rates as still in the restrictive range, which means that over time some amount of easing will be appropriate. But you know, the economy is in a very good place right now, and inflation's coming back down to target. The labor markets are healthy, we're seeing solid growth.
The goal of policies.
Really to sustain that healthy set of conditions, recognizing you know, there are risks on both sides, and so I think we're well positioned. I certainly wouldn't take another ease in December off the table, But again we're not in a preset path, and so we'll have to look carefully at the data and see what makes sense when we get to December eighteenth.
Well, the data this week showed inflation a little bit stronger than it had been in the CPI and the PPI, and those who do the nerdy calculations for the PCE say we're going to see.
The same thing.
Should you keep your foot on the brake a little more then because inflation is not back down to your target.
So you know, I don't focus too much on any one data point. I think it's really important to look holistically. And when I do that, what I see is that, first of all, inflation has come down significantly. I focus on the you know, a couple of month averages, and if you take food, energy, and in particular shelter out, the rest of inflation has actually been in the range consistent with the two percent, exactly what we'd like to see.
What's really still elevated as shelter and that is taking time to come back down, and a lot of that really reflects shocks from the past. I'm not seeing evidence of new price pressures, and so I think it's important
to stay the course. But that analysis of the data is part of why I thought it was really appropriate for us to begin easing in September, and to be in an environment where we are really looking over time methodically, perhaps patiently, to be normalizing policy, to maintain those healthy conditions that I talked about a moment ago.
Well, let's look at the other side of the mandate. Employment.
We had a very strong employment report, and then we had a very weak employment report, granted, affected by hurricanes and strikes.
So what's your judgment of.
Where the labor market is when you look holistically at all of the labor data and when I.
Look at all of the data, and you're absolutely right, there have been some stronger readings, there have been some readings over time that were a bit weaker, and there are.
A lot of special factors.
So looking at averages over time, looking at the range of information, what I see is a labor market that looks similar to conditions that we've considered full employment, so in terms of job openings and quit rates, and the fact that wage growth has been coming down and given the high productivity we've seen is consistent with the move
back down to two percent inflation and staying there. And unemployment has stayed in a range that is near four percent low by historical standards, so yes, higher than a year ago. So all of that, to me says healthy labor market conditions. Things to watch carefully and don't focus too much on any one piece of data.
Have to look at the whole picture.
All right, healthy labor market. Inflation's coming down, even if it's stalled a little bit, but it's in the twos and the economy is stronger than people had forecasts. So do you agree with Chairman Powell and saying there is nothing telling you you have to cut rates very quickly?
So I think that I don't. I agree that I don't see a big urgency. At the same time, I do think that preserving those healthy conditions, right, I mean, that's what our mandate really is from Congress. Price stability and maximum employment sustained over time, not just at some point in time. And so as I said before, I do see financial the policy stances being in a restrictive place and over time, normalizing that I think is going
to be important. But we're well positioned to be really careful in assessing the data and making decisions about the pace, about the timing, and so that you know, that's how I think about that.
Let me ask about the elephant in the room, and that is the new President elect of the United States. His policies have not been fleshed out. Tremen Pol's made it clear you don't know exactly what's going to happen. But do you expect that something in whatever his fiscal plans are will affect the economy and you will have to take another look, say at what your economic projections are and what the plot projections are for twenty twenty five.
Now, as we get information about the economy, certainly that includes about fiscal policy. Of course, it's really important to factor that in. And there are lots of things we look at. Fiscal policies certainly one of them, but I don't want to speculate on what policies that haven't been enacted or implemented might look like.
Well, do you think that tariffs as an economic concept add to inflation?
They can, And again we would have to see if there are tariffs that are implemented, more about the specifics and the dynamics for those.
Now, if there's a fiscal impulse in whatever the President elect chooses to do, is the economy growing too fast for that right now? Would that be a danger a worry?
So again, I think there are lots of things that determine how the economy evolves and grows over time. Fiscal policy is certainly one of them and certainly does have an impact on that, and we'd have to factor that in and look through that. You know, I do think, and Chair Powell has also said this that you know, fiscal policy at the moment is on a path that's
not sustainable. But again, we when we make our policy decisions to focus on our mandate from Congress, it's really based on the data that we have available and the analysis and the assessments that we can do on that basis.
As far as I know, President like Trump has never threatened to fire you.
But I wanted to ask.
What is in your mind the relationship between the Federal Reserve and the executive branch.
So what I would say is that the FED is structured by Congress as an independent body, and that that is important in terms of the ability for us to do our job well. There's a lot of analysis that shows that independent central banks are more effective at keeping inflation low and stable, and we have really seen how important it is to keep inflation low and stable in terms of the impact the higher prices past inflation have had.
And so I think that is a very good structure to enable us to do our jobs well.
So the things that come across social media basically just noise in the background to you as a policymaker.
I am very focused on doing my job and there is more than enough to keep me very focused and very busy now.
The people, well you can't see them.
I could see them out there, all the traders on their knees going tell us when you're going to.
Do this sort of thing.
Can we basically say, because of the potential changes that are coming and the data that we have seen, that the dot plot for twenty twenty five and the SEP for twenty twenty five, those are kind of out the window now and we should really wait until December or even later to get a good idea of where you think you're going to be and the economy is going to be.
All things I think always evolve, and so in about a month or so, we will have a new SEP and information from all of the policymakers about what they think. And so I think it's always true that you know, in the middle of the SEP information you don't want to take too much from what might have been written down, penciled in. I would say a number of weeks earlier, a lot of the data evolves.
What are the people in these tall buildings around us, all the corporate leaders in your district telling you about how they see the economy going forward and their plans.
Yeah, and I appreciate you asking about that. I think one of the really important things that I do, that my colleagues do is talk to people across the economy in lots of different sectors. So being out and about throughout New England and what I'm hearing is pretty consistent with what I said at the outset that people are
cautiously optimistic. They see an economy that seems resilient. Labor markets have moved into much more normal conditions relative to the unsustainable, more overheated conditions from a year or more ago, and the price pressures really have abated considerably. So that's
all very consistent. But of course, you know, the aggregate data masks a range of different specifis across individual firms and sectors and regions, and it's really I think helpful to hear all of that and pull the qualitative information together with the statistics.
One last question at your conference. It's on financial technology this year and the Boston Fed's been in the middle of financial technology and just coincidentally, coming up at the top of the hour, we have our Bloomberg Technology Show.
So let me ask you.
A lot of tech talk over the last five, six, seven years has been tech talk.
How fast are we going to see some.
Sort of impact on the average person from new payment systems. I realize you have fed now in place, but how fast are people going to say, hey, this is something different?
And are we going to.
See any kind of digital currency adoption, whether it's private or government in the next few years.
So, you know, the impacts of technology have many, many dimensions, and I think we're already seeing some impacts in terms of the roles that fintech are playing across our economy in different ways. And the conference today and tomorrow is intended to really bring experts together who have knowledge and done analysis from different vantage points to see as we put together the things we know, what are some of the things we don't know and need to know better.
And so what we're really focusing on is a number of different themes, including financial inclusion, what are some of the implications of the innovations for access to financial services? And then also what are some of the implications of technological innovation for the transmission of monetary policy, for our supervision and regulation of financial institutions, and also for financial stability.
So thinking about both the opportunities and the risks, and I think we are already seeing some of those implications, but it's still unfolding. It's complicated, and it's moving pretty quickly. So that's what we're trying to better understand. And again we're delighted that you're all here while we're in the midst of a conference on an important topic.
Well, thank you for having us.
Susan Collins, the President of the Federal Reserve Bank of Boston.
We'll send it back to you now.
Hi, Michael McKee, thank you very much. Bloomberg's Michael McKey speaking with Boston FED President Susan Collins here in Boston.
You're listening to the Bloomberg Surveillance podcast. Catch us Live weekday afternoons from seven to ten am. Easter Listen on Apple car Play and Android Auto with a Bloomberg Business app, or watch us live on YouTube.
And commute this morning.
It's very important on radio on Apple car Play and Andrew Auto to talk to the number one chart guy in the world.
It really works on radio, maybe works better.
On YouTube, but we're going to be chart free this morn with Uri and Timmer. The title is Director Global Macro at Fidelity Management, and you can see the miracle of this work on LinkedIn, where he's very very visible. Urine Timmer joins us now as he gets ready for the charts of the weekend. How do you amend your charts? When there was a news bulletin yesterday, the Bloomberg headline that there's seven trillion dollars in cash laying out there,
how does that affect Will dan Off? How does that affect Uri and Timmer?
Well, so that's that's cash shitting in money market accounts. Of course, we are the leading provider of money market so we're intimately involved with that with that cash. But my sense always has been that a lot of that cash did not flee the stock market in a flight to quality, which is kind of typically what you would expect, and then when when people feel more comfortable, they bring
the cash back in. In this case, the cash came out of the banks during the regional bank crisis, you know a few years ago, when banks, you know, still are paying half a percent on deposits, and they were then, and the Fed was raising rates and providing alternatives. So I don't quite see this as a powder keg of cash waiting to chase stocks. And the metric I look at is money market fund access assets as a percentage of the market cap in the stock market, and there
it's more it's more normal, it's more normal. So that money came out of the banks, my senses eventually will go back into banks, but not necessarily stock.
We need to go into the crown jewel secrets of fidelity. And Abby, thank you so much for listening this morning and giving us access to mister Timmer.
I'm going to cut to the chase.
What's the elasticity I've yield in money market flows? If yields come down two decimal points or one decimal point or a big figure, when does Paul get out of his money market funds?
Well, I think the FED is not going to cut as much as many people have thought and continue to think. So maybe it goes to four, it's at four and five eighths. If that's the case, money market yields stay around four or so, and I don't think that is going to create a tsunami, you know, out of cash into other assets, whether it's bombs or equities. So I don't think we're going to have another sort of zerb era where we go to zero or one and risk
premia in the bond market. Gets suppressed and then that money flees into the risk market. So I don't think we're going to get there, but it would be, it would It would take you know, more than what we've seen so far, for sure.
You're in What do you make of the move we've seen in financial markets since the election, big move of stocks, yields pushing higher, dollars, stronger, Bitcoin at ninety thousand per token, What do you make of all that?
Yeah, so the markets are always in price discovery mode. Right, Sometimes the new information comes in gradually, slowly, a company reports earnings, the stock price adjusts, and sometimes the information comes in all at once, as we had with the election. Right, you can tell that people were sitting on their hands, you know, it was supposedly too close to call, so
nothing really got done. And the market's brutally efficient in discounting new information, and so on November sixth, it had a lot of new information to discount, and that's what it did. And that's what price discovery is. And so the red wave trade right, small caps, less fed cuts return of the term premium rotation into financials, energy industrial, so broadening.
That is the trade.
And I think in twenty sixteen that trade was pretty much sort of done by December, right, So it happens very quickly. It's not like this is like the first bat of the first inning, like it's done instantaneously.
You have portfolios of Fidelity that are over fifty percent in their top ten stocks and they're very mag seventy.
Et cetera, et cetera. What do you see in your chart work on the flows?
Luisja Motto would say, the distributions in and out of MEG seven right now? Are we selling? Are we buying? What are we doing well?
I think the good news for the MAG seven is that they're not that expensive, right. I think I take a broader brush. I look at the nifty to fifty, the top fifty stocks, just because I have a data sets all the way back to the sixties and eighteen sixty and during the early seventies the original nifty to fifty and the late nineties, the dot com era, those fifty stocks were trading at twice the valuation multiple as the bottom four fifty. Today, the top fifty are trading
at a twenty five percent premium. So you can't call it a bubble if the valuation is not extreme. The price movements have been extreme, but not the valuation. So what we've seen over the past few months really since the FED started cutting rates, is that this has been a bullish broadening. So the market has broadened eighty percent of stocks are above the two hundred moving average, but it's not happening at the expense of the mega growers, and in that sense, this cycle in a way has
kind of gone in reverse. It's like a Benjamin Button cycle, where you know, usually a bull market starts very broad right, because the junkie low price stocks that are obliterated in the bear market come bouncing back, and then as the cycle matures, it gets more narrow and the blue chips are left standing at the end and you get those
breath divergences. This time, it's been the opposite. It started with the Mac seven and then even during the rate hiking cycle, those were the safe stocks to be in because they were immune to the FED because they had so much cash. And now they're holding their absolute performance. But the market has broadened really since a year ago, and so it's kind of the best that you can
hope for. Like are a more disorderly version of that would be that the mag seven or the nifty to fifty decline because money is moving from those stocks to the broader market. Then the index, the S and P would have trouble staying up just because of the weight of those seven stocks. But we're not seeing that yet.
Your titles director of Global Macro. Where do you see the US versus non US right now?
Well, so US, you know, excellence, you know has been in place for a decade. And it's interesting, you know, because we're always debating, you know, do we go outside the US? I mean the US trading at twenty two x, US is trading at fifteen PE, So the US is sixty percent more expensive than the rest of the world, whether it's em or EFA, you know, Japan, Europe. But you need a catalyst, right, Evaluation is not alone. You
need relative earnings. Like if you go across the street and you're in the halls of fidelity, there is price follows earnings and relative price or relative performance follows relative earnings. And so that is missing with between the US and the rest of the world because US earnings continue to dominate.
Price follows earning. Sounds like Bettina Dalton nineteen eighty. Okay, let's go there. I got an election. I got a belief nominal GDP's gonna pop. Do you, within the research of the fundamental animals at Fidelity and what you're doing with charts, agree that nominal is gonna pop. Revenues are gonna pop, and that's earnings will sustain.
Yes, So we are one year into an earning cycle. Trailer earnings are up eight percent this year. Forward earnings are off about twelve or so. The expectation is that earnings will continue to grow next year. And if we do get this nominal GDP pop and earnings are a nominal thing, the earning cycle can continue. But the thing I worry about is the return of the of the fed model, you know, back in the green span in
days of the eighties. Bond yields kind of you know, are causing indigestion again the rockvigilantes, And we've seen that now repeatedly over the last few years, and I think that is a risk for twenty twenty five.
You gonna be in New York soon, I will be please.
You got to come in because we got to talk about Babson the global ranking.
They just got yes, And while while you have me on the air, I don't know what your schedule is, but I would be like to invite you to come look at our chart room after the show.
Or it's like the Vatican, folks. You've got the golf stream right, Oh, sure you can go over you're in. I don't think I can do it. I think I have to race to the airport.
Okay, I'm sorry, but Paul's got the golf stone, so we'll do it next time.
You're in.
Timmor, thank you so much with Fidelity there, and we're efforting a number of their managers as well to talk about this spectacular year we've seen in the markets world.
This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on applecar Play and Android Auto with the Bloomberg Business app. You can all so listen live on Amazon Alexa from our flagship New York station just Say Alexa playing Bloomberg eleven.
Joining us now Gotamcunda Yale University with other parchment along the Charles River as well. He's given us such good help here with the election. I want to talk and this is a fancy technology seminary. Everybody here knows how to use a cell phone a computer.
They're back. They're using Fortran here at the boss.
Okah, gout them as simple as this is a ludite America where there's a huge in our polarization. There's a huge body of people that just aren't in taking advantage of technology and are almost anti technology.
I mean, I think certainly there's a huge anti technology push, but it's striking that some of the most deleite protect people in the world.
That's my second question. I got Elon Musk. As part of the new administration, he defines entrepreneurship in technology, and you got it. I got partially a ludeied America.
Yeah.
So you have sort of this icon of entrepretion technology on the Musk, and you also have RFA Junior, possibly the most anti science person in America, and apparently they're going to be serving in the same administration. So it's quite a contrast. And technology shocks, like China shocks, have had big impacts on the labor market. We know that they seem to be affecting people in lots of different ways.
We've seen the decrease in manufacturing employment at times, and all of these things added up to create a level of social ferment in this country that we're just starting to see the implications of. But the flip side of that is a lot of parties that have won landslide that will won big election. So this was a decisive
victory by the Repobulmans, but not a landslide. I didn't look anything on like two thousand and eight, for example, had interpreted that as gigantic sweeping mandates for all of their policies and found out that actually people were voting on one issue and that was and in this case almost certainly inflation. And they've then sort of leaned into
the overinterpreted their victory. How much of this anti technology thing that you're talking about is a product of people starting to overinterpret the victory And we don't know yet, but it's pretty striking when we see this, and Paul.
You see this with the technology reports we see like Apple or Microsoft or in the video, it's like two planets it is.
It's just extraordinary. Galtem, I mean, we're these cabinet picture coming fast and furious from President elect Trump and his campaign. What's your takeaway so far?
So in the first century AD, the mad Roman emperor Caligulam decided to make his horse encinitatis a console of Rome. That horse was still a better pick than Matt Gates Attorney general. You know, you sort of see Republicans Democrats we expect recall, but you can see Republicans recoiling that in general. What does not expect that the Attorney general's closest contact with the Justice Department before they get the job is being investigated by the Justice Department for sexual
like that. That seems out of the ordinary.
So it talk to us the role that Congress will play in the confirmation process for some of these appointees.
As large as they choose it to be. I think of the set of appointees, they're the sort of the normal appointees Burtom, Marco Rubio, who are going to get the most Democrats will vote just you know, say thank god we got him in fine. Stephanic at the UN will probably get something some a little like that. But the flip side is clearly Democrats are going to go insane over the idea of the sort of Hegseth Tulsie Gabbard at d and I that's the one that people in the internet, and I'll say in the in the
in the National security community. People are simply going in like that. They don't even know how to process that prospect, you know, or if k Junior or at HHS, I don't. I think people don't quite realize you. HHS has a budget of almost two trillion dollars. So the scale of what we're talking about wowing him there is just unimaginable. And this is someone who, when he is running for president, proposed that one of the things he wanted to do
was just stop all research and development on you drugs. So, I mean, you know, four years no R and D in the life sciences. I think people could probably object to that.
So what's the realistic of you in Washington? Just about to what extent was some of these Republican senators in effect go against their president by blocking some of these appointees.
I think people are starting to think not that much. It wouldn't shock me if Gates doesn't get confirmed, just because he's made so many enemies in the Congress that they might there'll be a reaction. But the others, I think the betting is that the level of patronage that Trump has and the level of sway he has over the party he ran ahead of all of these people, right,
he got more votes than most of these people. In Michigan, the Democrats held the Senate seat because tens of thousands of people came in voted for Donald Trump and left the rest of the ballot blank, yep, and so and so.
Maybe if you're a Trump supporter, I think a lot of those folks felt like he's doing exactly what we wanted him to do, which is to be unconventional, you know, kind of drain the swamp, to use a term from the past cycle. Maybe there is public support for this.
So I think there is certainly a base of Trump supporters for whom this is exactly what they wanted, and this is this is sort of they're extremely enthusiastic about that. But my strong suspicion is that base is not fifty percent of the country, and it's not anything close to fifty percent of the country, And there are a lot of people who probably did not vote to find out that, you know, we're not going to be inventing new vaccines
for the next few years. And note it's not just a four year problem.
Right.
When you eliminate these capabilities, you can't wave a magic want and bring them back. It takes generations to build the sort of scientific establishment that we have, and that is now at RESK.
This is going to be in your lectures.
Yeah, it is Tom Nichols of Naval War College, all of his work. Three times in the last two days people have sent me Death of Expertise Tom Nichols book that I interviewed him four years ago, The Death of Expertise? Is it as grim now as it's ever been?
Tom's great and I would say it might be grimmer than even then. I think that even he expected. You know, going into the election, you would talk to Democrats and Republicans, and Democrats, even the ones, the ones who are really scared, would talk about these sorts of appointments and you know, you'd say, like, what.
Did it not do?
Get the worst case? Yeah, And Republicans would say, well, you know, we'll just have a normal Trump, a normal Republican administration with a guy who makes sense mean tweets. So when you think about the spectrum of where people thought they were going to end up, these appointments are sort of the worst fears of Democrats, except not even that. Nobody was saw that Matt Gate's coming. So yeah, there's a profound death of expertise problem. But let's back out
from that. I think we we all as a society, just haven't thought through. Let's back up for a second. A lot of this is about new communication technology. We talk about social media, things like that which make the world more transparent. So we see that the experts were never as great as they thought they as we thought they were in their failures. That doesn't mean they're useless.
There's there're convenience stakes. When the printing press was invented, right, the big foreign part, the big consequence of that that historians go back is they say the Thirty Years War, the worst war of europe history, that killed a third of the population of Germany, was directly driven by the event of the printing We're.
Going to continue this discussion in New York, as I'm sure we will with got him Conda. He's with Yale University.
Here.
This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on applecar Play and Android Auto with the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal.
Dearn Morse Conference keynote speaker and professor at UC Berkeley's up Business School out there. Thanks so much for joining us here. You're a keynote speaker here today. What are you going to be talking about.
I'm gonna be talking about AI and the use in credit. So thinking about not just in understanding AI, in terms of deploying and getting better, better precise underwriting and.
Knowing people's risk and this sort of stuff.
That there's a general landscape of using AI for all kinds of provision of lending to people, and then there's some red flags, right, and so kind of putting the landscape out there, we need to think about both sides. We need to inform not just policy makers we're here at the FED, but also the providers, right, so they can think about things that they need to step up and understand.
We were back last time I was up here in Boston. We were doing some work with the Boston Consulting Group and they were saying, is they talked to their clients across all industries about the use of AI. They want to get a commitment that they will do it in the correct way, you know, and really, because AI is so powerful that you want to make sure that whoever they're talking to, that they make a commitment to doing it in the right way, the sustainable way. How does that apply to finance?
Right?
So the problem is there's so many different aspects of what correct means.
Right.
So if we think about AI, where where it's going to be deployed, right, it's not just you know, it's understanding credit risk and reaching more of the population in ways that biases are hindering.
So that's great.
There's also targeting and marketing, there's monitoring, there's chatbots to get information, authenticating fraud, right, all these sort of uses. Along the other side, though, we have to think about things like there's been research that finds it AI teaches itself itself how to collude, right, which has all kinds of your mind goes crazy when you start thinking about that. And then AI can be deceptive and conveyance to get an outcome at once.
So this is a sequel to the matrix too or something.
I mean, really, that's what reef shows up, right, right, Paul can play Reeves. I can't play Reeves. Come on, most of the public is scared stiff of this. Let's begin with the timeline. Are you looking out to two thousand and thirty or are you looking out to two thousand and forty.
Or twenty twenty five? Right?
I mean AI is already being you Are we ready for this? We're We're not ready, nor are the providers ready?
Right?
The providers themselves are concerned about the You know, there's startups left and right right, and whether the startup's doing and what inputs are we using? Do we let AI go on all the data that's available about someone to profile?
Heay?
But do you flying to Park Avenue and you're gonna talk to James Diamond and his team at JP Morgan.
You're gonna bring Keen Green.
Of Berkeley along just to impress everybody, and they're going to go we need to trust this process. What's the trust factor at this conference in Boston? To people trust AI?
I think I don't. I don't know the answer to do they trust? I don't think they know one way or the other. I think where we are is that right now? If we understand what inputs AI is using, so you can control that right where where it's going, what information it's using to make decisions. If you control the inputs, you're able to put a bound on what it can do. Right, You can tell it not to lie, you can tell it only to use these days these
certain inputs that are non discriminatory and other things. Right now, what the how that input use is getting deployed is a black box?
How from your research talking to providers of credit, how are they using AI yet? Are they using AI? Or is it still the loan officer that I got to convince I'm a good credit.
No?
No, definitely they are using AI, right, I mean from the you know, the simple way the chatbots right getting information in right that that is, those are AI driven, but also the processing and understanding under general parameters right under you know, how would you maximize for for profitably lending or how would you for profitably marketing new new.
Products to people?
Right?
They are using there? Are they deploying underwriting at a full scale using AI?
No?
Probably not. There are some exceptions to that.
But but we're using it little bits here and there, and it pretty soon the whole arena changes.
Is America behind on this or are we leading the way? Ah?
Probably leading? Leading?
Is not you know the the there are other countries that are also deploying.
China's deploying.
There's there's a whole movement in Europe and a law in Europe regarding some of these things, and so it's we are ahead, but we are with others in that that lead.
So Paul I got a credit rating of one hundred, it's like so low. You know, they don't even talk to me and I get email all the time. We'll give you forty five thousand, We'll give you ten thousand. Is that AI driven? Is it your fault?
I don't know the answer to that question.
But but that's where we are, right, that's where we you know, there there are people that are you know, they have credits course that maybe those credits course are not right, and maybe AI helps right and and so, and then there are other people that you know.
Well, here's my concern is that small community banks, they're not going to be able to make the technology investments. Therefore that whatever benefits may be out there, and I don't know if there are, bye by the way, you have to convince me. I'm afraid that they're not going to have the same capabilities to say a JP Morgan Chase.
So I'm I'm a big fan of having a community financial architecture. Banks, the lenders the CDFI's right, and the reason it's so important is because in downturns, these the research shows that these these local community facing lenders and banks, they they're able to stick with their customers and when they them the most. So so far, technology has not replicated that. Now, whether AI becomes a localized lender because its ability to act local is a question.
We don't know.
And how what does that mean for the financial architecture of the United States is a complete unknown.
So I mean, at the end of the day, if I'm providing credit, I want to just I want a good credit environment where I get paid back, where I'm able to diverse, you know, distribute you know, debt into my marketplace. But I want to get paid back. I don't want to take undw credit risk. Ideally AI will help me do that better.
Ideally it will help you do that better, and also to manage new products and new services for customers to figure out where they might be exposed to risk or where they might be evolving in their business or household.
Thirty second question, We don't enough time. It's unfair Type one Type two construct. Is AI in banking going to help banks or help them not lose money.
It's going to help them grow their business.
That's kind of what they want to that's what they want to hear at. Dear Morse, thank you so much for joining us.
A deare Moorese.
She's professor of finance at the University of California at Berkeley.
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