Is it ‘economic Halloween’ in the US? with political economist Mark Blyth

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1:20 Join us at masters of scale dot com slash apply twenty six. That's mastersofscom slash apply. Twenty six. The old system's run its course. When you basically start saying we're not producing any climate data anymore and we're gonna make up the jobs numbers, that's deeply troubling.

1:44 Because you can't price things. You the whole purpose of markets is pricing. No information, no prices, but So this makes as much sense as a fish in a privat hedge, but that's what it is. You make it sound fun, but like i it's It's hard, you know. I can make a house of horror sound fun. Um and in many ways it is. That's why we love Halloween. So maybe we're living through the economic Halloween.

2:16 That's political economist Mark Blythe, a professor at Brown University and author of the new book Inflation, a Guide for Users and Losers. I wanted to talk to Mark to better understand whether a new economic order is forming amid continuous tariff turmoil. and Trump's beefing with the Fed and the Bureau of Labor Statistics. Beyond the noise of today, Mark offers a bigger picture outlook on the outdated economic models that still underpin our understanding of the economy. Why MAGA is taking us back to the 50s and 60s, and what we still misunderstand and underestimate about China. We also discuss the Democrats struggle to craft an engaging story about the economy. Why it's so hard to predict a recession and what Brown's recent settlement with the Trump administration tells us about higher education's need to pivot from its reliance on federal funding. Now, economics can sometimes seem dry or daunting, but Mark manages to explain even the most complex theories in a clear, concise, and cheeky manner.

3:20 So let's get to it. I'm Bob Safian, and this is rapid response. I'm Bob Safian. I'm here with uh political economist Mark Blythe, a professor at Brown University and author of the new book, Inflation, A Guide for Users and Losers. Mark, thanks for being here. No, it's a pleasure to be with you. This has been a zany year for the US economy, for US policy, tariff wars.

3:50 President putting it. pressure on the Federal Reserve chairman, Jerome Powell and so on. But now it it feels like we've sort of reached An inflection point, the stock market's near an all time high. You got Tim Cook at Apple just announced another hundred billion dollar investment in US chip manufacturing. We've seen some.

4:09 Trade deals. CEO sentiment is turning up. Is there like a a a new economic order that's actually emerging? Does all this sort of chaotic Trump activity add up to something cohesive? Do you have a big picture for us on all this? Oh, do I have a big picture for you? Absolutely. Um, so imagine the following, right? Imagine you're probably not old enough to remember this, Bob, but there was a year called nineteen seventy seven. And in nineteen seventy seven, I think the US was still telling people if their license play ended in an even number that could gossip on a Monday, Wednesday, Friday.

4:46 It was just a few years before that they actually had price controls in peace time on beef, lamb and pork. Uh, wages were in a freeze across the economy and there was no war going on. If you look at the commentary of the time, people thought we had a terrible amount of federal debt. The government couldn't stand up to anyone. We were adrift, we were ungovernable, and it was all going to go to hell in a handbasket. And what happened was by nineteen eighty-five there'd been a complete shift in how we do everything. We deregulated, we integrated financial markets, we got rid of new deal regulations on banking and finance, we cracked down on labor, we outsourced, we began globalization as a process. And by nineteen eighty five Reagan could declare us Morning in America and everyone would believe him and it was an entirely different world from the one that we lived in. So where are we today?

5:34 We've run the the sort of the set, the experiment that we began with Reagan in eighty five of integrate, privatized, deregulate, et cetera. We've run that to exhaustion. There's been some good results, particularly for people who sit in the top twenty percent, ten percent, one percent of the income distribution. But for large parts of American society it was a process of hollowing out. It was a process of stagnant wages for thirty years. MAGA has a huge amount to do with this, the hollow and industrial base in the south east and in the and the midwest. So what are we doing now? Well, both parties. People forget this, gave up on free trade around two thousand and fifteen. with the collapse of the trans Pacific and Transatlantic trade talks. And uh when we got Trump, Trump put up tariffs. There was a feeling of the people around him that essentially by basically being the savings asset for the global economy

6:24 You've got an export surplus coming from Asia and Europe and everywhere. It's great. We get free everything and we pay them back with treasury bills and they have an unlimited desire for treasury bills. But at the end of it, you know, the biggest employers in the United States today are Amazon Logistics and Walmart. We realise that we didn't make anything. And Biden kept up all of the tariffs that Trump put in place and extended them. Tried to do green reindustrialization in new sectors. And for reasons we can go into, Trump gets back in and really hates the green stuff. It's shutting all that down and is basically trying to do carbon based reindustrialization and he's putting pressure on everybody. Tim Cook sits atop the one of the world's largest cash piles and one of the world's richest companies. He's not immune to the pressure. Now whether this can actually work is a big question. But that's the direction of travel, that's the big picture. We're rolling back a lot of the

7:13 bad consequences, attempting to deal with the bad consequences of the regime that we've been living in for the prior thirty years. This phrase of making America great again. I mean, obviously it's it's not the goal is not to move back to, you know, nineteen seventy seven when As you describe it, things were pretty good. I think it's more nineteen sixty five or maybe fifty five. I mean the imaginary here is actually quite amazing. It is a bunch of old white dudes, and basically they don't like a lot of stuff that happened culturally, politically, economically in the past ten to fifteen years. You very much get this with Barnon and others. That we need an economy whereby one dude can work in manufacturing and get paid enough money that his wife doesn't have to work. She can then have more kids. That's why we don't need immigrants. We can strengthen the family.

7:59 And then what we'll have is this nineteenth century foreign policy as spheres of influence where we run this giant carbon based economy that goes from Greenland to Canada all the way down to our satraps in Argentina and Brazil. And the rest of the world can go do the hell what they want. So I think there very is a kind of regressive modernisation built into this and that's its weak point. Right. Nobody's asking women in the United States, hey, how do you feel about the kitchen and more babies, right? There's nothing in place to make this work. So that's where the tensions start to come out on this. The idea that sort of globalization can be Stopped or reversed. Or whatever. I mean

8:37 It how realistic Is that I mean it it's strange with the tar, like the bad guys now seem to be Canada, India And Switzerland. Yeah, no go for go. It it's well I'm I'm surprised it's really not the EU because Trump's always heard a thing about German cars. I just figured that he must have a thing about Swiss watches because that's basically what they export the United States. So all those people buying Patek Philippe, etcetera, are gonna have to pay a bit more, but I think they can afford it anyway, right? Uh no, the Tar stuff is basically a reindustrialization project. He gets to ratchet up and ratchet it down for other foreign policy measures.

9:11 Right. So when we did liberation day in April two, the top market had a heart attack and the bond market freaked out. And then it went, Ah, we're kinda win, uh we're gonna pull it back, gonna pull it back, right? We're back we're basically back up to where it was. Right. There's the what they're really good at is basically playing the Overton window, right? We're here I want to go all the way out there. In order to go all the way up there, I'm gonna go even further than that. And everyone's gonna freak out. And then I'm gonna dial it back to there and you're gonna call it a win. And what the markets have been doing is normalizing this for the past six months. That now they're just completely on the hook for it, right? So if you think about it, we've got three p two per two point seven percent inflation just now, which, you know, if you're in nineteen seventy seven, you'd bite your hand off for that, right? You've got a long bond of just below five, right? They've been t going down and back in two thousand and six, that was about the same level. People forget we've been here before and nobody died, right? Uh the corporate

10:03 Stuff. I mean it is kinda worrying that you've got All this incredible evaluation overvaluation in uh very few technol tech companies, all based on something uh called uh AI, which nobody can quite tell us what it's really for yet. And we've invested on this and it's an arms race to degeneralize the eye, which is probably never gonna happen. Uh the energy costs of this and environmental costs of this are catastrophic, right? So yeah, there's plenty of there in the mix that we can pull apart and say this is good, this is bad, whatever. But to me it's this is a moment like nineteen seventy seven, right? The old systems are on its course. And we're moving in a new direction. Now, can we completely undo globalization? No, we don't want to completely undo undo it. But there's certain things you want back. And there's certain things you want to be able to do yourself.

10:50 And it's an open question, even with tariffs and all the rest of it, if you can get that stuff back. Not because you can't undo globalization. Of course you can't. States allowed globalization to happen. States can disallow globalization. The question is when you decide that you want it back, can you do it? Because if you haven't made something for twenty years, Where's you going to get the skills for the people who know how to make that thing? So Biden ran into this problem with the Inflation Reduction Act. He's getting Hyundai to build these big factories. They start building the factories, they're like, Right, great, where do we get the sk the skilled labor? And they're like, Uh we don't have any. And then the factory's mothballed. So you know, this is a very interesting moment for lots of reasons. The biggest beneficiary of globalization.

11:32 has been the United States, right? I just came back from Moline, Illinois. Drive around there for five minutes and tell me they really benefited from the past thirty years. Right. American corporations Made out like bondage.

11:45 Forty percent of the stuff still coming out of coming out of China. As exports are actually American multinationals. It's still us doing it. Right. So C suites have never been better compensated. Right. Share values have never been higher. Corporate profits have literally never been higher. They're twelve and a half percent in GDP. Right.

12:05 But at the same time when we have a a mild inflation by historical standards. People are thrown into poverty because the income distribution in this country's gone to hell in a handbasket. So we have to be very careful when we say nobody benefited like us. It's like what us are we talking about? The parallel argument that goes on uh around, you know

12:26 the spread of of wealth and equity in the US is like, well, some of the stuff we have to do because if we don't China's gonna eat our lunch. Are there things that people misunderstand about China and that relationship between China and the US? I I I've never understood what eat your lunch actually means, right? The president's really fond of saying that we've been ripped off for years, right? And a particular part of this is the scorn for the EU. And the funny thing is in 2008, the EU and the American economy were almost exactly the same size, about seventeen trillion dollars. Now the United States economy, basically cause of weird effects of healthcare spending on GDP and the Mag Seven, is a third bigger.

13:07 Now, they're the ones that are ripping us off. They're now a third poorer. How could they have been ripping us off? Right. Now it's the same thing with China eating our lunch. Our corporations left our workers to take their capital to China so they could make super profits by selling stuff back to us cheaper. Right.

13:27 Who's repping who off? Like what does that statement even mean? It's American companies that did this. There are no big Chinese companies. That are doing this. They're all part of the supply chain, right? But China is sort of um looking at the way the US is pulling back from some of its global engagement and kind of stepping into those places, right? And and You know, there's there's anxiety about that. There's anxiety that like

13:55 You know, w China's gonna Whatever beat the US in the battle to to have AI and sort of the next wave of technology. Are those concerns You know, like Unimportant? I I think the concerns are coming from the right place, but I think they fundamentally miss what's going on. China is engaged in the largest industrial experiment in human history. The sheer scale of what they're doing dwarfs any conception of what we've got. The United States has three urban corner basins, right? LA, Houston, and New York. That would qualify as a kind of mega city in China. China's twenty five of those.

14:30 And they're on their way to having a hundred and fifty cities between one and two million. Right, the the scale is just I mean, it's just incredible, right? In five years they have taken over every green tech sector. They have perfected E Vs. The the standard EV now has a range of four hundred miles. Like all this all the stuff that we fret about, oh they're gonna run out of juice, right? It's all solved. The reason we have a hundred percent tariff on them is because if people could get access to them, they never buy another gas gossling SUV in their life. They've completely got battery technology wrapped up, which basically is far more important than godlike AI that we don't know quite what we're gonna do with if we ever get it.

15:08 So, you know, and as for filling in the United States over extension militarily, one of the things that's interesting about the Trump administration is they're the ones that don't want to do this. And is China filling in the gap? Well, the United States has around two hundred military bases around the world. Uh permanently staffed uh that are real imperial military outposts. China has about six. Anyway, where you go? Don't think you really care about that sort of stuff. They're far happier just sitting back and making money and intimidating the neighbors. I mean yeah, but but you you you you make this sound uh pretty pretty troubling all this, although

15:44 You said that in the long term you're an optimist. So can can you square that for me? Well an optimist about who am I an optimist about the the human race in the sense that we haven't managed to kill each other yet, so that's always a good start. Um Am I an optimist in terms of the United States actually making a positive contribution to the most important thing for the twenty first century, which isn't AI. It's living in a warming world. No, we've decided to double down on the very cause of that. Drill baby drill three three million bottles and three percent. All the anti woke stuff on green investment, shutting down Noah. uh literally trying to get rid of two satellites in orbit just now that actually make carbon data, pooling out of international agreements on us. We're basically like screw you, we've got four Def one fifties. We don't give a shit, right? Meanwhile the rest of the world's like no thing this is the right path. No, I don't think so. And I think unfortunately the more that we do this, the more that we will become isolated. This kind of I island of carbon based uh profitability that over the long run is going to be in trouble if the rest of the world no longer needs your carbon outputs, it doesn't need oil, it doesn't need gas, and the rest of the world moves away from that. So in a sense the China stuff, we're handing it to them. We're we're literally putting on a plate and saying, Go on.

16:56 Take the future, take the sectors of mar, we're gonna be basically building huge trucks and playing with something called AI. Wow, Mark really doesn't mince his words, does he? I'm not sure I'm as convinced as he is that AI is just a sideshow, but when he talks about handing China the future when it comes to the energy economy, I'm right there with him. Now, Mark is only getting started, coming up a lightning round about the Fed, immigration policy, the big beautiful bill, and more. So stay with us. We'll be right back. Hey listeners, Bob here. If you listen to Rapid Response on Masters of Scale, you may be missing half the show.

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18:13 There can be two types of companies. Those are great at AI and those that went out of business because they weren't. How do we build a future? That is human centered. I'm Rana El Calyubi. On my podcast Pioneers of AI, we answer that question and so many more. As an AI scientist, entrepreneur, and investor, I know what it takes to build AI that works for everyone.

18:38 Every week, I sit down with the pioneers shaping our future. And we take you behind the scenes of the AI that's transforming our lives. Find pioneers of AI wherever you tune in. Before the break, political economist Mark Blythe talked about how the Trump administration is trying to remake the economic order. Now, he digs into some of the inconsistencies and the opportunities in the still unfolding transformation. We start with a lightning round around the Fed immigration policy and the big beautiful bill, and we end with what he called calls a house of horror and fun. Let's jump back in.

19:19 There's so many topics I wanna ask you. I I w I wanna give you a try a a rapid fire round. Um all right. Uh Trump pressuring uh Fed share Jerome Powell. That's what you do when you basically want to have structurally low interest rates which will enable you to basically dictate the structure of the treasury market. I wouldn't be surprised if what they also try and do is force big American banks to hold many more government bonds. Uh that will relieve the pressure on that. That will push down rates. That will help them do the rest of the stuff that they want to do.

19:50 Uh, which with TARFs is inherently inflationary. Just if I follow up on that, and have US banks own more treasuries so that we're less reliant on foreign governments and other folks owning them or just having more buyers. I mean that's essentially how it would work. I know financial repression, right? That that's what it's called in the literature financial repression. Next topic. Uh Trump firing the head of the Bureau of Labor statistics when the numbers weren't uh what he wanted them to be. Well, I this is very similar to essentially pressuring the Federal Reserve, right?

20:26 You don't really want the Fed to be independent. You want to be dependent and to do what you want through the treasury, right? That's what you want. It's a very different relationship. I'm not applauding this, I'm just explaining it, right? The similar one with this one is a bit more sort of like Trumpy, in the sense that you can't produce stats I don't like. Out. Right. This is w this is both of them are worrying for different reasons, but this one is a kind of form of kind of petulance that r that really troubles people in markets, right? If you're pressuring Powell, if they know that he's going to be out eighteen months from now, if they understand that what they're going to get is not some gold bug but somebody who's more aligned with the president. And its goals, but at the same time will respect certain things. The market could adjust all its expectations though. When you basically start saying we're not producing any climate data anymore and we're gonna make up the jobs numbers, that's deeply troubling. Right. Because you can't price things.

21:18 You the whole purpose of markets is pricing. No information, no prices, but If you don't Trust the data and the numbers that you're getting then You know, I I

21:29 H how do you assess where we're where we are? Well, you don't, you just have to take the word for it, which is exactly what they want. The people putting together these stats are dedicated to career people. They're mathematicians and statisticians. They're not political artists. And that's why the market's trusted, even if it's imperfect. Right. We know it's imperfect. But when it becomes you don't like the number, make it up and fill in anything you like. That's qualitatively different. Let's try this one. US immigration policy. Um, to me it doesn't make any sense because ultimately the fundamental problem, if you think that the problem to be solved are the wages of basically white working class American men, right, let's call it what it is, then yeah, you can tighten labor markets by mass deportations.

22:10 But you're gonna have a bit of a problem because those white working class men are kind of maxed out in the job market. And basically an economy is nothing more than the number of people, the number of hours they work, and the quality of quantity of capital they work with. If you remove twelve million people, either everybody else has to work a lot more hours or you increase the capital component, which is called AI. Which will lead to unemployment of the people you're trying to employ. So this makes as much sense as a fish in a privat hedge. But that's what it is. Your book about inflation. Are are we gonna see inflation again? It turns out that like most inflations are actually caused by supply shocks, right? So even the nineteen seventies, the oil shocks, the the commodity shocks, et cetera, all those things were in there. And it wasn't just the government spent too much money. So are we in line for more supply shocks? Yeah, because we're deglobalizing. Yeah, because of tariffs. Yes, because of climate change. Yes, are the inflation numbers what people personally perceive as their inflation rate? No, because basically

23:09 If you're at the bottom end of the income distribution, you spend eighty percent of your income on consumption goods, then you're much more sensitive to it than if you're at the tw top twenty percent where that's reversed as twenty rather than eighty, right? So there's reasons why people perceive their personal inflation rate to be higher, and in fact it is. All right, uh the big beautiful bill. It it wasn't that big, and it's not my definition of beauty. Uh I mean essentially it's another round of tax cuts from Republicans. Who saw that coming? They've never done that before. Tax cuts skewed to the top, say it ain't so And uh interesting that they're willing to actually sacrifice their own base because the only place they could find any money was in Medicaid. And as Steve Barnon said at the time, there's a lot of maga on Medicaid and come January next year they're gonna find out exact exactly how painful that is. The a pillar of of Republican policy has long been like

24:00 Smaller government versus bigger government. Yeah. Is that happening? So if you look at the size of the federal government in the nineteen seventies and then control for population growth, it's actually smaller than it was in the nineteen seventies. So I guess that's mission accomplished. So when you go in and you do Doge, you basically randomly fire people, you end up having a higher half of them back. It causes a great deal of disruption. It makes the skilled people that you have in those organizations that go stuff this, I'm out I'm not putting up with this shit. So your still level drops down. You're still unable and unwilling to invest in technology in the government itself. They're still running cobalt at the IRS. These people tell me that they're worried about the national debt. And then part of what they do is they cut the budget of the tax collectors and fire the tax collectors.

24:45 These are not serious people. You mentioned the national debt. What's your quick Quick take on the national debt. Do we really think the Fed is going to allow the collapse of the American economy?

24:55 Every time there's been a bump in the road since Greenspan, they cut rates in order to make things okay. If there was ever a serious panic in the treasury market, as they showed in twenty twenty and twenty twenty two, they would walk in and solve the problem. Uh is it unsustainable? Yes. If every bond that they had in their portfolio was now at seven percent, we might have a bit of a problem. But historically what we've done is grown faster than everybody else, and if the rate of growth in the debt stock is smaller than the rate of growth in the economy, the great The debt shrinks. Yes, thirty seven trillion dollars is an enormous number of forty three or whatever it is, but it's also like almost the ninety percent size of the economy. The reason there's so much debt out there is because everybody wants to buy it. There's never been a failed treasury auction. All these people that are constantly freaking out. Oh, they're debt, they're there. Well, who are the morons on the other side of the trade that keep buying buying this stuff for pennies like for literally three percent. If it's such a toxic asset, why is the whole world fill up with it constantly? So you know, I've got lots of things to worry about, but that's not one of them. The issue is every time that there's a big financial crisis, two thousand and eight, debt jumps by thirty percent. Covid, we chalked out another twenty percent. This is why it's up where it is. It's reacting to these crises. If you are where we are and there's a ginormous financial crisis, there are gonna be buyers at that point.

26:08 That's the one that I worry about in a crisis. Everybody wants to run to the safety of bonds. What Trump did and this is singularly important is that with the Tariff announcement He told everybody that what was once an informationally invariant asset, the treasury, doesn't matter what the news flow is, treasury, treasury is now a risk asset because we can and we will screw around with things that will affect its value. And once you've done that, you Do not get to put that GD back in the bottom. And once you're a risk asset, you behave like a risk asset. And that's when bailing things out becomes more problematic. That's what I worry about. The story that

26:43 That Trump tells about the economy and the world. That the Republicans now tell you. Like The other party, the Democrats don't seem to have a particularly cohesive story.

26:53 Of their own. That's right, isn't it? Now isn't that telling, right? Because if every hand of these guys are doing it so wrong, you can pick them up individually on why they're wrong, right? So tariffs are wrong because immigration is wrong because all right, fine. But simply pointing out the error of their ways is not to posit an alternative. And the reason it's difficult for them to do this, and Henry Farrell, uh, who's a very smart guy uh who writes a blog called Programmable Mutter, which I recommend, uh, made this point of about a year ago now, which is that the Democrats have become the party of the status quo. The Democrats are essentially the party of people who go to Whole Foods. Uh i it's the people who are in the top twenty percent, the manager as as Bannon derisively calls them, the managerial professional globalist class. And for us Everything's going great. It's fabulous, right? Our wages are through the roof.

27:41 Uh we're the ones that own all the stocks. I mean don't stop this. We're really sorry we hollowed out the Midwest and all these people are on Medicare and like there's no future for them, et cetera. As if technology was given to us by God and dictates what we do with it, right? So no, these guys have got very powerful set of rhetorical weapons. And the Democrats are just completely unable to handle it. And what they what they did is they double down on identity politics as a way of carving out and building a coalition that ignores all those facts. And that just becomes inherently fragile. And it's no accident that like the other side is completely targeting that sort of identity politics because it reinforces their base and weakens the other side. So if you take that away from the Democrats, what have they got left? That's the silence that you hear now. I have to ask you about the recent deal that

28:34 that your university that Brown made with the White House sharing admissions data, agreeing to donate fifty million dollars to local business development, all in order to like unlock federal research grants. What's the buzz on campus among Faculty do you have any like visceral personal reaction? We weren't formally charged with anything. We hadn't done anything. They just stopped paying the grants. And then we have to pay the people who were doing the work.

29:03 And you know, we're a one point four billion dollar shop losing three and a half million a week. I mean it's just it's completely unsustainable, right? So Mm my colleagues will say, Well, you know, it's not really a deal because we didn't really do anything and what's to stop them the next time there's a protest on campus and we're not in agreement, et cetera, et cetera. And my point is like, okay, so basically what happened was we went into the casino and we decided we were gonna play poker. We didn't really know we were doing this, but we started playing poker. And we've got two pair. Tom's out the guy on the other side of the table has an infinite deck and always pulls a flush. How long do you think you're gonna last? Have we sold our soul down the river for this? Um I don't know. I mean at the end of the day, you know, we work for universities. We're employed by them. Even if they're non profits, they have a bottom line. They can, unlike countries, particularly big countries with their own currencies.

29:55 Go bankrupt. Right. And the people who are the officers of the university have a responsibility to make sure that doesn't happen. For not just the faculty, for the staff, for the research, for everything. Yeah. I I mean, and is there any discussion, you know, if you were a you're a business and your cash flow is dependent, uh so dependent on one customer, you might be like, Oh, I gotta change my cost base. I gotta diversify my business so I'm not so dependent on that one customer. Are those kind of rethinkings happening at the university? I think through the entire sector this is happening. Um you've you know, you've got a confluence of things. One is, you know, for the first time ever, rather than being a source of support, the federal government is a source of challenge.

30:36 That that's difficult because it's the US federal government. This is this is a big thing, right? Um for certain universities that aren't so dependent on federal funding, and we weren't that dependent on it. It was an area we were growing into because that's where the research funds are. It's changing because this government and if they get another term this will be solidified, they really don't care about research and they think it should I mean my basic line on this is that they want to take the money away from us and give it to all the people who are overextended on AI, who have decided that universities are the enemy because we all like we breed liberals who come to Silicon Valley and care about woke issues. I mean, this is the Mark Andreessen view of the world. Uh and I think it has a great deal of currency. So I think the sort of fifty, sixty year relationship between the private sector, universities doing basic research, private um uh v venture capital funds, capitalizing that, bringing it to market, et cetera. That that sort of loop that's brought us biotech and a lot of the tech sector, et cetera. Uh that that's gonna change. American universities

31:37 our sort of the when it comes to absolute basic research, you know, superconductivity, uh quantum computing, a lot of these breakthroughs are not happening in Silicon Valley. They're happening in universities. And we've been doing this for fifty years. That's gonna change. And it's gonna change it's not sh I'm not sure that basically a bunch of man baby firms in in California are the ones that are really gonna do that. Whatever money they're gonna do, there's gonna I mean remember the Zuckerberg, the metaverse? I mean, what a way to spank money, right? We would never have done that. We would have literally started with a focus group that said, How do you feel about spending most of your working life with a pair of goggles on your head? And everyone went, No, we're at right stop there, right? But you know, you can't you can't stop Zuck, so he gets to spend billions on something that clearly nobody wants. So, you know, that's the way that it's trending. And then you've got the uh government also saying that like you take in too many foreign students. Well, the reason we're taking foreign students isn't just intellectual diversity or pluralism, it's the fact that they pay full freight. And then we can tax them and actually give more money to the domestic students. You cut that off. You're not solving the problem. You're making it worse. So we have huge challenges.

32:42 Right across the board. And it's coming and it's coming from our own government. For those who kind of get overwhelmed by the pace of the economic news by all the changes, like is there I don't know, is there a n a a specific number or metric or topic that you would say this is the this is what you really gotta pay attention to. I got I got a call from a network yesterday, one of the network news guys, and it said, Look, uh Mark, just uh quick one, uh do you think there's gonna be a re a recession? And I said, I have no idea. And they're like, But but you're an economist, you're meant to know and I'm like, Okay, so I can anchor on

33:15 last week's jobs report and the scandal around that and say, Oh, unemployment's going up and then we'll revise the next one and then it'll go up. Right, or don't, or whatever it happens to be. Can I tell you from looking at three or four numbers gonna be decision? Maybe some people could do this. I've never made any sense to me. It's always after the fact that we we're we're smart on this sort of stuff. Um big recessions in the United States. Uh okay, so two quarters of negative growth. Do people really notice this? Right. I mean, you know, I know it's the technical decision technical definition, right? But when you think about a session, what you're talking about is two thousand and eight through two thousand and twelve, right? That's a recession, right? Well and and and the question like, you know, will there be recession like

33:55 Yeah, at some point they'll be right back. Right, exactly. No, exactly, right, right. If you could actually do that, right, what you are saying is I can predict the stock market. Right, because you the by definition a recession is when profits go down, values go down, right? So what you're saying is I can tell you when the market's gonna go down. If you really could do that, you wouldn't tell anyone and you would make more money than God. Yeah. And that's why it's fascinating and that's why some of the most interesting people I've ever met work in markets. That's why I like to coming on shows, talking to you, all the rest of it. Because people think about this, but there's also this thing that they don't sort of understand sometimes, which is their thoughts about it are part of the system. Right. We like to pretend that we step outside of the system. It's sort of like the weather, right? So oh I don't like the weather, it's too hot. Well the weather doesn't care. It's either gonna be hot or cold, right? But you know, I don't like tech stocks, and I'm somebody who's really important and I start to like I don't like Warren Buffett anymore. I start to those things have consequences, right? You're actually part

34:54 part of the system. And that's what makes it super fascinating and much more complicated. And and for each of us individually, I mean, sometimes that system seems So big. And so, you know, hard to get our our arms around that it's like We control what we can control, but we're never really sure whether we're leading that system in what we're individually doing in a good way or a bad way. Like do I just do what's good for me, or is there something that I do that will be good for me in the long run, but I can't even see it? And finance, the incentives are always procyclical.

35:29 You lose if you lose money when everyone else loses money, you keep your job. Right. If you make money when everyone else loses money, they give you a firm. Right. If you make money when everyone else makes money, you keep your job, maybe unless there's a downsizing, right? But if you lose money when everyone else makes money, you'll never come back.

35:48 So your incentives are always procyclical. Take the back. Take the next step. Take on the risk. There was an advert just before the dot com bust, and I'm pretty sure the actress in it was Jennifer Connolly. And she was in this m hotel in the middle of the desert. And in comes a guy who's like my age, with the snake skin bag and the leather jacket, and much more handsome than I am, and drops it down on the floor.

36:11 And he says, What have you got for entertainment around here? And she looks at him and says, Any movie you would ever want to see on demand whenever you want it. What's that effect? And he goes, How is that possible? And I think it was a company called Quest. And it came up now Quest. And it turned out they went bankrupt a few months later because we didn't have the tech to do that. Mm. But then once you do develop the tech. We get Netflix. Right. So there are busts which harm the companies and harm the investors, right? Downside risk, that's why you get reward on the other side. But the there are busts that leave behind good stuff. Busts that drive out the old and bring in the new and it's really productive.

36:49 The worst type of bus are financial bus. Cause not only do you bail out the people that really should be paying the cost at the expense of everybody else. This is the book on austerity I wrote a decade ago, right? What you're also doing is your license and ever increase in risk taking. Well Mark, this was great. I don't want to say it's fun because it's hard. Like it's you know, there's stuff about this that's just You know, kinda scary and overwhelming. Right. And you know, you make it sound fun, but like it it's it's hard, you know? I can make a house of horror sound fun. Um and in many ways it is. That's why we love Halloween. So maybe we're living through the economic Halloween

37:29 Mark is a spark plug. He's got my brain buzzing all over the place. I need to take a deep breath to try to absorb his ideas. First to admit to myself that I may be more out of touch than I like to think. The enthusiasm for Trump and MAGA isn't born from thin air, but from decades of economic dislocation that I've been fortunate enough to largely sidestep. I see tech as good and I still think it is, but it's also important to recognize that the tech era hasn't been good for everyone and their ramifications. The relationship with politics and the economy, Mark's area of expertise, it's so tricky. Businesses control their own faith, but only to a point. If the success of the US proves anything, it's that the environment you operate in really matters. Of course, businesses also play a role in creating that environment, and if we take Mark's perspective to heart,

38:22 business leaders may need to be more assertive in shaping that environment. A Halloween house of horror and fun indeed. I'm Bob Safian. Thanks for listening. Rapid response is a wait what original. I'm Bob Safian. Our executive producer is Eve Tro. Our producer is Alex Morris. Associate producer is Mashumaku Tonina.

38:51 Mixing and mastering by Aaron Bastinelli. Our theme music is by Ryan Holiday. Our head of podcast is Leital Malad. For more, visit rapidresponsshow.com.

39:03 Yeah.

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