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00:00G20 innovation meeting is kicking off this week in North Carolina. Top tech executives are in
00:04attendance alongside U.S. and world leaders. Elon Musk, Jensen Huang, San Alton are among the names
00:10expected to speak at the ministerial meeting in the coming days. The meeting is hosted by
00:15Commerce Secretary Howard Lutnick and is a precursor to the larger G20 summit when all
00:20the world's leaders of the largest economies will meet later this year. Philip Luck joins us now.
00:24He's the director of the CSIS Economic Program. All right, Philip, the goal of this meeting,
00:30they always have themes, these meetings. This one's theme is to talk about a framework for
00:35international governments to approach AI regulations and other emerging technologies.
00:40But don't they have bigger fish to fry? Are they really going to be talking about this? What are
00:44they actually going to be talking about this meeting? Yeah, that's what the U.S. is going to
00:48want to talk about. And that's, I think, a broader theme of this G20 presidency of the United States.
00:53What the U.S. wants to talk about and what our partners want to talk about are fairly divergent.
00:58And the way we want to talk about them diverges, even if the things we want to talk about are
01:01the
01:01same. So, of course, I think what partners are going to be talking about going into these financial
01:05meetings is going to be, you know, the war in Iran, increase in sovereign debt, the Treasury
01:12Department's buybacks and what that says about the future. And I think what the U.S. is going to be
01:17looking for is fairly different. And when we look at this, these conversations just on the back of
01:22Jackson Hole, a number of these attendees were just in Wyoming. Will those conversations be
01:27markedly different or is it just continuing the same themes on the topics that you mentioned?
01:32I mean, I think they'll be different in certain ways. I mean, I think for sure, you know, the
01:36finance track of the U.S. presidency this year is really focusing on global imbalances, efforts to
01:43deregulate and sovereign debt. I think one of the areas where there's a real a bit of a ray of
01:47sunshine
01:47here is sovereign debt. That's where, you know, across the G20, there's a little bit more of an
01:53appetite and alignment on like the issue here. The problem then becomes the devil's in the details
01:57and how you get around your arms around it. But even on that issue, again, this is going to be
02:01much more, I think, partners wanting to know here from the U.S. how they're going to deal with their
02:06huge ballooning debt rather than some of the other issues which the U.S. wants to focus on.
02:10What are some of the approaches you've seen as you look at other economies with how they're trying to do
02:15exactly that, get their arms around the debt issue? Because the debt issue is always the thing that's
02:18in the back of mind, but there's always something more urgent that it seems like you have to address
02:23and it gets pushed aside, pushed aside. Is it getting to the point where it can no longer be
02:27pushed aside and they're going to have to come up with some solutions? You know, I never want to bet
02:33against a government kicking the can down the road further. Fair enough, fair enough. But to exactly your
02:39point, look, things have become much more complicated. Look, the world between the last U.S. G20
02:44presidency of 2008 and today, it's a markedly different world. And we not only do we have
02:49these aging populations across most of the G20, but especially the sort of the higher income
02:55cohort that is our sort of partners, aging populations, increased demand for resilience
03:01over efficiency, need for new military spending, as well as a kick to sort of increase innovation
03:08because productivity is stalling and that's one of your best get out of jail free cards for debt.
03:13So to your point, I think right now it's more about prioritization of what you need to continue
03:17to spend money on and create more debt than it is assessing that debt problem.
03:23And one of the things we've been talking about quite a bit this weekend, obviously, was Fed
03:27Borsh's first press conference and his ability kind of to potentially point towards a very much
03:33live Fed meeting in September. When I look at the actions from Scott Besson doubling down on some
03:38of the bond purchases here on Wall Street, the market wasn't really buying that and is very much
03:43focused in on this next Fed meeting. What are you making of the commentary that we heard from Borsh
03:49and also what that Fed meeting could look like?
03:52I mean, I'm very curious what it's going to look like. And I agree with you. I think the market
03:57is,
03:57whether it's Besson or Borsh, I think there's a lot of skepticism about the sort of rhetoric and the
04:02approach going forward. You know, I think we're going to see what that looks like. But candidly,
04:08I'm as curious as the rest of us.
04:11Well, I guess the one question that I've been asking of market participants over the last few
04:16weeks is even if we look at the data points we've seen thus far this summer, as much as we
04:21can say
04:21the data are very strong, I've had a number of people saying under the surface, the U.S. economy
04:25is decelerating. Growth is decelerating.
04:27What are your views on the data points we've been seeing and what that ultimately means for
04:32an underlying U.S. economy that's really been heavily driven by A.I. spending and consumers
04:37at the bottom of the K-shaped economy continuing to rack up debt?
04:42Yeah, absolutely. I mean, I think, you know, between the last two years, I think the thing
04:46that I've been the most surprised by is the amount of the U.S. consumer, the strength of the U
04:50.S.
04:50consumer and continue to spend and increase debt. And I also agree with you. I think even some of
04:55the brighter signs in the U.S. economy in terms of things like labor productivity, you know,
04:59I would argue that those are being read with sort of rose-colored glasses more than they should. And
05:04to me, those indicate a much more of a signal of a weakening labor market and a culling of labor
05:08more than it does sort of the early returns to these technologies. So, you know, I think, look,
05:14we've had a very good run for a while here, but I think there's a lot of signs of sort
05:18of a
05:18of cracks in the foundation. So what does that mean if you're the U.S. and you're going to something
05:23like this G20 ministers meeting, especially given the kind of divergence with traditional
05:28globalized economic policy you see in this administration versus folks that are acting
05:33more like we usually see, you know, the European Central Bank, et cetera, they're all going to be
05:37in the same room. How do those conversations go? Does it make it hard to address the issue when you
05:42are debating about what the issue really is? I mean, short answer is yes. I mean, I think there's a
05:47lot
05:48of things that makes this this these conversations difficult. I would say one thing. I mean,
05:52the G20 conversations are never easy. It's like it's very difficult to get the United States,
05:56China, Russia, India and other countries all on the same page on literally anything.
06:02But I think this is especially difficult because there's a challenge of understanding or agreeing
06:06on the basics, fundamentals. There's more than we've really seen in a very long time,
06:11a difference in interests. Right. We simply are not. The United States is not pushing for a more
06:17open and inclusive economy the way we have essentially for the past 80 years. And in that
06:22situation, you know, even where there are fairly narrow sets of interests that align, you know,
06:28broader issues come in. And, you know, it's really difficult to either agree on the fundamentals or
06:33agree on a path forward when things really do start to look a lot more zero sum.
06:37And Christina mentioned Elon Musk, Jensen Huang, Sam Altman in attendance. How do they actually fit
06:43into this event? Are they giving a presentation? And to your point earlier, are they just kind of
06:47there to talk about AI? Elon Musk has been a very big part at times of the Trump administration. And
06:54Jensen Huang obviously is kind of seen as the godfather of AI and has been promoted traveling
06:59around the world with different people associated with the administration.
07:03Yeah, I mean, candidly, this will be very interesting to see. I mean, obviously,
07:06this administration has taken this group of sort of American titans into the fold in a way that we
07:13haven't really seen in recent past, you know, how they're being received by other leaders of other
07:18capitals. It's very interesting, of course, especially in Europe, these are seen very differently than
07:23they are here. But I would say also that, you know, other leaders have sort of taken on the same
07:28approach. I mean, we had the president of South Korea come to San Francisco recently, bring in huge
07:34swaths of leaders of industry to sort of just sort of be at the forefront of this. So, you know,
07:39I think
07:39there's possibilities for this to be productive. But, you know, the reception of the other leaders
07:44will be very interesting to see. Well, that's what I was going to ask is what the vibes are going
07:48to
07:48be, because I've I don't cover the finance ministers meetings, but I've covered a million of the state
07:53department secretary of state level ones. I can't ever remember a group of private sector CEOs being
07:59invited to one of these. Now, when you're talking about AI, it is a bit of a different case. And
08:04it does
08:04seem to make a bit of sense. But I'm wondering if this is like, you don't even go here. Like,
08:08why are you here? Or if people are going to be excited to have access to these guys?
08:13Yeah, I mean, I think some of the invitees, you know, the people outside the G20 that the U.S.
08:18is invited, they might be interested in having that sort of access. But, you know, again, for the
08:22most of the G20 members, you know, they have access to these folks. So I would agree that I think,
08:27you know, in a lot of ways, I think the strategy that the U.S. administration has put forward
08:33maybe doesn't always best serve their sort of interest in exactly this way, which I think these
08:38have more than ever, these industries seem to be incredibly aligned with the administration.
08:43And the administration is using its economic power to advocate for these in ways that are sort of,
08:49you know, traditionally a bit more beyond the pale. So I would imagine their reception could be a bit
08:53frosty from some of the larger G20 countries.
08:56Well, we know Justin Wong will have a nice leather jacket on to keep him warm.
08:59It'll be interesting if Elon matches him, though. But talking about, I mean, leather jackets,
09:03we heard a lot from folks over in Jackson Hole, also people wearing vests, a la Mike McKee.
09:09Someone who was not wearing a vest, though, was Bloomberg Adlott's podcast host, Joe Weisendahl.
09:14He and Tracy Alloway, though, spoke with Richmond Fed President Tom Barkin about inflation.
09:18We want to play a bit of sound of what he said about that.
09:20The economy's solid. I think he said that.
09:22Yeah.
09:22And you can definitely see that. And the GDP numbers and the consumer spending numbers.
09:26I mean, it's been crazy this year that gas prices went up and consumer spending accelerated.
09:32It's been crazy that you have all this uncertainty and artificial intelligence spending has led
09:36business investment to, you know, almost double versus this historic thing.
09:39So there's a lot of momentum in the economy. Jobs market seems to have stabilized.
09:44Unemployment rates low. So all that's good.
09:46And I'm not saying inflation is just they head in the wrong direction. It's just not in the right place.
09:50I feel like not to put you on the spot. We've got a little under a minute.
09:53I'm wondering what your assessment of that is and if you agree.
09:56Yeah, I mean, look, I would say it has been very surprising the degree to which the U.S.
10:01consumer has sort of stayed resilient to this. I would just say if you're if you're looking at data,
10:05you're saying it's been crazy how access happened. Maybe don't count on X continuing to happen
10:10or at least have a really good explanation for why that's going to continue to happen.
10:13I think we're putting ourselves in a pretty precarious situation with the U.S. economy.
10:17I would also say that inflation will probably not go away in the sense that across the world anyways,
10:22food prices are going to start to see more and more inflation because we just had more than six months
10:28without fertilizer being in the supply. Growing seasons and planting seasons have passed around
10:34the world with less fertilizer and less planting. So we're going to be looking at a situation where
10:38food prices and other prices will continue to go up even if the straight opens tomorrow.
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