Moody's Talks - Inside Economics - Dr. Doom, a Stiff Drink, and Deflators

Episode Date: April 29, 2022

Nouriel Roubini, Professor Emeritus of Economics and International Business at New York University Stern School of Business, joins the podcast to discuss the U.S. and Global economic outlook and the threats of stagflation. Full episode transcriptFor more from Nouriel Roubini, follow him on Twitter @Nouriel. Follow Mark Zandi @MarkZandi, Ryan Sweet @RealTime_Econ and Cris deRitis on LinkedIn for additional insight.  Questions or Comments, please email us at [e-mail]. We would love to hear from you.  To stay informed and follow the insights of Moody's Analytics economists, visit Economic View. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Inside Economics. I'm Mark Sandy, the chief economist of Moody's Analytics, and I'm joined by my two co-hosts and colleagues, Chris DeReedies. Chris is the Deputy Chief of Economist, and Ryan Sweet, sorry about that, Ryan. Ryan is the Director of Real-Time Economics. And, hey, Chris, have you noticed Ryan's been kind of trash-talking me on Twitter? Have you seen this? I'm not on Twitter, so...

Oh, that's right. You're not on Twitter. I'm in the dark. We were referencing my tweet last night where I was getting ready for our... stats game. Yeah, yeah, you said you're going to... I said your hot streak's got to come to an end. Yeah, I call that trash talking. Oh, if you think that's right, just wait.

Oh, is that right? Well, I wasn't going to engage because I knew I'd just lose badly if I tried... Oh, no, we'll keep it. Trash talking contest with you. You know, because I, you know, I follow the Thumper principle. Do you know the Thumper principle? You ever heard of this? Rabbit?

Yeah, Thumbie. Bambi. Bambi. Right. You know Bambi? You don't know Bambi? I know Bambi. Thumper said, I believe he said, I think he said this to Bambi.

I'm not sure. If you can't say anything nice, don't say anything at all. That's what he said. You really don't follow that. I know you don't follow that. That's my point. Listen to any of our podcast. I don't follow that?

No, absolutely not. What do you think, Chris? You liked to trash talk on the podcast. I think he's got a point. Yeah, got a point, yeah. Well, we've got another guest. We've got Nouriel, Nureale, Nurel, Rabini. Nouriel, it's good to have you.

Such a pleasure to be with you on this podcast. Did you know that some... Did you watch Bambi when you were a kid? I did one as a child, but I didn't remember that things also. Okay. That was one of my favorite movies, Bambi. I still fondly remember that. Nureel is Professor Emeritus from New York University.

Well, everyone knows Nureole. Let me just say that. I think Dr. Doom applies, and we'll get to all of the doom in gloom. And should I say Nouriel or ask Noreal, are you good with that Dr. Doom kind of a character? Well, usually I say I'm not Dr. Doom. I'm a doctor realist because I'm neither pessimist. not optimist, I try to figure out the world there's going to be. But since I see many downside risk, usually I'm skewed on the downside. That's why. Plus, you know, Dr. Doom sounds

better than Dr. Realist. So that's a... Oh, yeah. Rolls off the tongue. A bunch of better marketing. Exactly. Rolls off the tongue. So you're, you were a long-time professor in NYU, now you're emeritus. You've founded your own firm, which I believe you recently sold, and now you have a new firm. Yeah. And, of course, you've been doing many, many things over the years, you know, obviously very engaged in the discussion around what's going on in the global macro economy. And you have a new book coming out? Yes.

Yes, it'll be published at the end of the year. I finished the draft one now between copy editing, typesighting, and publication takes about six months. So the final draft is there, but it will be published towards December or early January. I'll say. Can I ask, is it, I'm sure it's about the global macro economy and where it's headed, but is that right? I mean, what are you writing about? Well, the title of the book is actually mega threats, trend. And there was a famous book, I think, in the 80s by John Esby, the futurist, title mega trends. That book was about how much technology and other things

going to change the world for the better. This book is instead about all the things can go wrong. And I've become a little bit, maybe too ambitious, because, of course, I'm an economy. So I talk about all the traditional economic and financial risk, you know, that private and public, inflation, financial crisis, you name it. But then I see that around the world, there are other types of risk that have also economic and financial consequences. So there's a chapter, of course, on global climate change and whether we resolved or not using economic analysis.

Another one on global climate change. One about AI, robotic and automation and that threats to jobs and labor income. Another one about the rise in income and wealth inequality beating to populism and threats to liberal democracy. Another one about strategic rivalries between U.S. and China, but not just U.S. and China. But the US and the West and China and his own allies being Russia, Iran, North Korea. Another chapter about the risk of de-globalization. So, of course, there are books on each one of these topics. But the way I think of it is they are all interconnected to each other.

So it's like a 10 by 10 matrix. Every one of these threats affect the other one, is affected back. So I was trying to, in a holistic way, to think about all the things that can actually doom us, not only on the economic side, but also technologically, pandemic, climate change, politics, geopolitics, and they're all interconnected with each other. Well, it sounds like a great book, but it also sounds like you need to have a, you know, a stiff drink between chapters. Yeah, from Dr. Doom, maybe Dr. Apocalypse.

Yeah. Wow. Yeah. Totally for Dr. catastrophe. And that's coming out in the end of the year. At the end of the year, yeah. Yeah. The book is not deterministic.

At the end, there are two chapters. They say there is a road that takes us to dooming loom. And there is another road in which if we do the right things, of course, we can avoid the most of these risks. So the outcome depends on the right policies, of course. Maybe we can talk about that, too, because that would be really good to do. Well, perfect. And, you know, we have something in common that we're both Iranian-Americans, Americans.

Americans with Iranian heritage. Yeah. So you were you, where were you raised? Were you raised in Iran or were you raised? No, no, I was born in Istanbul because my father left Iran for business and he was working in Istanbul. But then when I was here old, we moved back to Iran for about a year or so. And then we moved from there to Israel, where a Persian, Iranian Jewish family. And then by the age of four, we moved to Milan.

And then I told my parents, hello, we've been in four countries in four years. Can we stop somewhere? So I grew up in Italy. That's why I still have an Italian accent. Yeah, you do. You do have an Italian accent. Yeah, because I grew up there and I came to US for grad school after college. So, you know, to come in high school, maybe you don't have the accent, but I came when I

finished my undergraduate studies. So I'm an Iranian Jew born in Turkey, raised in Italy, ended up in US. It's a global nomad. Very cool. But I cannot go back to Iran because, you know, know, being, I used to work for the U.S. government for a couple of years. I'm Jewish. I used to have Iranian passport now, a U.S. passport. So if I were to go there, maybe I get in, but I don't get out. Yeah. At least under the current regime. So you have to go and visit. Great country,

great civilization. But unfortunately, we have with a bad regime in power. Exactly. Well, it's wonderful to have you. And, you know, before we kind of dive into the subject at hand, the economy. And, you know, obviously it was great timing, right? Because we got a bunch of data this week. One of what, one of the data points was GDP. That fell 1.4% in the quarter. And I thought I handed the conversation over to Ryan for a minute or two to give us his sense of that report and give us what, you know, what it means. Right. Yeah. I think overall, the takeaway is it's a little bit misleading because the drop in GDP was attributed to two pretty volatile components of GDP inventories and net exports.

So declines in GDP during expansions aren't, I mean, they're kind of uncommon, but last time, last expansion, there was three times that GDP fell. And in each of those times, it was either attributed to inventories or net exports. So we kind of knew this inventory hangover was coming. We added a boatload of inventories in the fourth quarter last year.

we weren't going to be able to duplicate that. So inventory subtracted a lot. And then the consumer, we're just buying a boatload of stuff, goods. And a lot of those goods, retail sales, are imported. And that's why imports are exceeding exports by a noticeable margin. So overall, it was a little bit of a surprise, but we always knew there was a risk that GDP could fall in the first quarter. So you're saying, you're arguing that these inventory, less of an inventory accumulation and the, the widening out of the trade deficit are kind of one-offs.

They're not more fundamental and thus a negative print. Yeah, I mean combined inventories and net exports subtracted four percentage points from GDP. So the first number I really looked at was real final sales to domestic purchasers. That's the underlining economy. And that was up over 3% annualized in the first quarter, which is an acceleration from what we saw in the second half of last year. So, you know, I think, you know, the economy is slowing, but I don't think it's as bad as the first quarter GDP numbers would otherwise suggest. In fact, I think jobless claims are more telling of the state of the economy than GDP is. And we have jobless claims south of 200,000.

So it's really hard to be overly pessimistic about the economy right now. About the growth rate in the economy. Yeah, yeah, exactly. Yeah. Well, you didn't mention government spending fell. I think defense spending in particular fell a lot. That field felt a little bit weird. too, didn't it?

Yeah. In terms of the size of the decline. Yeah, it was a little bit surprising. We don't have a lot of good source data on government spending. So that one's, of all the components of GDP to forecast, that's one of the hardest. Well, you know, the Bernard Yaras, our colleague who follows government, thorough government carefully pointed out that the deflator for defense spending rose sharply because, you know, tied to oil because the defense,

Department of Defense consumes a lot of oil, as you can imagine. And it's a big part of that deflator. So when you see oil prices spike, like we did in Q1 because of the Russian invasion of Ukraine, that caused the deflator to jump and that depressed, significantly depressed, the real defense outlying number that appeared in the GDP,

which also feels like a bit of a measurement or one-off kind of fact. Yeah, I mean, the economy's, I mean, GDP's going to bounce back in a second. Okay, well, let me ask you this. So what do you think underlying growth is in the economy, GDP? Right now, as of Q1? I mean, if you look at the last several quarter, it's bouncing all over it.

We have a couple quarters north of 6%. Then we had one that fell. We're probably three and a half four. That's year-over-year growth, actually, 3.5%. That's probably more accurate of what the economy is wrong. Yeah. Hey, Noreal, I don't know. Do you watch these data, these, you can see we're,

pretty nerdy about the data, the weekly data or the monthly data. Do you follow these GDP numbers as carefully as well? Or do you have a view on what happened in the first quarter? Yeah, I follow them. Maybe not as closely as you folks do. But, you know, I agree with your overall assessment. You know, some of the components of domestic demand, real private consumption was quite fine, CapEx spending was fine, residential investment was fine, so the negative print was,

as pointed out, inventories and net exports. The net exports with a strong dollar may keep on worsening in some sense, so that one might be a further drag to growth, maybe over time. But, you know, the first quarter of even consensus

was expected to be weaker, about 1%, in part because people, I think, were thinking that the delayed effect of Omicron would show up, more in the first quarter data out and the fourth quarter. And that might have been part of it.

One caveat is that, you know, we first had the COVID and Omicron. Now we have, you know, the Russia invasion of Ukraine and the impact of it, it's only very, very partially into the Q1 number. So we'll have to see how much of that has a negative impact on the second quarter of economic growth as well. And then there are also the shutdowns are coming out of China because of their own zero COVID tolerance policy. They might also negative effect on the supply side, global supply chains. So there may be other types of stagnationary friction, even in the short run that may push inflation to remain high and weak and economic growth.

Yeah, yeah. Okay. Hey, Chris, before we move on, we had a cornucopia of data. and I'm sure the fodder for our statistics game, which we'll get to in a few minutes here. Of all of the other statistics, GDP obviously was kind of the marquee statistic, of all the other statistics that came out during the week, is there one that you would call out as important and want to highlight? So you want to go to the statistics game?

No, well, I wasn't quite gone there yet, but we could, we could, but I was just wondering if there's another one of those statistics this week that you think, would, it's particularly important for people to focus on. So I selected for the game what I think is the most important statistic of the week. But there are certainly, if you want to talk housing, certainly continue to get very strong house price growth number so far. So there's still the residential investment component of GDP was still quite strong. So we could go there if you want, but otherwise I'll. Okay, you're angry to play the game.

Okay. Let's play the game. There's only one correct answer to the most important number of the week. And it's not GDP. It's not GDP. It's not even close. Oh, really? I'll give you a tree.

Okay, hold it. Let me get, this is part of the game, but let me, let me get into the mind of Ryan. The employment cost index? Yep. Ah, there you go. All right. Oh, yeah. This is why I have the trash talk.

I try three off your game. Say, say, Noreal, you see how I got him pegged? I know exactly where he's going. Yeah, you're ready to mind. That's impressive. You know, it's hard really close. Okay, so Ryan, tell us about the ECI, the employment cost index. Well, are we going to play the game?

And I got my mind to change up my knowledge. No, no, no, no, no. Because why is that so important? Go ahead. For the Fed. Because they're laser focused on wages because they're concerned about a wage price spiral setting in, which would keep inflation elevated, raise the risk of a stagnation scenario, which is the worst case scenario for the Fed.

It's a nightmare scenario for the Fed. So they're paying very, very close attention to wage growth. I mean, Powell himself even said Fed Chair Powell recently that the labor market's very tight, but unhealthy. And we're seeing very, very strong wage growth. And that's going to be a concern that it's supply chain issues. That's keeping inflation elevated now. Maybe we transition into a period where wages are keeping inflation elevated.

All right. Hey, Nureale, how worried, and I know I'm kind of getting ahead of myself here, but since we're on the ECI, the employment cost index, how worried are you that we're getting into kind of a wage price spiral where wages reflect price inflation and then the price inflation reflect wages? Obviously, that's a pretty pernicious dark place. You don't want to be there. How big a deal is that? Well, you know, I think it's a meaningful risk because, you know, depending on the measures, of course, that you use to measure wage growth, it's in the 5 to 6% range that is significantly higher than what it should be if you want to achieve inflation rate of 2%. You know, we have inflation at 2 and, you know, potential productivity growth at 1.5. You have to have wage growth at 3.5 maximum in order to achieve 2%. inflation. If you are in the five, six range, that's not consistent with that. And what concern is that there is a very tight labor market. And one is the unemployment rate, of course, at 3.6%. But the other one is a measure they so actually think developed by folks at Goldman Sachs of the gap between labor demand and labor supply. Labor demand, the way the measure it is the sum of employment and

job vacancies, and labor supply the labor force. Now, that gap between the two is estimated to be about 5.3 million jobs, the highest we have had in decades. And that's, if it remains this high, wage growth is going to be north of 5%, closer to six. And therefore, you're not going to be able to achieve an inflation rate of 2% unless there is a massive tightening of a financial condition that would require a recession. That's the point.

The dilemma that the Fed is facing right now is that with statutory shocks that increase inflation and reduce economic growth, the tradeoff required to achieve a soft landing becomes harder. Because either you care about inflation and you tighten enough well above neutral to prevent inflation expectations for becoming the anchored, but then

risk a recession, or if at some point then you worry about the impact on growth, given that one mandate, you don't tighten enough. You may have the anchor of inflation expectation and then you end up into a bad equilibrium. Now, that gap in the labor market is huge. Those who believe in the soft landing story tell you the story that some of the gap is going to be reduced because labor force participation rate is going to rise significantly. So labor supply is going to go up. And if you tighten monetary policy, you reduce labor demand,

but the margin where you reduce it is job openings as opposed to employment. And if you can narrow that gap from 5.3 to about $2 million plus, then wage growth can go towards 4% or less, and then you have the soft landing. But it's very knife edge because it requires, in the best scenario that growth is below potential, around one-ish, for over a year, for that equilibrium to be achieved.

And even in that case, it's not so obvious you're going to achieve the soft landing. Because if inflation is sticky, you may have to push Fed funds rate that more than three and a half towards 4% to push inflation down enough. And that leads you to a recession. So whether we get a soft landing or a landing is very knife edge. And of course, there is a spectrum of use between those who believe that the Fed is going to be able to make it and those who believe that no, we're not going to get a recession. Yeah, and I'm going to ask you point blank right now. Where are you in that spectrum? Well, I'm more on the on the very side. I think that I see a bunch of, first of all, of stockflationary pressure continuing. First was COVID, now is Russia, Ukraine, now is China,

and my piece speaks about medium-term forces that are statulationary. So that tradeoff becomes harder where you have more inflation, you have lower growth than otherwise. And it's not just a problem for the Fed that we have the same problems of high inflation is flowing growth in Europe, in other advanced economies, the only exception being Japan, where inflation is still quite low. And of course, there is inflation also many emerging markets. So we're going to be also in a period not just a Fed tightening, but it's going to be tightening by the Fed, by the ECB, by the Bank of Canada, by the Bank of England, the Riggs Bank, pretty much any advanced economy and many emerging markets,

so that global liquidity tightening is going to have a globally impact and spillover effects. And I worry that the process of wage price determination is becoming sticky enough that the parts that the Fed was having for what CorePC will be this year, next year, into 2024 is too optimistic. So for them, the dot plot suggesting that we reach 1.8 at the end of this year and maybe 2.5 by the end of next year, is already out of the window with 50 basic points increases in May, June, maybe July. By year end, you're already at neutral, and that may not be enough. And if you have to go by next year towards 3 and a half four, then I think the risk of a hard landing becomes great.

So I worry about it. people are couching their views on recession risks in terms of probability. So, for example, I would say, if push comes to shove and someone said, what is the probability that the economy enters into recession over the next year? I'd say probably about a third. They said, well, what's the probability of recession, the economy entering recession over the next two years? I'd say probably even odds. Do you think about it in those terms? Do you have some probabilities? Yeah, yeah, I would agree.

Probably over the next 12 months, the Fed tightens, but is not enough to push into recession. That's why the probability might be only a third. But if I were to be right, and I might be wrong, that the wage price process is too sticky, to be reduced towards 2% with only a moderate fat tightening, and then the Fed were to go towards three and a half, to 4%, you know, by the end of next year, then into 2024, the risk of a recession

becomes at least that even odds. Yeah. Yeah. Okay. Hey, Chris, remind me, what are your odds for recession over the next year and over the next two years? Over the next year, I would, not too far from you. I would say probably 40%. Over the next two years, I'd probably close with 60%. Sixth, a little higher. So you're out doing Dr. Gloom, you're even gloom. than Dr. Baum. I'm just pointing that out. And Ryan, what is your odds? I'm being realistic.

I said over the next two years, 70%. Oh, so we're going in. That hard landing is, or soft landing is not going to be, they're not going to be able to pull off. Okay. I didn't want to be too doomish, but I see you guys are. Yeah, they out did you, Nehreal. Hey, before we play the statistics game,

I want to go back to something you said about the labor market, because, you know, you pointed out that labor-supplied demand kind of gap analysis. Yeah. And, you know, one thing that I can't get my mind around is, you know, if you look at that, you'd say, oh, the labor market is at full employment, tight as a drum, you know, nowhere to go here. But we are still creating well over half a million jobs per month, which we've been doing for more than a year.

We did it in March. We'll see what happens for the month of April next Friday. How can the economy be creating so many jobs? if the economy is at full employment? I can't kind of square that circle. We may be close to full employment, but we may not get full employment. But I think that what, as I said,

those who worry about the times of the labor market are concerned is that the number of job openings is huge still on top of employment that is growing. But even that increase in employment is only marginally putting a dent on those job openings. And labor supply is improving. You know, labor force participation rate, as we know, drop like a stone is recovering, but it's recovering only very slowly. And there's this debate about whether this great resignation is more of a temporary phenomenon

or more a permanent phenomenon. And I'm in between. I don't think it's totally permanent. There will be some increase. but maybe not enough to increase labor supply. So I think that tightness in the labor market is going to remain with us. And that's going to keep wage growth higher

than necessary to achieve the 2% inflation rate. So we may not quite be there at full employment, but we're pretty darn close, no matter how you cut it. That's for sure. Yeah, for sure. Okay. Let's play the game.

Just to remind the listener, the game, the statistics game is we each, put forward a statistic. The rest of the group tries to figure that out through questioning and clues and deductive reasoning. The best question is one that is not so easy that, you know, Ryan gets it.

You know, that we don't want that to happen. And not too hard that, well, you know, no one's going to get it. That I can't. I wasn't going to say that. And a bonus, if it's, you know, apropos to the topic at hand.

And, of course, we're talking about the economy. so in the outlook. So that's kind of wide open here. And a lot of statistics this past week. So let me, let me, and Nuriah, I'm not going to go to you first because, you know, and you don't have to play the game, Norel, only if you want to, only if you want to. Let's go to, let's go to Chris first. Chris, what's your statistic of the week? Well, my statistic was 4.5%. 4.5%. Is that the ECI year over year? That is the ECI. That is the ECI. Yeah. But I'll give you a backup if you'd like.

Well, that would have been too easy, wouldn't it have, Ryan? That would have been a little... I gave it the year over year. Okay. You probably were thinking about the... Yeah, quarter of a percent change. One point four is the... But it is the most important statistic of the week.

There you go. For all the reasons we gave. But I'll give you a backup. And this is a trio. 0.6%, minus 0.9% and minus 0.3%. Does it come from GDP? Yeah.

All right. Say the three statistics again? 0.6%, minus 0.9% and minus 0.3%. Are these contributions? No. I think, I think... Okay, go for it.

Well, hold it. Was it from the GDP report or from the monthly consumption? It's the monthly consumption. Okay, so... All right, so the 0.6 is the real increase in consumer services spending. The minus.9 is probably durable goods spending. Correct. And the minus point three is non-durable goods?

You got it. Oh, very nice. Nureal. Nureal. What do you think, Nureale? Yeah, it's a lot to be... A little weird, I'd say. Hey, where's the cowbell, Mr. Sweet?

So, Nureole, I forgot to tell you, if you show, you know, above average... game acuity, you get a, you get a cowbell. So that was a pretty weak cowbell, I'll have to say. Okay. Can I provide this statistic myself? Oh, hold on one second, though, before you do that, because you're next. But I want to, I want Chris to explain, you know, why. You know, why did you pick those statistics? What's going on? Well, we mentioned consumption actually is supportive of GDP. So consumers are still spending despite their confidence. But they're the nature of spending is changing. We are shifting back towards more services, less durables, certainly as a consequence of the pandemic, but that also may have some implications for inflation going forward given that we've seen much of the inflation in the durable sector, as we've talked about previously. So less durables, more services, unless we get the type of wages that Noreal

is talking about, that should help to calm some of the inflationary pressure. Hey, here's a factoid for you, which I found quite interesting. If you look at overall consumer spending, real consumer spending, since the pandemic hit, so go back to March of 2020 through March of 2022, the last data point. Average annual growth is 2.4%. If you go in two years prior to the pandemic, real consumer spending growth was 2.3%. So it's right, you know, we're kind of like right on trend. You know, consumer spending is exactly where you would have expected it to be if there had been no pandemic. I found that I find, you know, obviously the big shift, as you pointed out. Right. And it's starting to shift back. But, you know, but consumers have been doing what they've always been doing, you know, at least. All right. Noreal, you're up. You're raring to go. I can tell. You see that? He wanted to go before I even given the green light. He wanted to go. All right. Now I'm nervous.

Okay. My statistics is 3.6%. But the easy answer that is the unemployment rate is not the one that I wanted you to get. There's a different 3.6%. Another 3.6. Something that goes beyond the U.S., so to give you a hint. Oh, okay. 0.6%.

What did you say, Ryan? No, I like going international now. Oh, yeah. It came out. It came out this week. About a week ago or so. I would say, you know, was slightly more than a week, I would say. But it's recent.

So it's not Eurozone CPI. No, it's higher than that. It's something global. It's not something related. So I'm a global macroeconomy, so I know more about global variables than domestic. Sorry about, I'm coughing. I apologize for that. Is it a growth, it's growth rate, a growth rate?

It is. It is. Is it real economic growth? Yes. Is it real GDP growth? Yes. Is it the IMF? The forecast?

Yeah. That's what I'm going to say. Yeah, is that IMF. That is unfair to the max, because I took him down the path and then you, You came in and cherry picked the answer. Don't you think? I don't want to say it. It was a team effort.

Let's say team effort. It's free riding on what Mark was getting to. Yeah. That's that word. They're forecast for this year of growth from 4.4 to 3.6 globally. And also next year's growth is going to be only 3.6. So by global standards, mediocre, let's put this way. And inflation, of course, has been a forecast.

revise upward. So real global GDP growth in calendar year 2022, according to the IMF is going to be 3.6. And that's kind of sort of- Calendar year 2020 as well. Oh, both years. Both years? Oh, I mean, okay. Oh, interesting.

And what's potential growth, GDP growth? Is it about that? I think that globally is higher than that. It's around four and a half or so. Okay. Because the market markets are growing much faster potential than advanced economies. Because it depends on if there's market dollar-based or PPP-based. Yeah. Okay. So that's below you, so the IMMet is saying below potential growth. I have to check exactly what's their definition of potential. But let's say it's close to below. Certainly a significant, I would say, slow down compared to their January for a cast. forecast was 4.4 for this year, but because of what happened in Russia, Ukraine, among others,

they are revising it downward and revising upward, their forecast for, of course, inflation, but so does everybody else. Yeah. Do you, does that feel, how does that strike you? Is that kind of consistent with your view of growth this year? I think it's a reasonable estimate for this year. The revisions, of course, I mean, for Russia and Ukraine, they, expect a total free fall, significant drop in growth in Europe, because proximity to Russia, Ukraine, because of greater reliance on energy and natural gas, because of the trade and financial linkages, and even the impact on consumer and business sentiments. Some spillovers also to Asia, slow down of growth in Asia, in part because slowdown of Europe implies less

exports from Asia to Europe, in part because tightening of financial condition by the Fed affects Asia, EM, in part because what's happening in China is slowing down growth in China, that affects growth throughout Asia. And the rise in commodity prices is quite negative because most of emerging Asia tends to be a commodity importer as opposed to exporter. The commodity exporter tend to be, say, Middle Eastern oil exporting countries. So it's a weakening of the global. It's a weakening of the global economic output. In a stackflation in direction, revision upward in inflation expectations and revision downwards in growth for a custom expectation.

So not the speculation, but stackflation in terms of interaction. Got it, got it. And I do want to come, Brewer, you definitely coming back after the game and talk a little bit more, talk a lot more about recession stackflation. But Ryan, what's your statistic of the week? 5.2%. 5.2%. Hmm. It's a statistic that came out this week.

It did. We've already talked a little bit about it. So I have a backup if you wanted. Is it one of the statistics we've already talked about? One of the reports, yep. One of the reports within. It's not the east back to the ECI, is it? Oh, it's the ECI.

Core PC? Nope. It's in the ECI. It doesn't get as much attention as it should, but what's the 5.2% Is that year over your growth for private sector workers excluding bonus pay?

Are you like bugging my emails? How did you get that? I know for sure you would not get that one. Oh my gosh, I got it? Yeah, okay, where's that cowbell? Oh, here's the cowbell. Oh, I am extremely...

Nouriel, I am... I'm deep in his mind, though. I got him nailed. I got him nailed. He thinks he's so smart. Oh, my gosh. Either you're a mind reader or you know every statistic under the sun. That is so funny.

That's my go-to number. Do you see how I did that, Ryan? You need to take a lesson there. You see no hesitation, just, you know, methodically. You're a laser-focused. Okay. Why is that so important? Why do you pick that one?

I mean, that's... So incentive pay, which is captured in the overall ECI, can be very volatile. So when you strip it out, this is kind of like wages version of the core CPI. You take out the volatile components, and that's what we have with nominal wage growth for private workers north of 5% year over year. It's very strong. We only have data going back to 2006, but it's the strongest that we've had since 2008, on record since. We talked about this in the past, but just to get it out there, you know, the employment cost index is a quarterly series from Bureau of Labor Statistics.

and thought to be the quote unquote best measure of wages and compensation because it controls for mix, occupation industry mix, and other measures of wages more or less don't. So the average hourly earnings, which comes out with the monthly employment report, that has no control for a mix. And right now that's all juiced. I think that's almost 7% year-over-year or something like that. but the 5%-ish, which we're getting from the ECI, feels like that's kind of underlying wage growth.

Correct, yeah. Would you say? Right. Yeah, I don't even pay attention to average average. Yeah, which is obviously below inflation, so real wages are declining. Correct. All right.

Very good. I took great pleasure on that one. I've got a lot of statistics. I've got a lot of good ones. I'm a little nervous because I, you know, I might give you too easy one. What if I give you one, if it's too easy, I'll give you a hard one. Is that okay?

That's fine. Okay. And the easy one is 6.2%. 6.2%. It's a statistic that came out this week. Is it housing related? It is not housing related. No, indeed it's not.

Oh, I thought this was going to be easy. Okay. It goes back to the consumer related to Is inflation? What is it? Is inflation related? Not inflation related, no. Came out today?

Savings rate? Savings rate. Personal savings rate. That's a good one. By the way, I think if I did my look back correctly, that's the lowest saving rate since 2013.

That's the lowest rate since 2013. So that means consumers are now starting to spend down a bit of the excess savings that they accumulated during the pandemic. Still quite prodigious amount of excess saving, by our calculation, $2.6 trillion still out there in excess saving, but it is now starting to roll over a little bit. Hey, Nehryl, let me ask you about that.

How do you think about that in the context of the doom and gloom? During the pandemic, consumers sheltered in place didn't spend saved. And, of course, there was a lot of government support. A lot of that got saved or fair share got saved. So you got all this cash, you know, out there. sitting in people's bank accounts, doesn't that provide a nice cushion here to consumers and spending and the economy more broadly allow it to kind of navigate through without going into recession? Do you have a view on that? Well, you could make that argument, but you could make

the opposite argument by saying that the biggest problem we're facing right now is the rise in inflation. And that rise in inflation is a combination of, on one side, these supply bottlenecks And there's a variety of them, from COVID to Russia, Ukraine, to what's happening now in China. But then on the demand side, of course, we had extremely loose monetary and fiscal policy. And the fiscal part was a massive transfer to the household sector that led to a build-up of excess savings and pent-up demand. And now that we're reopening, that leads to a significant robustness in consumption. And the consumption number has been quite strong.

So if you worry about inflation and overheating of the economy, keeping inflation high, having those excess savings that can be run down if it's another $2.6 trillion. And actually, if the great resignation continues, people who are out of the labor market, we have those savings, we have to spend them to live. That puts a further pressure on demand. So you have supply bottleneck, you have strong demand because of loose market and fiscal policy. and the risk then now a hard landing becomes greater. So I see it as a risk factor rather than a positive one. Got it. Chris, how do you think about it?

Do you have a different perspective? I actually think of it more as a buffer as a potential positive. In the face of higher inflation, right, the consumers have certainly some savings to draw on to pay these higher prices, at least for a while. Now, demographically it differs, right? I think that's a very important point to make. So certainly these savings are really concentrated at the higher end.

So it might provide that buffer, but only for a select number of households. You still have fragility at the bottom end where people are actually running out of savings at this point in the face of rents and inflation, prices on gas or food. Yeah. You know, NURIL, we calculate this concept of excess saving across different demographic groups based on data from the Fed's financial accounts and distributional financial accounts, survey consumer finance. It's a bit lag, so we don't have Q1, but looking at this data through Q4 across income group, what's really interesting, I found interesting, is that the decline in the excess saving already has begun, but guess which groups are using that excess saving most quickly?

I would have thought the low-income groups, right? You would have thought that. You know who it is? It's kind of the high middle, like the 60 to 90, and that's because they didn't really, they didn't get government support or a lot of government support, and they weren't able to shelter in place like the high-income households were, so they had much less coming in, And they are now spending down more of that excess saving a lot more quickly. So I found that pretty interesting.

Yeah, it is. Okay, I want to give you one more statistic. It's a hard statistic, but maybe you'll get it fast. But just because I think it's a really important one, a really cool one that came out this week. 82 basis points, 82 basis points. And I'll give you a hint, Chris should get this statistic. In Nouriel, we have a running joke here. Chris only

$1,000 statistics. What is it? The rise in mortgage rates since the beginning of the year? No, no. That's been a lot. It was 3% at the beginning, and that's five.

Oh, okay. It's a home ownership, vacancy related? Yes, indeed. Yes, it is. Yep, homeownership vacancy rate. Was the homeownership rate? No, that didn't go up that much.

No, that is the home ownership vacancy rate. Oh, it is? Oh, vacancy. Oh, correct. Yeah, right. If you look at the vacancy rate, across homes, occupied housing stock, not for rent, occupied housing stock, 82 basis points.

That's a record low going back to World War II. Goes to the housing shortage, you know, very severe housing shortage. And the house price gains we've been getting up until now. But anyway, okay, so let's, Nareal, before we kind of dive in deeper here, can we define terms? You know, I think we all know what a recession is, sort of. But how do you, because you, in your guardian piece, which by the way, I recommend everyone, it was a great piece this past week in the Guardian. You talk about stagflation and you mentioned that concept a number of times in the conversation so far.

How do you define stagflation? How do you think about it? Well, there are maybe two ways of thinking about it. True stagflation will be a situation where you have inflation rates that are significantly, higher than the target of a central bank together with an economic recession. So in the 1970s, given to all shock, we had the double digit inflation, and we had two severe recession in 74, 75, and that double deep recession 80, 82. So that will be a true stagflation.

The other way to think about stagflation will be stagflationary shocks, that everything else equal, increase inflation and reduce economic growth, but they don't lead necessarily to a recession. So short of a recession, you have a significant slowdown of economic growth. And I would say that Russia, Ukraine is such a stuck treasury shock. That's what the last led, the IMF to revise upward. Therefore, a forecast for inflation in advance economies of emerging market this year, and significantly revised downward their growth. forecast as well. So that's a something goes in a stackflation direction, as opposed to

a true stackflation. So in the United States right now, 3.6% unemployment, 8% CPI inflation, you wouldn't consider that stackflation, or would you? No, I would not consider that the stackflation. I don't know. The editorial board of the Wall State Journal, the bit biased. They said that Q1 data were stackflation because you had recession and inflation at 8%. But But we know that there was partly a technical reason why we have had that negative growth print and you need at least two quarters of negative economic growth to have a definition of a recession. But I would say, suppose that we are in a scenario in which inflation remains stubbornly above the Fed target, the Fed tightens in order to push it lower, and that causes a recession.

And the data suggested in the United States, any increase in the three-month moving average of the unemployment rate of at least 0.5% leads almost inevitably historically to a recession. Then you could be in a situation. You're speaking before about the probability of a recession in the next two years, whether it's 50 or 60 or 70. If you end up in that recession, most likely you end up in that recession together with inflation being above 2%, whether it's going to be 3 or 4, I don't know. But I would say if you have a recession, you have inflation above target.

That's a staculation. It's not as bad as the 70s when inflation was double digit. And then you had the really severe unemployment. But technically speaking, that outcome would be a true speculation. We're going to end up in a recession and you have not achieved your inflation target. So that's the risk. Once we're thinking about the recession, most likely we have to take. about the stockulation or a recession in the next couple of years.

Unless the Fed pushes the inflation down to 2% and causes the recession by doing that, you achieve inflation at 2 and you have a recession. But I think it's more likely that if inflation is persistent and you're trying to achieve 2, it stays above 2 and then you have a recession and that's a speculation. Okay. So just to paraphrase, if we have very slow growth and or a recession, recession, but inflation remains persistently high, you know, above that 2% target in a meaningful way, like 3, 4%, or 5.

But persistent, not, not, you know, it may come down, maybe elevated, but come down as the recession plays out. But you're saying it remains persistent even with the slower growth. That's a stackflation in your mind. Well, a pure recession and inflation, say, 4, I would call it the speculation. Okay. If growth goes to 1%, technically is not a recession, it's a growth recession. Yeah.

The growth below potential, again, will be a stagflationary direction, technically speaking, you know, this question of semantics of how you want to define the stagflation, of course. But it will be an outcome that is stagflationary, I would say. Yeah. Yeah. Okay, that makes sense. I mean, I've kind of the way I've thought about it is that for there actually to be staggflation, that has to be a period of persistently high unemployment and persistently high inflation.

High inflation is anything above, you know, close, above two, certainly closer to the three or four, an unemployment that's, you know, four to five to six, not not below four, something like that. Yeah. It has to be a rising unemployment rate that is associated with at least two consecutive quarters of negative economic growth. And we know that even a 0.5% in the unemployment rate would lead to that recession. Once you start going up with unemployment rate, it goes much higher.

So yes, even if it's a mild recession and the unemployment rate goes from 3.6 towards 5ish or 6ish, and you have inflation around 3-4, that's not a typical recession because during the global financial crisis, we had severe recession and we had low inflation and for a while we had deflation. meaning inflation was below 2%, and for a few months was actually negative. This will be instead a staccflationary recession because inflation for the first time will be in a long time well above target while you do have a recession. Yeah, okay. And normally, normally, you know, normally if you have an overheating of the economy

and you have inflation high and growth high, recession might be associated with a tight monetary policy that pushes the culminary recession and pushes inflation below target, but that's when you have a negative aggregate demand shock through tight monetary policy. But if you have a negative supply shock that reduces growth

and increases inflation, and then you have tight monetary policy, you end up with a recession and inflation is still above targets. That is a cyclational recession. So to get cyclation, you need to persist in negative aggregate supply shocks.

That is the worry that I have. Yeah, that's a great point. And it resonates with me. You're saying, look, we got nailed by the pandemic. That's a massive supply shock to the global economy. We got nailed by the Russian invasion of Ukraine. That's a massive supply shock to the economy. No surprise then. We're in a situation where we're kind of grappling with the potential for a stagnationary environment because of the supply shocks. And then you go on to say that, look, there's a lot of other things out there that feel like, like they could be significant supply shocks. Yeah. Yeah. Yeah. Those are more immediate term forces. They're not in the short run.

But if I take, I have a view that we are at the end of this period of 30 years of great moderation where inflation was low and growth was robust. I think we're going to move gradually in the direction of a period of what I would call great inflationary instability. And again, I'm not talking about hyper-inclair. inflation or not even about double-digit inflation, but if you had inflation going from two to five percent advanced economies, that has massive consequences, not only for the economy, but also for financial market, like bond yields, credit spreads, the stock market, you name it.

And, you know, in my latest piece I've written, it's not just on the garden, it's the piece on project syndicate that is syndicated around the world. I speak about 11 potential sources of negative aggregate supply shocks over the medium term. I don't have time to go over all of them, but briefly, no, de-globalization and protectionism, reshoring of manufacturing and disruptions in global supply chains, aging in populations, both in advanced economies and emerging markets, restrictions to migration from south to north,

increased decoupling between U.S. and China, global climate change, pandemics that may come back, cyber warfare, income and wealth inequality leads then now to fiscal policy to help the workers, the wage earners and those left behind. Geopolitical conflicts, today is Russia, Ukraine, tomorrow could be U.S., Israel, Iran, could be North Korea, could be eventually a conflict on Taiwan, and you know the role of semiconductors there. And finally, we're weaponizing the role of the US dollar by imposing trade and financial sanctions against our strategic rivals. And then they're going to decouple from us. So we may be in a world that is where, you know, financial links, international reserve currencies,

the role of the dollar, may we can, that may weaken the dollar, the inflationary. So these are all medium-term forces that in my view might be stipulationary over time. Yeah. Even a few of them would be important. If more of them occur, Those are all things that increase cost of production, reduce potential growth, and they are a statuary. Now, there's a lot there, and we obviously can't go down each one of those. And that sounds like a book, doesn't it? Well, there is a part of my book, there are a couple of chapters exactly on this topic.

There are these two chapters of the book on the risk of a return to inflation and stocklation, yes. Yeah. And that also demand factors that in my view can lead there. But there are also supply factors as well. But the list you gave, and I found it impressive that there were 11, I would have stopped with 10, just saying Noreal, just a nice round 10. Would it be nicer 10?

Yeah, like the 10 commanders. Or the 10 plagues, right? 10 plagues of Egypt. There you go. That's right. Exactly. You know, they weren't rank ordered. Were they in your mind in some way in terms of chronology?

or terms of severity or likelihood? No. No, because, you know, when we speak about the globalization, of course, it could be extreme, could be globalization, could be globalization, could be globalization, you know, people are using different terms. It's a direction. I think that we're going in a world where there'll be more restriction to the trading goods, in services, in the movement of capital, the movement of labor,

in the trade in technology, data information, how severe is going to be depends on lots of factors including politics and geopolitics. So that can be as important or more important than, say, global climate change. And global climate change is also stackflationary for a number of reasons I can discuss if needed. So it's not ranking them in order of importance. Each one of them could be more severe or less severe depending on a bunch of things. Let me try to identify one by asking. Yes.

Which one of those do you think is kind of not well appreciated as a risk? I mean, all those are risks that, you know, that people have thought about, you've thought about, you've written about, you've talked about, which one of those is least appreciated in your mind in terms of being a threat and could lead to kind of that stagflation scenario that we've been talking about? Well, maybe the one that is least appreciation. this paradoxically global climate change, because everybody's worried about global climate change

and the damage that global climate change can induce and what can be done about in terms of mitigation, adaptation, and you name it. But I think that if you think about the inflationary impact of global climate change, there are many channels that are important. Channel number one is that we rightly want to decarbonize and we've been bashing big oil and producer of fossil fuels, and they have underinvested massively new capacity. The shareholders, the banks, everybody saying underinvest.

But unfortunately, the increase in the production of renewable energy has not been sufficient to compensate for the fall in the capacity in fossil fuels. The man is growing because we're returning to global growth, and therefore there is a structural imbalance between demand and supply. And therefore, that's going to lead regardless of what's happening in Russia, Ukraine, to a super cycle in energy. So that's one of the consequences of global climate change. Secondly, global climate change leads to whether it's rising sea levels as opposed to hurricanes, as opposed to droughts, as opposed to fires, to significant damage in economic activity. And specifically in agriculture, I mean, people worry about Russia, Ukraine, an impact on food prices.

but there is a massive drought in the west of the U.S., from the Colorado all the way to California. And it's not just the Middle East, it's not just sub-Saharan Africa. And as you know, two-thirds of all fruits and vegetables in the U.S. and nuts are produced in California. And you need for the cattles, you know, having water, and Lake Power Lake Mead are at 100 years low levels and so on. So some farmers in California prefer to sell their water,

water rights rather than producing food. So that's another channel. And the third channel thing is important is that as we move to renewable energy, we need actually to use energy to produce, say, electric batteries and things of that sort that require lithium, palladium, lots of aluminum, and lots of stuff that uses energy. So there's a risk of what people refer to as green inflation that actually derives in oil and energy prices increases the cost of production of those inputs that are necessary for going in direction of green and renewable energy as well.

So these are all channels that are, I'll just say, statulationary that I don't think are well considered. People really worry about global climate change because, you know, it's bad for the environment, it's bad for the economy and this and that. But there is an inflationary impact that over time becomes severe on food, on production of goods and services, on energy, on lots of. other things, that leaving aside that actually a huge part of the stock of even real estate could be damaged.

I mean, if you're in Florida, everything is moving there. But what happened in Miami with that building collapsing, in my view, is a canary in a coal mine of how rising sea level and hurricanes can destroy a huge part of the capital stock, whether it's commercial or residential real estate over time. And now, insurers and investors in real estate are start to think about how global. global climate change may impact the value of those assets and how much they could become stranded assets. That's why central banks are worried about climate change, about the financial stability. Some of the impact might be on not just energy becoming stranded assets, but parts of real estate

becoming stranded assets. That's another thing that has to be considered, for example. Yeah, very interesting. So the transition costs from getting here to there certainly raised the supply side event. And I guess the hope is that this transition occurs over a long enough period of time that it doesn't become, you know, a macroeconomic event, or at least not to a significant degree. You know, insurance rates rise, you know, people move in response to that. We go from fossil fuel to green energy over time, but, you know, I think that's the hope. It's the hope, but, you know, going from fossil fuels, the renewable requires, one, providing, you know, by the administration that this bill, but better plan, a trillion dollar, and half of it was for incentivating and subsidizing that transition. That money is not there.

So both the U.S. and Europe have a goal of reducing that greenhouse gas emission by 50% U.S., 55% by the end of decades. the thing is mission impossible. Two, you need to have carbon taxes that are at 20 or 30 times higher than the average globally that you have right now. And with energy prices rising and oil fuel prices rising, the idea of increasing now carbon taxes is totally politically impossible. If anything, actually, many countries are cutting fuel taxes as a way of reducing the impact on households of this spike in energy prices.

So there's a lot of talk about decarbonizing and renewable energy, but we're doing very little about it. And therefore, that's one of my concerns that there's too much talk about it, but it's mostly rhetorical. And we're not going to achieve those targets. And the planet's going to become, you know, one and a half to two percent is mission impossible. We'll be lucky if we get to three. And there's a risk of a cup of three. And three is a disaster for the global economy over the medium term. Okay, I think we need more than one drink between chapters, just saying.

Yeah, I mean, there's a full chapter of this issue in my book. Yeah, I know. The solutions are too costly to be politically acceptable. Mitigation, this net zero mission is a mission impossible. Adaptation will be too costly. Say, in Manatam, they have a plan to build levees near the Verrazano Bridge to avoid the rising sea level from destroying Manhattan. The project alone would be $125 billion.

It will take 20 years. And even if you protect Manhattan, if the sea level rises, then the water has to go somewhere. It's going to flood New Jersey, shore, or Long Island, right? And there are thousands of cities. Oh, well, okay.

Half of world population. So mitigation doesn't look likely. Adaptation is just expensive, and geoengineering is a freak sign so far. So it's easy to talk. talk about net zero, achieving it is much harder. The frustrating thing, I think, for economists, is I think we know what the answer is, and that is just raise the price of carbon, please.

Do it fast. It'll work. Yeah, so you need gasoline at $10 or $15. Yeah, well, maybe not immediately, but, you know. Yeah. Anyway, hey, I do what, I know we're running short of time. I have two other questions for you, though. One is going back to recession, stagflation. What indicators do you look at to gauge, you know, where the economy is headed and what the probabilities are of the economy going to recession or stagflation?

Now, you know, there's been a lot of debate discussion around the shape of the yield curve. I'll just throw that out there. But are the, do you, what do you feel about the yield curve or what other indicators are you looking at to try to gauge where we're headed? Yeah, the yield curve has been a reasonably good predictor, but not a fair. perfect one. And it depends also which part of the yield curve you're looking and how inverted is and for how long and you name it, with brief inversion, but it's not very inverted right now. I think that the important thing is going to be, first of all, to look whether there's a persistency of these negative supply shocks. You know, if China keeps on locking down more and

more, that's going to have global impacts on global supply chains. If this conflict in Russia, Ukraine gets to the point in which, say, you have a full shutdown of exports of natural gas from Russia to Europe. I think the folks that J.P. Morgan said, you could have a doubling in almost a doubling in oil and natural gas prices in that extreme scenario, if it happens all at once. Those will be severely stagnationary. So those are factors that are on the supply side. And then we have to monitor very much what happened is to wage inflation.

If there is a de anchoring of inflation expectation, if this wage growth is in a 5, 6% range and is not falling, if these measures of the labor market gap between supply and demand, the tightness that doesn't go away, I think the risk that then wage inflation remains high, price inflation remains high, and then inflation being higher than wage inflation erodes on real incomes that eventually also slows down demand. those are all variables that are worth considering. Got it. Got it. Okay.

So we're going to end the conversation in a bit different way. So, you know, you've made a really strong case for, you know, the threats out there to the economy and the economic expansion and the possibility of recessions and stackflation. How – take the other side. If you're wrong, why are you wrong? What could make this turnout better, much better than you think it will turn out? Well, there are some cyclical factors and there are some that are more secular. On the cyclical side, maybe the Fed is either good enough or lucky enough to pull a soft landing. And that depends very much on the price wage mechanism and how much there is a de-anchoring,

not only of inflation expectation, but also how much there is a wage price spiral. And one could make arguments one way or another, but one could argue that things are going to end up with a soft landing. The second factor I spoke about many statuasionary, how to say, trends in the global economy. But of course, those are optimists, are thinking about technology and technological innovation. One increases the economic pie. Two, reduces the cost of production, a variety of all the new goods and services. So the optimist on growth, on productivity growth and on inflation remaining low would argue that technological innovation is both deflationary but positively deflation.

like a positive aggregate supply shop that reduces cost and increases the production output and productivity. So over the long term, I think that that might be true. But first of all, we don't see yet the impact of these robotic automation, AI, and so on, in the macro data. They're not yet in the productivity data. It's hard to see that. two, it leads to significant disruptions. And I have a whole chapter in my new book about what's the future of jobs and of labor income. And it's not just the manual jobs.

It's not just the cognitive jobs. There are extreme scenarios in which even the more creative jobs, even your job and mine may be eventually done better by an AI or machine learning. Oh, wow. Maybe you and I are better than AI today to predict what the Fed will do. Maybe tomorrow and AI takes all the speeches, all the data, and understands the reaction function that fared better than you and I do. So even economic analysts might become, may become, how to say, obsolete. You cannot rule it out, right?

They already some financial reporting of the- Well, let me say in my lifetime, I don't think that's going to happen to real. I don't think so. Maybe in Ryan's lifetime. That's possible. Yeah, exactly. We're not going to obsolete, but maybe Ryan will be. Maybe Ryan, yeah.

Yeah, hopefully you're saving. Hope you have a higher than a 6.2% savings rate. Yeah. So I worry that actually innovation, AI, robotic, on one side, increases economic pie. But as we know, is also increasing inequality because it's capital-intensive, skill bias, and labor saving. So if you own the machines and a robot, you do well, if you are in the top 10, 20% of, the distribution of skills, maybe you still become more productive, but everybody else, white color, blue color, their jobs and income gradually is replaced by the machine.

And that's going to lead to a backlash, the same way in which the rising inequality driven by some of the aspects of trade and globalization led to a backlash against globalization. You could have a war against the machines. So you cannot rule it out as well. Well, I found it very informative. I asked you to play the other side of the coin. You did it admirably for a little bit of time, but you just couldn't help yourself. Right back to the dark.

Hey, Dr. Dole is there. Yeah, yeah, yeah. It's like I can't get beyond that. Yeah. But I, you know, I'm telling you, I hear you, in all the things that you brought up are really good points and obviously challenges. And we always have challenges. But at the end of the day, you got to admire the ingenuity of the California. capitalist system and the ability to adjust and respond to challenges. And, you know, particularly the

American capitalist system, I mean, if you can figure out how to let people make money, they figure out how to solve problems. So again, going back to climate change, just put a price on the carbon and people, good things will happen. You know, people will figure it out. So, you know, I, that's the optimist in me that, you know, when push comes to shove, we, what's that old adage that from Winston Churchill about Americans, he said something like they try everything and then ultimately do the right thing. You know, so it's a lot of bad effect.

You know, I just keep going back to that. I feel like, you know, we'll do the right thing. But anyway, it was wonderful to have you. I really appreciate you taking the time and providing your perspective.

And I wish you the best of luck with the book. I'm definitely going to buy it. And, I will definitely have a bottle of whiskey or vodka. That's what's going to say. You know, I'm going to have a drink, at least one drink per chapter. Yeah. So thank you, Nuriya, I'll take care.

Yeah, great pleasure being with you all. Thank you. Thank you. And to the listener, thank you for attending this week's podcast, and we'll be back with you next week. Take care now.