Brought you by Bank of America, Mary Lynch. Investing in local communities, economies and a sustainable future. That's the power of global connections, Mary Lynch, Pierce Fenner, and Smith Incorporated member s I p C. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene with David Gura. Daily we bring you insight from the best in economics, finance, investment, and international relations.
Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot Com, and of course on the Bloomberg This is arguably the most interesting economic interview in the history of Bloomberg Surveillance, Bloomberg on the economy, including the work that we've done with Bloomberg News over the years. These two have battled with many battles over the years, and today they said collegially looking forward to American economics from Harvard University and from
Colombia University. Joseph Stiglet's it is a change world from when you two went at it decades ago. Let me first go to you, Professor Rogolf. What do you need to observe from the Trump cabinet and those within this new administration to soften the rhetoric of our new president. I don't even know how to say that. I mean, we haven't want to say that he listens to them. I mean, I think he has appointed some adults, you know, in the cabinet, the Secretary of State, at the Secretary
of Defense. But you know, is he someone who's going to listen to them? This his behavior going to be erratic, not so much looking at the policies as the whole temperament. Do they look like, you know, they're going to be a rational administration? You have been a harsh critic of conservative economics and of the politics and the rhetoric of the president, like not what you want to see from the administration. How should Democrats progresses in a liberal world
respond to the Trump presidency. I think they have to stand together and say, this is not normal. Uh, it is not normal Uh in the United States, where we've been combating racism, bigotry, uh, uh, misogyny for decades, to have a president who so openly expresses those kinds of views. Uh. And in many ways, that's the number one issue. UH strongly agree with that. Uh. It's also a very big issue to me is the rule of law, including the international rule of law. Uh, if you want, Uh, there
are more companies to invest in the United States. Uh. You change the tax law, you change the regulatory system. I might disagree about how you do that, but you don't go after individual company companies. That's smacks of authoritarianism fascism. But Professor sig, this is not normal. But he was elected on a democratic platform, and he was elected. What he had a minority, he does not have a legitimacy of and there was interference from Russia, but he wasn't elected.
What will the world look like in four years? Uh, looks be clear. We don't know because there is a very you know, we know what he said. I think we have to take treats seriously what he said as if and if he does anything like what he has said and anything like some of his economic advisors who are very strong protectionists. Uh, we will see a very different world. I know what you're gonna say, and you
say the dreaded F word, fascism. We're Bill Gross a week ago or so talk about the Mussolini industrial policy of Italy? Can rogoff? Are there tilts towards that? Is there a zero sum attitude here? That signals have changed America where there has to be a global response to Trump economics. Is this fascism light? Well, I think it's President Obama said we need to give him a chance. We want him to do well. The whole world wants
him to do well. So I don't think we have want to have a reaction, you know, before he's actually at a policy. But if we're talking about the threats to institutions, I'd start with the fat um. Okay, simply, there are a couple of vacancies. They're probably a couple other governors who might step down, and then certainly Fisher and Yelling are probably likely to leave. He's gonna get to point the fet but more importantly, will he respect
their independence. There are lots of ways Congress can bring pressure to bear. The president can look at what Nixon did, Arthur Burns, that's why we had the great inflation of the seven Is I see the Trump presidency is actually having strong growth the first couple of years partly inertia, partly deregulation, partly stimulus, but after that it could be
high inflation, a classics mass. Right. If if so, let's spend one minute on defend Does Donald Trump really want higher rates, which is what he's been asking for, and tweets if you're in charge, how can you want higher me in no ways in the construction industry. I know this is a good example of the mystery of Trump because he said something during the election that, as King said, is totally the opposite of what anybody in the construction
industry normally believes. And he wants a boost to the economy and high interest rates will be even worse for the dollar in terms of a high exchange rate that he's worried. In the time that we have left with you, with this historic moment, with the two of you together, let me start with you, Professor stig Lets. We need
an inter national advocacy. Now. Can the i m F be that institution with Madame Legarde after Madame Legarde, someone like Robert rog And running the new I m of Who knows, But what would you like to see out of our international institutions, particularly the i m F. Well, I hope and I assume that they will be a very strong advocate of the international rule of law, that there are certain rules that we have agreed upon and
the way the international system works. Uh. The w t O is particularly important because the area where he has been most explicit in threatening the international rule of law is a unilateral kind of protectionism. Uh. And so we need a voice to say this is not the direction to go, and then there will be cases brought if he actually goes and does those things. Uh. And we are there, we ought to be support for for what
they adjudicate. I guess the problem is at all of these organizations, Professor Rogoff, are considered elitist or they're they're considered to go to the ones that have enjoyed all the benefits of globalization. Is it not the markets that at the end of the day will really be the president's checks and balance. Well, of course, but I just speaking of the I m F. I mean, I do think Christine Leguard has been very sensitive to inequality in these issues which are really not so obviously within the
IMPS permit. But at the end of the day, this is a political issue. It's a technocratic institution. Professor rogo If you're a great phrase which I stole for the for my book title years ago, flying on one engine were now flow without question. Flying on one engine now, at least within our political economics, How do these international organizations assist a new world order. Given the turmoil within America, well, I think they could be challenged very quickly with problems
and emerging markets. If US interest rates rise. We live in a world where by many measures, the dollar are it's more influential than ever help me capital out close. We could see problems even in the context of a growing UUs and Europe. But Professor Siglitz, is this about inequality. I had a pretty spirited session with the Madonna le Guard, Very Dad and Larry Summers and a lot of people on the panel. We're saying that actually, this is not
populism isn't fed from inequality. It's fed from people feeling left out that they're not being taken care of. And this goes back to taking control back, which could be immigration. Actually, I think, uh, at the bottom a lot of this is the fact that you say, in the United States, the bottom of hex stagnant incomes for a quarter century. If their incomes have been growing, they would be more accepting of immigration, They would be you know, their attitudes
towards these changes would be totally different. So the fact is, yes, things are out of their control, but not only are they out of the control. They've been going in the wrong direct distinctive different of your two economics, I would respectfully suggest, as Joe, you're taking a more broader view, and I would say, can you have more of a rigor within your analysis? Coalesce those two views right now? The economic advice this president is going to get, what
flavor of advice does it need need to be? Does it need to be broader? Stiglets? Let me just say we're both so much closer to reality that he might get it wouldn't matter. What matter? When would you accept the job as governor of the FED? Professor Stiglets, Uh, I think of the answer is yes. I think it's very important for anybody who is willing to, you know, say I'm not going to be you know, the FED has a kind of independence. Uh. If I got appointed,
I would exercise that. And if he tries to fire me, that's that's life. Yeah, very it's unfair because you have very little time. But how do you redefine globalization to include good question? Well, you know, what we have to understand is that globalization has represented a fundamental change of many the rules of the game in ways that have disadvantaged large groups of our population think about that way. So what we have to do is rewrite those rules
in ways that undo some of that. So, for instance, one example is UH workers in the United States are threatened by their bargaining power is weaker. What we've done simultaneously is weakened unions and weaken their bargaining power in the workplace. If we, instead of weakening it further said, let's try to help them unionize. You know, it won't fully undo the force of globalization, but at least that
gives them a little bit more sense of control. Professor let me just point to the work of another in outbol Price Winner other than Sticklets, who's here at the forum, Anga Steten, who has read and that you know, you have to be careful when you're talking about inequality because if you think of the whole world, this has arguably been the best thirty years in history. This is a question of you know, how do you treat people within
borders versus across borders. And I will say the tax cut is really hard for me to understand if we're trying to address inequality, Professor Rogo, Professor sticks, this has been wonderful for us in the decades we've been here a great, great moment as well, Neil Robinias where this
New York University. I was talking to our executive producer Rachel Worsban about a conversation with Roubini in two thousand five or two thousand six, if they claimed Belvedere Hotel here, Professor Rubini and I laid out the financial crisis of the next thirty six months. It wasn't that easy back in neurial. But what we got wrong, and what you've mentioned in your book and throughout this crisis, we get the amplitude wrong. We get the scope the size of
these moves all of us. What are we getting wrong right now about the amplitudes we will see under President Trudge Trump. Well, the markets are happy sincetell action because of course it's gonna be physical. Steamer is going to increase growth in the short run. Is cutting taxes mostly for the rich, capital gains, income taxes, corporate taxes, estate taxes,
gonna slash all sorts of regulation. I think the resk that are enterprised by the market is that the fiscal steamulus has already led the signal of it to a rising long rates doubling of the year and a sharp price of the US dollar. Donald Trump says, yes, said one thousand jobs in Indiana carrier, but the appreciation of the dollar based on the FED model is going to read that but next year and have two four hundred
thousand jobs lost in manufacturing. And if the dollar is going to strength that further and longer, it's going higher because the fiscal steamless is excessive in an economy that is close to full employment, forcing the FED to tighten faster and sooner. Stronger dollar hiring interested in a crowd out.
The recovery gonna damage economic growth. So paradoxically, supply side trickle downe instead of helping the white working class that voted, I mean, it's going to force them to become very protectionist and even more so against trade, globalization, and migration. So if inconsistency between trickle down on one side and protection is on the other side, this is basically a working assumption of what we've seen in policies. How did
we miss this? We were in there, you know, I've been here seventy two hours and all I keep I'm thinking is are we missing something? Because twelve months ago we completely missed Brexit. We completely missed Donald Trump. Are we looking at things wrong? Well? Often what said the commercial wisdom in Davos is a contrarian dicator. In two thousand and six and seven was predicting a roup of financial crisis. People were thinking it was a lunatic lassary.
By the way, it was the panic about China generally, February asking me back to thousand and eight. I said, no, it's not gonna be back to thousand and eight. Is gonna be temporary phenomenon. But at that time, nobody predicted Brexit, nobody predicted Trump, nobody predicted that rent is losing Italy. And there's this massive backlash populist against globalization because here we have, of course the top one percent elites who are not in touch with what's going on in the
rest of the world. So how big do you think the wave of populism will be? How will it reach France? Will it even reach if not, it is Netherlands and possibly touched Germany. I think it's going to increase throughout the world. The first of all in Europe. There is a meaningful chance that lepan might win in France. I think the Poles are wrong. There's a stigma to say that you're voting for Lepan because her father is a
neo Nazi. She was a neo fascist herself, so the same way which a stigma to say are voting for Brexit, for Trump or against Rentzy. I think the Poles in France around. Secondly, Philon is a toucher right near liberalists in a country where essentially the Colombic policies are all populished, and even lepan is having a an agenda is actually appealing to the left, to socialist and comedy. So in a second round where there is Philon against Lepan, many
on the left might decide to vote for Lepan. And if she's elected at the end of Europe and the Eurozone is a risk initially when there will be election, Chinquest is committed to come to power and never a friend of on the euro Those are important risks. You mentioned neo fascism with miss Lepan. Yeah, does Mr Trump have elements of neo fascism to his discourse while living aside you know is bashing the press and also the thing.
Net Felts was Professor Economics, Columbia, Nobel Prize winner, free market supporter, He said that he is bashing of businesses in stelling businesses where they should be producing, located so on, reminds him of the corporate is that was in Nazi Germany and in fascist Italy. We are not yet there, but this is trying to micromanage economic activity. Going against market is a paradox. Yesterday, President Jimpin, who is nominally they either of a communist country, has said, I mean
in favor of free trade and globalization. What the leader of the biggest catalist country in the world, Donald Trump, is saying things that against capitalism. That's a part of the mail. Each front rate economist has a different style of different cases. You have been one of our great hinging old world analysis with the New World of America. But after what you've seen in the last twelve months,
is America becoming part of an old world mentality? Well, it's becoming in the sense that unfortunately globalization as winners and losers, and we've forgotten that the losers are many, not just the white blue colors, but also increasingly white color workers are displaced by trade, migration and globalization and the policies of the last time twenty years. I have not dealt with those who are losing from globalization, and Trump, even if it's a silver spoon born billionaire, has come
to rally for these people. Even if it's economic policies frankly on taxation and regulation on labor are not gonna help a white working class that voted for him. Therefore, is gonna have to give them some red meat. What's gonna be red meat? Bashing migration, building a wall, and
becoming very protectionist. But that's not going to help the working class, right, But on the paradox, right, so that you know, bashing and building walls and the US becoming more inward looking walls, China trying to save globalization in intern aspects to sit automatically paradox lead to conflicts between the two nations. Well, it certainly can lead to trade tensions and currency wars. Well, you know, eventually tensions can lead also towards China could be accused of being a
currency manipulator. You might try to slap pariffs against China, and that eventually could lead to retaliation in many in different ways. And then there's the political dimension states that have been done by Trump and his surrogates about Taiwan, about the side China see about Korea may lead actually to build up of military tensions as well. Mr Trump's lead advisor on a sperient bar of Uk Irvine, has a tone about China which is about them. It was
reverential here yesterday for presidency as well. What tone would you advise for the Trump administration given Trump's domestic politics, and yet they have to project to China. How should they project? Well, whatever it is, an outside there is running for the presidency, whether it was RNA, Reagan or Big Clinton or Bush. Before the election, the Bush China say no democracy, no human rights, and fair trade, dumping
your name, the currency manipulation. Once they come to power, they realize you cannot bully China is the second largest economy in the world soon enough the first largest, is a major political and geopolitical power, and you have to engage China. The idea you're gonna bully China, I don't think it's consistent. So either they understand that and they
start to have a constructive dialogue with China. But a plenty of things you can sell about China to opening up to trade, to foreign entirety investment, fair trade, you name it, or if you're gonna challenge China on the economic or trading or sides in aggressive way, then there's going to be conflict. All right, But so we've we've been what ten minutes talking about risk and possible conflicts.
Why are the markets up or they do a big correction because they're in Lolaland Well, the markets went up after the election because one, you have a phisical team's gonna boost growth in the short run. Secondly, the tax cats are all going to go to the corporate and the relative that is income taxes, corporate taxes, state taxes, coublic things taxes, and there's doing a slash regulation on environment, on trade, on financial sector, on pharma, on your name it,
on labor. And therefore the markets going up. I think the markets are underprising that the fiscal steam was accessive. It's gonna lead to a tight in the financial condition. Longer returned dollars going to lead them to trade wards and profection is gonna damage growth and economy and their food market down the line. So a huge correction you're expecting.
I expected over time there will be a huge correction, Yes, over time, alright, new or rebellion on particularly good form I think brought you by Bank of America, Mary Lynch, dedicated to bringing our clients insights and solutions to meet the challenges of a transforming world. That's the power of global connections, Mary Lynch, Pierce fennerin Smith Incorporated, Member s I p C. Before we bringing Robert Shiller. Tom, let me see one of your favorite words and ask you
about the zeitgeist in Davos. So what are you feeling today on the second day of your world that cond informs any meaning very different than the first day. It is always true that this these meetings shift and I would shift from the certitude of everyone speaking of populism to the reality David Gura of uncertainty and something I've never thought of before, folks, and that is the uncertainty
of the uncertainty. I'm not quite sure mathematically what that means, but that is the feeling up here, conversation to converse station. The other thing on a real basis, David is yesterday was completely dwarfed by the speech by the President of China in London, the Prime Minister of the United Kingdom, and today is a much more normal day of sharp discourse. Francine Laquise panel early this morning, David Girl was on fire and animated Larry Summers. Yeah, Larry Summers was fired up.
Before you bring our next guest, let me read a tweet from him, Robert Schiller tweeting this morning most interesting things so far at Davos, Patrick Brown, I believe a Stanford biochemist speaks on coming veggie synthetic meat. Will all be vegetarians because it's cheaper. There's there's a lot on the menu as it were there in Davos. Well, there are two or three different Davos. But David, I would suggest the panel I looked at was Living to one hundred,
which was a panel they had. I'm not sure I want to car there was a battle of getting out there. He has not one hundred, but he has aged in the world of seen all in economics laureate from Yale University. Uh, Robert Schiller, It's wonderful to have you. I know, David Girls got a bunch of questions for you as well. Describe uncertainty for our audience worldwide. Everybody learns it an econ one one. Carl Case at Wellesley taught it for
years of late Carl Case, what is uncertainty. Well, the traditional definition was given by Frank Knight at University of Chicago professor in a book called Risk and Uncertainty. I think risk, he said, is measurable probabilities, where you know, flipping a clients fifty fifty chance, you know it's uncertainty is in you don't even know what's being tossed. Yeah, I couldn't possibly come up with a probability number. But I think uncertainty maybe has slightly different meaning now than
Frank Knights. I think maybe it's, uh, it's the pervasiveness of the UH, the new Trump administration and the Brexit action UH bringing up it's sort of nighty and uncertainty. But it's also just a sense that the whole world is changing. Even up the valley. We have a jargon alert Robert Schiller, folks talking about Frank Knight in the classic paper David Gura of nine and when you hear Green, Spann or Schuller speak of nighty and k and I g H nighty and uncertainty, there's a certain character and
heritage to that from another time and place. David Robert Shiller give us a sense here of how much of the focus at Davis, how much of the focus at the annual meeting is on Trump pomics, on defining what it is, on on getting a sense of what it's going to consist of once he's inaugurated on Friday. Well, it's always amazed me how much attention Donald Trump gets. Uh. It shows to me the power of narratives, the power of showmanship. He honed this on his TV show The Apprentice,
and he's gotten expert at it. He's he's a master storyteller, and he's gotten the whole world looking at it. We were talking about uncertainty a moment ago Nightie and uncertainty. How much of it is there? And what are you looking for when you when you're looking for clarity, when you looking for a better sense of what Trump and omics is and what it's going to mean. What's going
to provide those answers to you? See? An example of real ninety and uncertainty is the uncertainty generated by Trump's tweets about nuclear power, nuclear weapons. Uh. And he has suggested that we are now entering a new nuclear arms race with other countries that because he wants to talk tough about our nuclear arsenal, other countries are going to be deciding that they have to build them too. That is real uncertainty. Where where does that bring us? Now?
It may be that he's wise and those that it's just cheap talk, nothing will happen from saying these things, but I you know, I think we're many of us worried that it isn't cheap talk and it has brings real and fundamental uncertainty to our lives. Is there an upside of potential upsite to all this talk, whether cheaper or otherwise. Is it good that we're having more communication about policy issues that less is is uncertain because more is poken of. Well, I think it's refreshing at times
to hear Donald Trump questioned some of our basic assumptions. Well, for example, should we demonize Russia? I'm thinking that maybe we should be wary of the current regime in Russia, And he's right, let's not demonize the country or the people. They're nice people. I can tell you have that many nice Russians. But uh so he turns the talk around in ways that we're kind of unacceptable, and sometimes it's a good thing. I think. Is it a guilded age?
Professor Schiller, we had I was shocked this morning in our early hours of Bloomberg surveillance, how many times people spoke of a neo fascism in the industrial policy of Mussolini in the n twenties. That's an emotion from another time and place. Can we drag forward that this is just simply a plutocracy and a time of a guilded age. Well, Mussolini was he rich? I don't think so. I don't believe he was so. It it's uh, it's an unusual trunk, isn't.
Trump is an unusual combination of a gifted rebel rouser and a billionaire. So I wouldn't call it a plutocracy, although that that's an element of it. It's it's his. You know, some people discover their theirselves in front of an audience. You know, you start, you start observing, and you're observing the audience and noting what works, and it becomes a passion doing that. That's why Trump isn't hasn't been interested in getting briefings. It's not what he does, right,
He's he's a speaker, an action figure. We've been talking about history here a little bit, looking back to the nineteen twenties and nineteen thirties. What's what's useful to you when you're looking at history now? What are you reading? What are you looking at or are there analogs here in American history for what we're seeing today? Absolutely. I I just gave my American Economic Association presidential address called
narrative Economics. And I've been back in the twenties and thirties trying to un to stand the narratives of that day. And people forget what was on people's minds then. For so, for example, this UH is a factor about uncertainty. Back in the nineteen thirties Mexico, the Mexican government nationalized the oil fields UH and the hacienda's UH. It was a
major step. And at the same time there were people talking about that in the US and and Franklin Delano Rose about seemed to be our president seemed to be drifting more to the left over the years of his administration, and we came into appear where many business people said in the nineteen thirties, we're not expanding because of uncertainty. And I think we have this now right now. Trump offers inspiration and uncertainty at the same time. Is you
gave a speech to the American Economic Association. It harkens back to Joseph Schopeger's a claim speech of another time and place, Uh, the nineteen forties. Is it is cham Paider faced in his speech a zero sum society? Forget about the politics and the emotion of neo fascism? Is it neo mercantilism that we fall back to, like what we saw in the thirties? Right? Well, so that the thirties, that's another source of the Great Depression. It was it
was trade wars. Uh. And so people try to solve their depression problem the same way Trump is proposing solving it. It's not it's not an inspirational story. So ultimately it's been goes back to Adam Smith. Our prosperity is generated by trade, by people doing what they do best, and uh, market forces determining who is doing the best. Uh. Now
Trump wants to interfere with market forces. Now he may have a legitimate argument for doing that because some people weren't insured against risks to their careers, and now they they kind of thought they had a right to something action from the government. So maybe they are owed that. But it does come at across of Economic Efficiency. Bob Sheler, let me ask you. You You just finished your tenure as
the head of the American Economic Association. You mentioned the speech that you delivered at the meeting in Chicago narrative economics. I put that out on Twitter. I want to ask you about inclusivity in economics. Imagine that's something that you've had to wrestle with here over the last couple of years. It seems like something that's talked about more and more at confidences like the one you're attending now in Davos. What progress have we made on making economics more inclusive?
Are you referring to women in economics? Women in economics, yes, exactly. Minority is expanding the field. Well, there has been progress, uh, but it is still a ways to go. Uh. I don't know what to say that economics has been traditionally
a male field. I don't know why. Claudia Golden, who was a professor of economics at Harvard, did a study of women's reaction to economics and concluded that women uh react more strongly to the poor grade they get in their into our econ course and uh their perfectionists, whereas man they don't care. Uh. So women have to understand or I shouldn't put it like that, but uh, I
think they are increasingly accepting the importance of the field. Uh. It's it's actually a very good field to go into, I think, for even if you don't become an economist, you know it's interesting. David, I'm so glad you brought this up. I've never seen Bob Schuller squirm so so
my life trying to get h oddus. I look at Amanda Kowalski or Naomi Lamora at Yale University economics, and I love your idea that women get more upset at that econ one on one exam, which full disclosure, I'm I'm really against the way, freshman your economics is taught in America. I think it's a tosserved was to any and all involved in particularly teachers, frankly, but within this is the idea, even if we're not math centric, even if we're not Michael Woodward, you gotta know some math
to do economics and to understand the dynamics. To our listeners, Professor Schiller struggling with mathematics at home for younger children, what's the formula? How do you get kids engaged to get to the dynamics of Euclidean geometry, the dynamics of algebra, let alone get on maybe to a possible understanding of differential equations. How do you put that love in kids? Well, I guess I succeeded. My kids liked man. My son was a math major in college. What did I do?
I don't know. I think it has a certain lower to it, a certain narrative. When I was a kid, I read Mathematics and the Imagination. Yes, that's the same book that Google founders must have read, because they took the word Google from that book as a very big number. So I don't know. I think that there's a Yeah, not everyone is going to be interested in math. But right, I'm gonna editorialize here, David Girl, I want you to
jump in with a professor. But to me, the basic idea is you've got to have permission to let your kids be nerds. And there's a whole societal construct in America it says you have to be nerd free. There's a photograph of young Schiller, newly minuted out of school, surrounded by Migdigliani and a whole bunch of other guys, and he is the nerd in the room. Trust me, nobody. They show up at the summer conference and everybody says CASHUS hipsters can be in the sixties and their Schiller
sitting bowled upright with a tie, David fob Shiller. Let me bring it back to Davos in the limited time that that we have left that we mentioned the speech by the Chinese president yesterday. Vice President Biden speaking in Davos this morning delivering a really impassioned speech about the trans Atlantic relationship in the future of Europe. On ye his words, it's imperative that we act or to lead to defend the liberal international order. Who's going to take
up that mantle here in the new term? Are we gonna see who's gonna be fighting for that, the liberal international order? And how difficult is that fight going to be? Evaluay? I saw a Biden's speech and I liked it. Um. I didn't find much to disagree with. Uh. We could have had a President Biden that was once talked about, but I guess he won't be the person. I think a lot of people in America, though, are realizing the
importance of civil society. UH, and that we have to help reaffirm American civil society, which means that we don't rely on the president to form our view. We have our own We have our own society, and the President is our servant in this civil society. Bob Shiller, thank you so much for joining us Today has been fantastic. I have no idea where America and our good society
is in six months. The uncertainty here is palpable, but your voice all the criticism we get when you're on the right the left, they go back and forth on Schiller, thank you for your exuberance here at our meetings. Robert Schiller of Yale uh University, David Gray and New York Tom Keene in Davos, Switzerland, there for the World Economic Forum's annual meeting. In Tom, I know you're there with a special guest. I'll let you bring him in. Very
special guest. David Lipton had large shoes to fill. Some would say it was John Lipsky, and of course his tenure UH and leadership at the International Monetary Fund. Dr Lipton is the first Deputy Managing Director of the i m F. People say, well, what is that? And it's a most interesting and important job. Is the I m f tries to adapt and adjust to the international economic system. Dr Lipton is out of Wesleyan and Harvard and most
importantly in Germaine. To the moment, was part of one of the most important moments in economics I've ever seen, and that was jeff Sex getting off the plane from Russia a million years ago as Russia was thrown into turmoil. You served and worked with Jeffrey Sax and Russia a long, long time ago. Within your new assessment, how is Russian economic growth and when we see Mr Putin and the back and forth with Mr Trump framed for us the Russian economy that the I m f C s. Sure. First,
it's a pleasure to be with you. Um. I was just in Moscow last week at the guide our forum UH named after the reformer who we were working with this time. Russia has had a terribly tough decade with the global financial crisis, then the oil price decline and the sanctions. And during that period where the country might have fallen into chaos again much as it had experienced at the breakup of the Soviet Union, they actually managed
policy extremely well. The central Bank kept inflation under control, the Finance ministry kept the budget from exploding despite the incredible loss of revenue, So they get a lot of credit for avoiding instability that would have turned a tough decade into a real debacle. But their problem is that now with the recession ending, Uh, they're headed for growth,
but it's really slow growth. It's you know, gonna be just a little bit this year and we think, you know, maybe one and a half percent over the medium term. That's just not enough. Yeah, Saxon Lipton observed historic change in Russia. What will be the new Russia with Mr? Putin? And I know you can't speak on American policy, but as a representative of the I m F, what does the new oil at all lower price Russia look like? Oil is no longer a big enough deal in Russia
to drive the economy to higher living standards. Total oil production in Russia before the price decline with two thousand dollars a person, you know, they can't have living standards with that. So they have if they if they have a future, it's going to be to build a private economy, uh, that can take advantage of all of the new technologies, can be modern, can be diversified, they're working on it right, but they have a long wait. And I want to famous folks, is Dr Lipton is one of our great
experts on Russia. David Gura, he had a bigger entourage than Laguard and his entourage. They're all shaking their heads, going, wait, this isn't an interview on Russia. We're doing behind a So David saved me from my Russia fixation. I know we're gonna come back here with David Lipton. I certainly want to ask about the future of multi ladder institutions like the like the International Monetary fone, given what we've seen here in the US and around the world. We'll
get to that. David Lipton with us. He's the first manage director of the International Monetary Fund. I want my colleague David got to jump in here. But I believe I saw a lift of Maurice sobs Fell's latest adjustments to the i m F view. Is it a global lift to the economic system. Now, what we've said for the global economy is that, for the first time in quite a few years, were not revising down our forecast. Our forecast says that growth in the global economy is
going to be picking up. It was three point one last year. We're looking at three point four this year, three point six next year. What has changed is that we're seeing somewhat more rapid growth in the United States. And that's partly because the United States has been strengthening, but also because we're presuming that the budgetary policies of the incoming Trump administration will be supportive of the economy, with some tax cuts, some spending increases, and some efforts
to boost infrastructure. David Litton, given what we've seen here over the last eighteen months, say, does the IMF have to change the way it makes the case for multilateralism? Does the IMF and concert with other multi lateral institutions have to change the way it's making that case. I think that's pretty important, you know. I think we've been on this, uh, this on this case for a year a year and a half. It's clear that there's rising
discontent with the globalization of trade and with migration. UH. Some of it comes from the fact that there are winners and losers in trade UH and with migration. Some of it comes, I think from the difficulty people have of they know that something's hurting them, but it's very hard to sort out whether it's the aftermath of the global financial crisis and the sluggishness in the economy that resulted, whether it's technological change that replacing people with machinery, or
whether it's globalization. I think we need to do two things. We need to try to help diagnose what's really going on. It's important, for example, if if really most of the problem comes from technological change, interfering with the globalization of trade is clearly not an answer how much of that. Secondly, the other point that I wanted to make is that we need to help countries find ways to deal with
those who are adversely affected. We need to stress both uh global growth and dealing with the negative side effects of interconnectedness and efforts to blust growth. How much of the problem here is definitional. A few weeks ago we had that your colleague Christine Legard at Bloomberg, and she spoke about the threat of deglobalization. We hear a lot
about the prospects for deglobalization post globalization. The people not understand have trouble understanding what globalization is, and could institutions like yours do a better job of explaining that. I think that's a fair point. Um. Globalization is changing. Uh you know, we've we've seen a huge rise in what fraction of a country's output is dedicated to trade. It's
that's doubled in the course of my professional lifetime. But interconnectedness has really changed because of the creation of global supply chains where uh you know, uh, some part may be made in Mexico, come back to the United States, get improved, get shipped back to Mexico. It can go back and forth several times, where much of what's produced by Germany may have started emanated in a supply chain
in Poland or elsewhere in Central Europe. I think the interconnectedness that we see now is so deep it's unlikely really to be unwound. The question is whether people whether we can find ways to take care of people who are hurt when economic change is disruptive and try to protect the beneficial parts of globalization. This interconnectedness has really
helped a lot of people achieve higher living standards. The great fortune of speaking with that Jack lou the outgoing Treachery Secretary a couple of times now, and he always talked about a three prown approach about fiscal policy, monetary policy, and structural reforms. Which of those is is the hardest cell? Is its structural reforms? And how do you how do you make that case? Uh, two countries? How do you
make that case to people that it is important? You know, I'll give you a funny answer, which is that ideologically it's hardest to get people to agree to some sort of budget stimulus because there's a lot of ideological objection to that. Everyone agrees structural reform is good, but it doesn't happen, not because they're ideological objections, but because it's
politically so complex. You know. We feel that with growth still sluggish after so many years after the global financial crisis, you just don't have the luxury of picking and choosing people. Countries should be trying to find each and every lever that can be used to be supportive. UH. Demand support may help short run, UH, infrastructure will help medium and long run. Structural change will help over over the longer run. I mean, we just don't have the luxury of choosing.
I don't want to get you in trouble. And they claimed leguard time out chair, but I'm gonna ask anyways. The other day, Mr Trump talked about we need a week dollar, and everybody in the racket killed over because what you're supposed to say is we want a strong dollar and a strong dollar policy. I know we're not near a Plaza Cord dynamic or a Reuben dollar of the late nineties into two thousand two. But where are we with the US dollar is did you start to
stayings exorbitant privilege? Where where are we within the dollar is the dominant feature of how we measure all. Our view at the I m F has been that the world works best when exchange rates are determined by market forces and stay in line with fundamentals. And you know, we've seen some increase in the value of the dollar to the extent that that is validated by policies that strengthened Erica's fundamentals. It's not a problem for America, it's
not a problem for the world. If the US is UH, you know, demanding more UH, it makes sense that the dollar is UH is somewhat somewhat stronger. But I think it is important that countries around the world maintain exchange rate flexibility. You'll not recall the problem that arose in the Asian financial crisis setting where countries were pegged to the dollar, and while a dollar a strong dollar was
good for America, if I'm good for Thailand. Should point out you're on the watch there in Washington at the time. Are we near a mercantile is um? When we hear all the rhetoric can heat? Is it a zero sum America? And are you gonna have a you know, when you're blue book in April? Are you gonna have a little box down there on neo mercantilism? Is that what the PhD is at the I m for thinking about right now. I do think we need to separate two subjects, and
I hope these can be separated. Uh as the administration begins, uh the United you know, hearing here at Davos, some of the businessmen who are close to the incoming administration and who in some measures say they speak for it. They say that America set up the rules of the game. Played by the rules, other countries took advantage. The playing field has not been level it needs to be leveled again. And that that's that's one aspect well and clearly one
aspect of what the incoming administration aims to address. That is a very different subject from the question of whether there should be continued close UH trade ties, whether the interconnectedness UH should continue. Surely when half of the world is emerging market and developing countries, and those countries are providing of the growth in the global economy, those are America's ex work markets, and when they're large, when if they get larger, they are larger export markets. And if
they don't grow as much, they're not so good. So I'm hoping that the administration can distinguish as it develops its policy between an effort to try to deal with what they view as undesirable or abusive policies and separate that from the question of interconnectedness and globalization. David Lipton, thank you so much. Look forward to seeing it with
the spring meetings of the International Monetary Fund. Mr Lipton is the first Deputy Managing Director f the i m F. David grein New York on time Keenan Davos and now a moment with John Stezinski of Morgan Stanley hs B, seeing of course his work with Blackstone, but far more than his perspective in migrating often between New York and London and across Europe's service in philanthropy has been noted uh by those in America, by the Queen in England,
and of course his service to his Catholic church as well with the Pope in Rome. John, you are the most qualified person to speak on the scope and scale of what we are hearing too often in the recent weeks was as not direct affronts, but an allusion to a nineteen twenties industrial policy of Italy, and even a selected group of our interviewees speaking of a fascism light a neo fascism framed for us, this polarized moment that
we're in around those fiery words of another time and place. Well, I think you're making a very important um reference to history, um. And and clearly in the context of the world order today, or perhaps the world disorder today, as some people might like to say, we have the a new set of powerful personalities who have really evolved quite formidably in the last fifteen months. Um. You've got Abbe Si and Mody
and do Terte in Asia. You've got generally see and Urdwan and Putin in Russia and the Mid East, and you now have Donald Trump, all of whom are very much strong personalities, strong leaders responding to domestic UH, populist um sentiment, nationalism, similar to what you reference with UM these other characters in the twenties and thirties in Europe.
But I think it's also important to say there's a new geopolitical order, what I call power, a more powerful set of players that have evolved or will evolve following the inauguration of President Trump in the world stage over
the next um, the next couple of years. And you've seen the beginning Benis of that with obviously the theater UH and the statement of President she here at Davos opening the forum and giving what I thought was a very thorough speech sixty minutes speech on globalization that candidly could have been given by President Obama. Speaking of theater, are you worried that there isn't enough room on that
world stage for so many powerful personalities? As you say, I think if we had all the personalities that I've cited on the stage at once, UM, we would probably have to go to Yankee Stadium or something. UM. I think, what's the most important thing? Can we have a guy from Bowden talk about yank Stadium? They would all go to Fenway. I love Fenway Park and Boston Red Sox are still alive and well, so we continue to support them. But remember we have the New England Patriots and they're
doing extremely well. Less forget UM, but I think one of the things we noticed here in Davos, and it says I was just just came out of a meeting with Ursula van Dervey and who's the defense minister in Germany, and I had lunch listening to Queen Ranya talking about the refugees from Syria in Jordan's. Davos gives you the chance to meet people one on one. It gets to
deal with the human dynamic. And I think as long as this group of very powerful personalities takes the time to meet one on one and understands each other and listens, you know, Klaus Schwab is telling us about responsible and responsive leadership. I think a good part of leadership today is not just being on broadcast UM, but actually being on listening mode and good leaders uh. I learned early on in my career Morgan Stanley, of what you need to know to be a good leader and a good advisor,
you'll figure out by keeping your mouth shut and listening. Tom, and I think We're in a mode now where leadership is going to require a lot of listeners. So you always said that, David, he said time shut up Davids, the next question, please, I didn't say times, so, but
because I think there's some projection here jumping chat. I don't want to make you the spokesperson for Fort Klashwab, but I am curious here there There has been so much criticism of Davas this year, in particular this gathering that some have said is out of touch with the feeling in the world, the populist sentiment that we're seeing around the world. Help us bridge that gap? Then, what what could the rest of the world learn from Davas.
You mentioned the robustness of the conversation, the opportunity to talk with people about issues, engage with them on issues of real importance. Are there themes here that you think are easily translatable? Well, you're making a very important point, and I think it's important to make the distinction. We've sat in meetings today and yesterday where people said, no one foresaw um breggsit, no one foresaw the Trump victory,
no one foresaw the rise of populism. Twelve months ago at Davos, and I think, UM, it stems from the fact that there are a couple of things going on here. One, this is the one percent of the one percent of the one percent talking to itself. Um, there's no one represented among the number two. Claus has created this great Youth Leaders Young Global Leaders group, and I think we need to see more of them. They're very bright young people.
But if you look at the power of the Internet today and power of social media, these people are creating their own fantasy worlds on social media, and then they're the ones who lose hope and are disappointed when they they're not employed. And there's a high degree of youth unemployment. There's a high degree of frustration with a lack of spirituality in the world. More people are in fact finding God, So there's a lot of things going on. So having more youth in the room here in Davos, I think
would make um a big difference. I'm greatly honored to ask you this question. There is, without question, no one, no one. It appears on Bloomberg surveillance. Who puts money with mouth is and feeds the homeless? What have you learned and how do we feed those so disadvantaged that they are desperate for the next meal. What is the
tactical or logistical reality of feeding the homeless? Well, you know, it's interesting, it Tom, It's a very good question, and bravo to you for asking it, because it's not asked enough. Because what you're really asking is what is it that feeds um human dignity? Uh and the core of self esteem? And actually, what's happened a lot. You heard Joe Biden's speech earlier today where he used the term human dignity,
which really comes from his strong Catholic upbringing. Um, and I was really proud of the fact that there's a man who's not afraid to be very comfortable in his Catholic skin. So to your point about you've got to be very focused on the human condition and making sure it's like we were talking about the Syrian refugees today, they're very proud. These refugees don't like taking handouts of
food and accommodation. We're just trying to survive. But part of feeding the homeless is you've got to be prepared to give yourself not just time and money, but you've got to be prepared to listen. Okay, We're gonna have to leave it there, Johnson, thank you so much more. Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on iTunes, SoundCloud, or whichever podcast platform you prefer. I'm out on Twitter at Tom Keene. David
Gura is at David Gura uh. Before the podcast, you can always catch us worldwide. I'm Bloomberg Radio, brought you by Bank of America Mary Lynch. Dedicated to bringing our clients insights and solutions to meet the challenges of a transforming world. That's the power of global connections. Mary Lynch, Pierce, Fenner and Smith Incorporated, Member s I p C.