The Wolf-Krugman Exchange: Trump’s ‘vibecession’

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Hey guys, Mark here. We're bringing you something a little different today on The Briefing. Regular listeners of FT Podcasts will know that earlier this year, the FT's chief economics commentator, Martin Wolf, sat down with Nobel Prize winning economist Paul Krugman for a series of discussions we published on The Economic Show. It was called The Wolf...

Krugman exchange. Well, they're back at it again with a second series of four weekly episodes. And this time they're assessing what a year of President Trump has meant for the U.S. economy, the world economy, and democracy everywhere. So here goes, episode one. Martin Wolf and Paul Krugman with their thoughts. So, Paul, hello. How are you? I'm good. How are you, Martin? I'm feeling pretty good. All things considered, I'm actually doing this podcast from my home.

which is in South London. And where are you? I am, I'm slightly ashamed to admit, in the Virgin Islands, ducking the closing in of winter in New York. Let's talk about where we are with our favorite villain, Donald Trump, or President Trump, as he should be called. Now we're getting towards the end of the year, and I get the impression from reading your substack that you're feeling that things are going so badly, as it were, and the American people have really begun to notice this.

And maybe things aren't quite as grim, at least they're grim, but the grimness implies maybe things will get better in the not incredibly distant future. And we had these really rather encouraging... political results certainly for me and of course even more for you with how well the democrats did in these recent special elections well i'm less terrified

than I was. I mean, this is not a normal presidency. This is not normal politics in the United States. What we have is a group of would-be authoritarians trying to speedrun a transition into one-party non-democratic rule. It's clear that the goal was to, before anybody had a chance really to stand up to them, to end U.S. democracy more or less permanently.

I mean, that's not hyperbole. That's just kind of where we are. And the good news is it does not seem to be going well, or at least it's not going according to schedule. Hello, I'm Martin Wolf, Chief Economics Commentator of the Financial Times. And I'm Paul Krugman, Professor at the City University of New York and author of a Substack newsletter.

And welcome to the second series of the Wolf-Krugman Exchange, here on The Economic Show. In four episodes running over the next four weeks, Paul and I will be taking stock of the global economy. after almost one year of Donald Trump's second term as president. We'll be talking about economics, but also politics. We're going to start with the United States, where things continue to be alarmingly interesting.

And future episodes move on to the rest of the world. So let's kick off with something we often do on The Economic Show, where we put something on a scale from 1 to 10. So after a year of Trump... How healthy in one number, scale one to 10, with one terrible and 10, everything is great, do you feel the US economy is now?

And perhaps also in comparison with where it was in January. Okay, it's clearly in worse shape than it was in January. And maybe it's a five. The normal indicators, unemployment rate, inflation rate. are worse than they were in 2024. Unemployment is a few tenths of a percentage point higher. Inflation, which had been on a downward trajectory, is now up.

catastrophe. We're not in a recession, but then there are weird shadows in the economy that make it in some ways considerably worse, probably, in terms of how it's experienced than these. conventional numbers would say, and also huge risks because so much is being driven by highly speculative investments in AI. What would your number between 1 and 10 be for the state of American democracy at the moment?

Oh, I mean, we're below that. We're at a four or three, but not a zero. And maybe trending up. There just has been a lot more pushback. Things are happening on a routine basis now that we're completely... unthinkable. I mean, if your worst fantasy, did you imagine that masked government agents would be kidnapping people off the street? And that's now a routine occurrence in our major cities. So, gosh, this is not a fully functioning democracy. And we look...

you know, enviously at places that know how to do democracy seriously, like Brazil. Pretty humiliating for an American. A lot of institutions just fold it, but the public has not. And so I'm just vastly... encouraged by the fact that we did have just gubernatorial elections, but they were blowouts for what is clearly a referendum on Trump. And if you look underneath,

it's in some ways even better. It really does look as if the idea that there was a MAGA coalition that was going to rule is not going to happen unless they basically use force and intimidation, which is not out of the question.

Let's just go a bit deeper on the economy. My view had been that what has happened has very dire long-term consequences, but I wasn't clear that there was going to be some crash. at least on the actions he's taken so far. So what's been happening to the economy hasn't really surprised me. I see about a protection of this kind as more likely to have longer term, medium to long term effects than short term effects.

Have you been surprised in any way by what you describe as the number five economies? Is that more or less what you would have guessed? I think I'm pretty much on record as saying that this idea that... protectionism causes a recession is not really right. It's not borne out by history. It's not borne out actually by basic economic policy. Economics doesn't suggest that's right. Yeah. Tariffs degrade.

long-run efficiency. They hurt long-run performance. Now, what was special and is visible in some of the numbers is the uncertainty. It's one thing if Trump had just sort of permanently imposed tariffs that were...

1934 level, I wouldn't have said that would be recessionary at all. It would be a terrible thing for the long run, but not recessionary. But it was the uncertainty, the constantly changing tariffs. How is a business going to invest when it has no idea what the trade regime will be next month?

Now, even that, you can see it a little bit more subtly in some of the numbers, but at the same time, unfortunately, history doesn't serve us controlled experiments where just one thing happens at a time. So we have simultaneously this... radical break with 90 years of US trade policy. At the same time, this vast boom in artificial intelligence. And so most investment is kind of weak. Most businesses are not hiring.

But on the other hand, they're spending enormous amounts of money on data centers. And that in some ways has masked whatever the effects of Trump's policies might be. Now, you've written quite a bit recently, I think, about the vibe session. sort of vibes. Is that to you a significant part of why it's not doing as well as you would expect despite this huge AI investment boom?

Somehow, the mood, if you look at the confidence measures of various guide, the Americans really do seem rather gloomy. Is that what you're talking about? Yes. No, it's not. By the way, we should say that consumer spending has not fallen a lot, despite the fact that people say that they're quite unhappy with the economy. So in some sense, this is...

If we look at what people do and what they say, it's a little bit out of kilter. But yeah, I mean, many people have made the analogy with the late 90s, both the dot-coms, but even more important, the telecom. investment boom, which ended in grief for a lot of companies. You and I are old enough to remember 1999. And the thing was that at that time, that boom bubble, people were giddy. The ordinary person.

was feeling that they were part of this great adventure of prosperity. Now it didn't last, but they, and there's been none of that now. There's nobody out there who is thinking, well, you know. NVIDIA is doing well, and that means that anybody can make it. That's not how it's playing now. And if you look at the standard numbers, the Michigan survey runs all the way back to the 50s.

Consumer sentiment is at its lowest point ever. It's lower than it was in the aftermath of the 2008 financial crisis. It's lower than it was in 1980 when we had a 14% inflation. People are really, really down on the economy. I had thought that Trump might have, if only because of partisanship, that Trump might be getting better ratings on the economy than Biden did. But in fact...

The Vibe session has, if anything, intensified. I was just thinking as you were talking that I recognize this contrast with the late 90s. Well, I think the overall economy seemed to be doing better. Was part of it with the dot-com bubble? Everybody felt they could sort of get in on it. But here, what we're seeing is booming expenditure.

by a really small number of gigantic companies, which is quite different from the sort of players in that. They are real businesses, there's no doubt about that. But they looked like a bunch of incredibly... powerful oligopolists, and that doesn't really excite ordinary Americans because it doesn't really have anything to do with them. Yeah, I mean, the dot-com stuff was sometimes silly, often silly. People even kind of recognize the silliness, but it was kind of nice.

feeling that there were opportunities. I think everybody understood that some of these things were really not going to work. And now, yeah, it's the same. I mean, having Google and Mark Zuckerberg. leading the charge into the future does not give you a lot of confidence that the future is going to be very good for the common man. Isn't there some sort of awareness that some of these businesses

aren't really quite the businesses we want to be so big and powerful. Is that part of the vibe before we go back to the economics? Yes, I think it is. And I think people do have a sense, first of all, that these... Businesses are very heavily built on basically hacking your brain to indulging and encouraging your worst instincts. Not a day goes by without some horror story about...

ChatGPT encouraging people to do something stupid or self-destructive. Yeah, even suicide. Yeah, and if we have a government that clearly... basically is a government of, by, and for predators, including ways that probably we won't get into.

And that does filter through. Everybody has a kind of sick feeling about where we are right now. Do you think that one of the factors here, which you've written a lot about, and seems to me very important, for the ordinary American sense of themselves, is that this government is so obviously in bed with a very small number of immensely wealthy plutocrats, and to a degree, which, of course, this is the famous story.

back in the beginning of the last century in the great Gilded Age period. But this seems in practice to be more egregious.

Is this part of the vibe Americans are having? Is that part of what they're reacting against? Well, it's very hard to pin that down. And I suspect that fewer people than you think are really aware of that. One of the things we've learned, and I'm following the political scientists and poll analysts and so on, is that it's very difficult for people like you and me who are immersed in this stuff to appreciate how tangential.

Much of the news is to ordinary people. And I'm not sure even if you did a poll and you asked, are you aware that Elon Musk gets a lot of his money from government contracts? I would guess that many people are not. But I think there is a general sense that it's unfair. Inequality doesn't actually have as much traction politically as you might expect, but unfairness does.

And the sense that we're in a regime of unfairness everywhere really does. Now, we've been reading a lot over here about this affordability idea. It was obviously what Mr. Mamdani campaigned on in New York, and he certainly won a pretty spectacular victory and an encomium from Donald Trump, which must say must be one of the most surprising meetings I've ever seen in my fairly lengthy life.

But is he on to something here that somehow this links perhaps with their feeling about what happened with the inflation under Joe Biden? There are really important things that have become unaffordable for ordinary people. You've written about housing, rents, and so forth. How live is that really is an issue, and do you think it'll last? We had a bout of inflation really from 2021 to 2023. And people, I think, were, people are upset about the jump in the level of prices, especially because...

we'd had three-plus decades of very low inflation before. They expected 2% a year, so 6% over three years, and they got roughly 20. And that sort of, they say, we got cheated. Yeah, and although wages went up a lot. And contrary to what many people believe, actually wages rose more towards the bottom of the wage distribution. So we actually had an equalization. So struggling families on the whole.

We're better off in terms of purchasing power, but it's a natural thing. You feel that you earned your wage increase and then it was snatched away by the inflation. So that's a big part of it. Wages have risen more than grocery prices. over the last five years or so. But wages have not risen more than housing prices. And so there's some real affordability stuff. The price effects of the tariffs, as I see it, are still coming through because a lot of the price effect...

was clearly absorbed by business, but it's not going to be absorbed forever, is it? That's right. Although one quirk is that it's turned out that the effective tariffs are not as high as the... posted tariffs. And part of the reason there is it's not really, we think, a lot of illegal tariff evasion, but there were a lot of things that businesses could do to avoid paying tariffs that weren't worth doing.

when we had 2% tariffs, and are worth doing when we have 17% tariffs. So, yeah, we're probably looking, we've probably seen something like half of the eventual price impact of tariffs on consumer prices, and the rest is working its way through the pipeline. I think what is special, part of the reason that the rage over affordability has persisted. I think they might have started to fade if we had some kind of continuity, except...

Trump ran a campaign all about, I am going to bring prices down. I'm going to cut the price of energy in half. I'm going to make your groceries much cheaper. And then obviously hasn't delivered on that and hasn't even made an effort to deliver on that. And people... feel betrayed, which is, coming back to where we started, I'm glad that people feel betrayed. This is important. Well, obviously, he works on the assumption that the promises I made have nothing to do with...

What happened six months later? People shouldn't hold me to account for something I said six months earlier. That just sounds fair. Yeah, I mean, this is Trump's whole modus operandi, is that a promise from Trump is...

a suggestion at best. You know, that kind of works when you're dealing with, I don't know, university presidents, but it doesn't work when you're dealing with the American public. Just one final thing on the tariffs. You've got this really rather important case in front of the Supreme Court.

which, of course, you follow very closely, and I've been very interested in, on whether what he's done is legal. My own reading of American trade law, and I know a few experts, is that it isn't. My confidence that the Supreme Court will decide that it's illegal isn't very great, given some of the other things they've decided. What do you think the Supreme Court's going to do? My guess is that this may be...

a step too far even for the Supreme Court. The president can do some special things to deal with economic emergencies, but when Trump imposes tariffs on Brazil because they have the temerity to try Bolsonaro, That I don't think fits the definition of an economic emergency. And two lower courts have already ruled that the tariffs are in fact illegal.

We have betting markets. The prediction markets say that there's only a 26% chance as of this morning that the court will uphold Trump's tariffs, which looks about right to me. Can he get around that? Can he ignore it? Well, just blatantly ignoring it, I think, does become a problem. I mean, if you're a Customs and Border Patrol agent and you collect the tariff that the Supreme Court has ruled illegal.

I think that you are personally liable. You have yourself broken the law. So this is serious. And he couldn't pretend that, quote unquote, breaking the law is an official act. which the Supreme Court in an earlier judgment decided was actually completely kosher. Yeah, well, and, you know, there are other routes around. The president has a lot of leeway to impose tariffs to...

protect national security, Section 232. And Trump has been doing that quite a lot. Not all of it is under this Emergency Powers Act. But there too, I would imagine that the... potential legal challenges are huge. I mean, he's imposed national security tariffs on bathroom vanities. God help us if we get into an international conflict and we depend on China for our bathroom vanities. If I remember correctly, he imposed a tariff on Canada because the governor of Ontario showed an investment.

from which it was quite clear that Ronald Reagan didn't like tariffs, which everybody who followed trade policy at the time, and you were one and I was one, knew damn well was true. But he still imposed a tariff. How did he manage that? Was that an emergency? I think he may have used the Emergency Powers Act on that one. But yeah, it's all on any reasonable standard. Almost everything he's done on trade is illegal.

We do not live in an age of reasonable standards. If they do come out against him, that's an important judgment on what is, after all, for him and for the world, his signature policy. Yeah. And it's humiliating if the court rules that his signature policy is illegal. And it's less certain, but it does look hard to see how you can rule that the tariffs were illegal and avoid giving the money back. So, quite a scene.

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So let's talk about the labor market, and I want to also talk about the stock market, Bitcoin, the sort of the froth factor around AI. But let's talk about the labor market, which seems sort of not completely clear to me. a significant factor for this vibe session, as it were, more than that, sort of anxiety about prospects for jobs? Yeah, so what we see... And this is measurable and very clear. We have not yet had mass layoffs, large job losses. But what we have seen is very low hiring.

It's a frozen labor market, probably at least in part because of tariffs and general uncertainty. But businesses are not hiring. They're not firing a lot either. So if you're in a job, then you're reasonably secure. Should you lose your job or if you're a young person entering the market for the first time, it's actually very grim.

Long-term unemployment, overall unemployment isn't up there very much, but long-term unemployment is because once you've lost a job, it's very hard to find another one. And this does reflect back, even people who have jobs have the sense, correctly, that... I better not get sassy with my boss because, you know, if I'm laid off, then I'm in big trouble. And so this does color people's, colors people's perceptions also. It's a tragedy. I mean, we've had previous...

information of previous studies. What happens if young people starting their careers enter into a weak labor market and have a hard time finding a job? You know, how long does it take them to recover from that bad start? And the basic answer is forever. If the labor market is poor when you're starting out, you never get as far up the ladder as you would have otherwise. And so this is a big deal. I think this actually is what we're seeing in Britain. I have been seeing. We have had a...

really rather weak labor market in exactly this sense, even compared to our European peers since the pandemic. And I think it's become a very deep source of anxiety for young people. percolates through to their parents because they're concerned about them too. And I think it's a big source of worry. And I think it's considerably worse than in the US from what little I know. So I recognize this concern. But so what's causing it? It would suggest that...

Employers are being very cautious. They don't want to hire because they don't know what's going to happen next. But it also would suggest that basically underlying demand is quite weak. And that's what needs to sort of justify. the Fed to cut rates. And some people on the Fed are saying they should. At the same time, well, inflation is pretty damn sticky. So how do you read that? If you were sitting on the Fed board, what do you think they should be doing?

Yeah, I mean, I'm glad I'm not sitting on the Fed board. Yeah, I agree. I actually do know people who are and are, you know, they go around muttering dual mandate, dual mandate, because it's really hard because of the. I know quite a few too, and I think it's a very tough job at the moment, and particularly with, of course, Trump in the wings. By the way, the thing is, if it's weak demand, you would expect more layoffs. So it is a little...

I mean, it might be weak demand, but it might be also just this freezing effect of uncertainty. And possibly, possibly AI. There's at least some straws in the wind that suggest that early... business applications of AI are reducing hiring or particularly of college graduates or simply that companies are kind of waiting.

waiting for AI, that if you're Amazon, you're planning to replace a lot of your workers with robots a year or two down the pike, you might not want to hire a lot of people now. So it's a little bit of a mystery. I've never seen anything like it. We normally have a...

a pretty one-to-one relationship between the unemployment rate and hiring rates. And this situation of not especially high unemployment, but very weak hiring is really quite novel. That could be, of course, as you say, the uncertainty. That could be tariff generated, the tariff policy generated. And is the sticky inflation, despite what seems not a very strong economy, also related to that? Actually, you could say that the tariff uncertainty.

has slowed the pass-through of tariffs into consumer prices. If you are a retailer, you know, raising prices does piss off your customers, to use the technical term. And if you think the tariffs might go away, I mean, if you think that... sometime in the next few weeks, the Supreme Court might rule that all those tariffs that are making your products expensive may disappear in a puff of smoke, then you may choose to eat the tariffs until that's resolved.

As I said, you're thinking about being a member of the Federal Open Market Committee, and you say, so what is happening to the economy? And the answer is God knows. How do you make an interest rate call?

in that situation. So let's look at the other area of really big uncertainty. You just mentioned AI's impact on the jobs market. Is there going to be a jobageddon, as it were? as a result of AI? Are we going to suddenly start seeing really dramatic effects on the employment of relatively educated young workers, which I've always thought...

would be a nightmare politically for all our societies. If you can't give these people good prospects, well, these are the people who start revolutions. They did that. Young, unemployed people who have got educated. degrees is over. That's how the 1848 revolution started. So this is a big deal politically. Is this what we might be seeing? It's possible. I mean, so far, again, it's all pretty modest as far as we can tell. It is so difficult to interpret the various studies. I agree.

report that they have not actually succeeded in making productive use of AI, but some have, and then there's some, it's all over the place. And there's also this weird thing, which is that... A number of businesses are telling their employees, you must use AI, and when they can't actually figure out what good it does them. So we're in this kind of liminal space where it's all potential and hype. I mean, what it can do is...

There are a lot of things. I follow artificial intelligence stuff sort of marginally for decades. And it used to be that there were lots of things that were simple, common sense things that we just couldn't do. recognize the same object seen from different angles. And all of a sudden, all of that is a solved problem. Translation.

My computer was a joke, and all of a sudden it becomes actually pretty damn good. So there's no question this is a powerful, productive technology, but we don't know yet. And then, of course, I guess I... There's the sort of short-run macroeconomic impact, which is that this is driving a lot of business investment and it's driving the stock market. And quite possible, as was the case in the late 90s, that you have a genuine...

productive, important technology, and everybody who invests heavily in it loses their shirt. So there are two aspects of this. One, the stock market is incredibly buoyant because of this, or has been. And maybe it's filtering over into some other speculative bubbles. I think you just wrote about Bitcoin. That may also be related to...

the deregulation going on, the encouragement of cryptocurrencies more broadly. I mean, that may be really separate from AI, but it's noticeable. So there must be a wealth effect. I mean, at least among relatively well-off people, because... stocks have gone through, these major companies have gone through the moon. And second, associated with that, there's a huge investment boom, which the stock market must be funding to some degree. Now, if it turns out...

that the investment doesn't really get a decent return, which is perfectly plausible given that we don't see business models, then two things will happen. The stock prices will fall and the investment will fall. They will have all this stuff which will have been built, data centers and so forth, but it really will be very low return, though perhaps quite useful in some way. But this is bad for the future of the economy.

The administration has sort of shot the macroeconomic bolts except for the monetary policy ones. And then there is a concern out there that actually they're beginning to borrow more. It's not... all funded out of profits. There are marginal companies borrowing a lot. There is a lot going on in private credit, which we don't really understand. And there are financial risks. So what's the downside here? How bad?

could it get? I don't have any real reading on this, but there are these negative stories you can tell about where we are. Yeah, a lot of talk about the circular financing of the AI-related companies are all kind of taking in each other's washing, making the bottom lines look sort of artificially good. A year ago.

You could say, well, you know, this AI boom is being financed out of retained earnings. And so, you know, yeah, Meta may lose a lot of money, but who cares? But now there's a lot of borrowing. And markets are taking note. Oracle, credit default swaps, feel young again. It's like going back to 2008. But the credit default swaps on Oracle have just blown out.

suggesting that people do think there's a significant risk that one of the big players here might end up defaulting on some of the debt that's taken off. So nobody knows, right? The financial stability is always... It's a game of whack-a-mole. You're always trying to knock down financial risks, and you're often at risk of fighting the last war. So you cope with, you know, we dealt with a lot of the old shadow banking stuff, but now we have private credit.

that creates a whole new set of risks that are at some level, at a metaphysical level, similar to the old shadow banking stuff. I don't think we're at the edge of another financial crisis, but then... To be honest, I didn't think that in 2007 either. Well, I didn't then, but I was more worried than I am now because I tend to think this is narrower. It's not related to housing, which is...

a classic asset class to create problems. We saw that all over Europe. And the big companies involved in this are in cash flow and profit terms, basically about as solid as a company can possibly be. So there are obviously marginal players, which are Microsoft, Google, Meta. These are pretty solid companies. So if you succeed in getting a colossal financial crisis out of this, I think that would be...

Quite a major achievement. I'm absolutely astonished. Yeah. A financial crisis is not high on my list of things to worry about. But then again, our track record...

The IMF once did a systematic study of how successful are economists at predicting recessions, and the answer is a zero success rate. Yeah, well, what does worry me is that when this happens, it could well be under another Fed chair. And that might not be a very sensible person. And I think on the whole, Jay's been a pretty sensible person. And by and large, actually, over the last 20, 25, 30 years, I'll quibble a bit about some of them. You've had pretty sensible Fed shares.

And that might not be true a year from now. And that could make a big difference. The Fed share really matters if there's problems. Yeah, I mean, and without getting into the individuals, people on the short list range from... somewhat weak to absolutely horrifying. Now, saving grace to some extent is that the Fed chair is not a chief executive who can just...

make the decisions. It's a monetary policy, it's a committee. And the committee seems likely to remain sensible at least for a couple of years. So, yeah. And one thing, by the way, I would say is that the... You're saying that these investments will leave us with useful stuff. That's one of the things that's unclear. The 90s investments, you ended up with a lot of fiber optic cable in the ground that didn't get used right away, but was eventually useful.

the data centers probably depreciate quite fast. And so, in some ways, this is more like the companies that got over their skids on shale. It's turned out that shale... wells depreciate much faster than conventional oil and gas wells. And so we might have a big waste of resources that is really lost. We may be just burning up real resources on stuff that won't get used, especially...

if they're kind of taking the wrong approach. One of the things that we're worrying about now is that the Chinese have been focusing on smaller models that are less comprehensive, that apparently can... achieve about 90% of the effectiveness of the big models at far lower cost. And so this thing may, you know, aside from the inherent questions about AI, there's also the question is, are we doing AI wrong?

That is, I think, a really interesting possibility, and that would certainly justify a pretty big collapse in stock prices and investment. I've just been to China, and they certainly do feel that they've got a... more sensible approach. And when you look at the amounts being spent on these data centers and the dubious benefits in terms of improvements at the margin, yeah, you can ask that question.

Let's put this all together. People aren't very happy about the economy. You've still got the Epstein files. There should certainly seem to be an amazingly hot topic. Trump's approval is remarkably low. So coming back to where we started, could we begin to feel that not only have we passed Pete Trump, but that... We should really begin to feel that the American system will be able to get through this. So I'm beginning to feel maybe this will work out. How optimistic are you of that?

I thought of it as two to one on at this stage about 10 months ago, eight months ago, that Trump would get away with it and he would have created a dictatorship. But now I'm beginning to think it's less than evens. I think that the... My view is that it's more likely than not that the autogulp, the self-coup will fail, that Trump and company will not succeed in installing permanent autocratic rule in America.

And it tells you something about where we are, that believing that they probably won't do that makes me optimistic. So it's still very scary, but it's really looking like they may not be able to pull this off. that doesn't mean that we've gotten through it safely, even if we have, even if that's how it works out. For one thing, an enormous amount of damage has been done. Of course. To America and to the world. To us, to the world. I mean, the United States was the...

essential country, and we are now completely unreliable. Nobody will trust America for decades, even if it ends. And then there's this longer-term question, even if we get through and we end up with a Democratic Congress.

the next year and then we end up with a democratic president uh in 2028 winning winning every election is not a reliable strategy for safeguarding democracy so you know the fact that If we don't end up not just holding back this bums rush from MAGA, but if we don't end up having a Truth and Reconciliation Commission of some kind, some accountability for all of this.

then we're still in very, very bad shape. The thing that particularly worries me, and I follow this very closely, and perhaps it's partly because of my family background, my history of my family as refugees from Hitler, there seems a... a remarkable amount, I mean, astounding amount of genuine, clear fascism, even Nazism, circulating around on the extreme right. And even three or four years ago, I wasn't aware of that.

It's possible if the Republicans are in opposition, that's where they're going to go. And these people only have to win once. And you really have a problem. So it remains very, very scary, I think. But I certainly will feel better if...

it looks as though they haven't pulled this one off. Yeah. So in next week's episode, we're going to talk about the economics of... mega man. And on the other hand, well, what does the newly elected New York mayor tell us? What does that mean about the future of the Democrats? And look at it from the economic point of view.

And meanwhile, I think it's your turn to tell us about your cultural coda. Yeah, well, what I can say is that I've always put a musical coda on my Substack, and I think it works here as well, is... Pink Floyd, The Great Gig in the Sky, where the lyrics consist of nothing but an extended wordless scream. And if there was ever a time when a primal scream seemed appropriate as a reaction to the... to the world around us. It's now.

So when I was asked to do this, I found it, I think, much more difficult than you do. But as I said before, I'm a sort of opera person. And I was thinking about the best things about tyranny, which has after all been the theme. Last time, I think I had Fidelio from Beethoven. This one is even more direct. It's from Puccini's Tosca, which is about...

the evil ways of an Italian police boss who's really a gangster called Scarpia. And the song is by Tosca, who's the heroine, whose lover has been tortured. And she sings this absolutely magnificent song, Visi Date. I lived for art. I was a peaceful, loving, decent and honorable human being. Why, God, have you inflicted this upon me?

It's a very dramatic scene, and the aria is absolutely magnificent. So that's my coda for this week. Thank you very much. I think we've had a very good overview of why we're feeling a little bit more cheerful. And we're feeling a little bit more cheerful because things are going rather badly wrong. But we don't quite understand fully entirely why the economy is going as it is. But I'll take it anyway.

Cultural references are not very much like what you expect from a couple of economists, but here we are. Well, even economists are human beings sometimes. Some of us. Some of the time. And that's it for the Wolf Krugman Exchange on The Economic Show for this week. And we'll be back here at the same time next week.