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But we've got to de-escalate before we can move forward. So that is the Secretary of Treasury with a really welcoming announcement in my view. I don't know who wouldn't welcome it. Today's going to have doesn't sound like anyone blinked.
More looks like China. But the fact is, we're going to meet in Switzerland. We'll talk about de-escalating before even talking about specifics. What could that mean? How about a decrease in the tariff rate of 145%?
Easy to imagine that going down on both sides. Ken Rogoff is with us now, professor of economics at the Mortis Boas, chairman of international economics at Harvard, New York Times bestselling author. His latest book is now out. It's called Our Dollar, Your Problem, an insider's view of seven turbulent decades of global finance and the road ahead. Ken, welcome. Did you like hearing Scott Besson's voice telling you what's happening this weekend for the economy?
I did. I mean, I like whenever Scott Besson's being pushed out front. He's sensible, calm. I think he's been doing a great job. What's your sense? I mean, the market's up today. Two hundred and fifteen points, probably on basically that statement at about two thirty today, the Fed's going to speak. Do you expect the Fed to move? No, the Fed's not going to move. I mean, they might. I mean, they're going to move probably at some point later this year.
But the job numbers were too good. The inflation's too high. It's just not screaming out to be done yet.
I don't think they will. But the market certainly is reacting to China. I don't know where things are going, to be honest. I'm very confused by everything. But there's you're confused.
I'm confused. But but I think it's not just what he says, but that he's being pushed out to say it, that he's being a voice of the administration. And I think a lot of the market views him as good and reasonable. So they're happy seeing a lot of Scott Besson. How happy would the market be, do you think, if we start hearing about trade deals done?
India, South Korea? It'd be great. No, it'd be a tremendous triumph.
It depends on the details and everything. But of course, it would make people very happy. There's no question.
They're looking for an exit. I think a lot of the market believes that in a year this will be settled one way or the other. We'll have probably 10 percent tariffs.
China, we don't know. And the deal making will be done. They believe that. But, you know, we have to get there. What do you think? I'm more nervous about it.
I mean, it's felt very chaotic to me. I know, you know, it's art of the deal. And I have many, many conservative friends. I regard myself as centrist. Many conservative friends who just say, you know, just don't pay attention to the exact details.
It doesn't matter. But on the other hand, you know, it's one thing if you're doing it over real estate and you've got 100 deals and you make five of them, you're a rich man. But of course, we have to have deals with all the countries. So we have to rope them all in.
Which is interesting. But as people have described to me, in fact, Kevin O'Leary, he said, if you get Japan, you get India and you get EEDU, that's 70 percent of what you need. And he goes, can you bring in those three big deals? He goes, Wall Street will love it. That'll be a welcome addition to our economy. They will. There's no doubt about that. That'd be very encouraging.
We'll see, you know, I take shape. They they have their own domestic audiences. You know, they have to satisfy.
And so they can't lose to they can't appear to be losing face. I mean, look at Mark Carney in Canada, who is sort of. I don't know where that's going, but he's pushed back and he won an election. So I think Trump likes him. That kind of helps. They have some kind of personal relationship, and that's great. Although, you know, it's a little frosty on their meeting the other day.
What can you do? But I don't know. I'm a little less certain than the market seems to be that this will all stabilize. So does this remind you, you look back at seven decades in finance, does this remind you of any other period? A hundred percent reminds me of Nixon. Nixon, like Trump, was a tough person. We hear him like he didn't have Twitter or, you know, his social media.
But you hear him in the Watergate tapes, like people complain about Trump criticizing Powell. It's nothing compared to the way Nixon dressed down Burns. And he got he didn't just get Burns to do something. He got Burns to pump prime the economy. It actually was a mistake.
It created a huge inflation. But, you know, also, Nixon, you know, would say these, you know, is a sort of tough S.O.B. at times. You see it. He will curse his allies.
He'll say this. But, you know, he was a thinker and he went to China, for example. And that was a huge triumph. Watergate tapes, not so much. But, well, what can you do? You realize if Watergate happened to Trump, he would have powered right through it.
No, he would have just been Trump's mindset. Brian, I got to tell you this story. Forgive me. I'd been a professional chess player, you know, before I went became an economist.
I was playing in 1974 in Poland and going with a really top tournament with a bunch of Russian grandmasters. We're taking a nice walk and I'm telling them about Watergate and that and and said the president lost his job. They what? And I said, yeah, he made tapes at the White House tapes. And they're going, you idiot.
Of course, he's making tapes. You know, that's what the Kremlin does. And then I said, but he was forced to give them over to the Senate. And they go, and you believe that? You think that's what really happened?
Because, you know, in their world, that's just unimaginable. But, yeah, that was, you know, clearly this era. That was a big shock to the system and the global financial economy. We went off gold and that was his decision.
That was Nixon's decision. Do you like that decision? Did you like it then? Do you like it now? I liked it. Well, to be honest, then I was playing chess and barely noticed it. And even as an economist, I didn't think about it that much.
But I think it's taken me a long time to appreciate how epic it was. So the title of my book, Our Dollar, Your Problem, comes from when Nixon sent John Connolly over to Europe in 1971. He just went off the gold standard. And they were, what are we going to do? The dollar was as good as gold. We didn't mind holding tons of dollars, kind of like the Asian central banks do, because we could get gold. We were fine.
Now you're telling us it's not good as gold. We're worried you're going to inflate. And Connolly said, well, our dollar, your problem. But of course, when we went off the gold standard, we hadn't figured out what to do yet to anchor inflation. And it was our problem. The 70s was a tough period. And what did we do? We eventually, we had a lot of inflation.
And I actually worked at the Federal Reserve at the very tail end of that. There was someone named G. William Miller that came. Nobody even remembers him. But I worked for him for a short period when he was there. And he had no idea what was going on. And then Carter brought in Volcker. He was the first one to try to rein it in. But he had to raise interest rates to 18%, 19%. And it didn't even work the first time.
He had to do it twice. And needless to say, it caused a recession. I'm a big fan of Ronald Reagan's. I don't think Jimmy Carter was a great president. But I'm not sure Ronald Reagan would have become president if Volcker hadn't got appointed.
So it was an epic moment. And sort of set the standard that you let the Fed do what it needs to do to control inflation in normal times. I want to emphasize in normal times. Because when there's a pandemic, when there's financial crisis, war, the Fed's independence has to go by the wayside. And you have to do what you need to do. I was speaking to Ken Rogoff, his book is now out, Our Dollar, Your Problem. So Ken, the thing that factors in every day with me, and I know deep thinkers like you, is our debt. So no matter what we're spending now, we got to find a way to pay off that debt. And then when interest rates go up, the debt, the interest on the debt goes up. So it's the number one expenditure. Now we're sitting there dancing on the edges and talking about tax cuts. But what has to happen for our, to get the debt going in the right direction? Can we do it through growth?
Well, the best way to do it is through growth. That's what everyone says. But right now, even the interest rates are high enough. And everybody was saying they would never go up again.
I felt like a lone voice arguing. You said they would. I said they would. Yeah.
I certainly, on your colleague Maria Bartiromo show many, many times for years saying this is going to end, doesn't go on forever. So it's more difficult. I mean, right now, you know, the interest rates are a little bit above growth.
And so you could sort of sit there. But the trouble is, we're going to have another pandemic. We're going to have, like you say, a war, maybe a cyber war. We're going to need something. So yeah. Maybe something unexpected.
Yeah, something unexpected. And then they want it to go up another 30%. And with interest rates, what they are and us, maybe the dollar not being quite as special as it was, that was happening before Trump.
That is not a Trump phenomenon. It's going to be tough. So near term, you know, we at least like to have to appear that we're trying to take this into account. And we haven't until now. So the way I understand it, and ballpark figures, we before the pandemic, we were spending $4.5 trillion. What we made, we brought in $4.5 trillion. No, excuse me, spend it. And now it's over six.
The pandemic's over. We're still spending in that level. Senator Ron Johnson has come out and just said, can we just get down to $4.5? If you look at the revenue we're bringing in, we'd be pretty OK by now.
Why is it so difficult to get it down? Is it because of Medicaid and Medicare and those expenditures keep rising? Well, two things. A wonky point was we've had a lot of inflation under Biden. So $4.5 trillion ain't what it used to be.
So, you know, as a share of the economy, you'd have to go up, I guess, 20 percent, you know, from the Biden years, which takes you up a ways. But yeah, I mean, if you compare us to other countries, we do much less besides the military and social, you know, Social Security and Medicare. And so it's harder. It's harder for us to adjust.
Only Japan's kind of similar to us. So, you know, I want to have an easy answer to this. Which way you want to go on this of spend less tax more?
I don't want to I don't want to. But yes, there's a problem. When you look at the big, beautiful bill, as Trump labeled it, we're looking to renew the tax cuts from 2017. I understand it.
Keep that levels make them permanent. I understand it. We're also looking to expand our expand defense up to over a trillion dollars. And Senator Roger Wicker came out and said it's not enough. I agree with I agree with that more.
Add more. Yeah, I think you have to adjust for inflation and the fact that there's Iran, there's what's going on in Ukraine, what's going on China. And this is one thing, you know, Trump clearly had right back in his first term and a second term, the Europeans have to pull their weight. It'd probably be good for them. By the way, I think the euro would be that's their currency would be more used if people felt they were a geopolitical power. So but even so, we do need to spend more on military.
We live in that world. Don't we need to find a way to get a smart guy like you in there, Ken, to find out what we're spending it on? Because when we can't pass an audit, which means people aren't recording things, it's impossible.
We don't have the records in order to find out what waste is. So people go, are we really going to give a trillion before we fix what we're spending it on? It's a fair point. So people certainly say, look at NASA and look at the fact that Elon Musk seems to be able to send payload up there for a 15th the price that NASA does. Why isn't there stuff in the military?
We have this, you know, you know, I don't know what trillion dollar plane coming online. There are some of the questions, but it's not easy to cut fat there. I mean, one of the things people don't understand is what seems like waste in the military.
Sometimes, you know, you need some excess someplace. You don't know where the enemy's going to strike. It's a competitive game.
We cannot afford to lose. So I'm not sure. I think we can just slash things. But yes, getting smart people.
I don't know about like me, but, you know, like tech people looking at things. Of course, it's good. Right. We're going to come back and talk a little bit more about the economy. Ken Rogoff is with us now. Harvard professor also is best selling author.
His latest book, Our Dollar, Your Problem, an insider's view of seven turbulent decades of global finance and the road ahead. Don't move. Grandpa's here.
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And that's the big misconception. The Asian manufacturers are very, very high tech and produce very high quality. So if it came back to the U.S., it would take a lot of infrastructure and grants like China does to American companies to bring it back into the U.S. And for the record, I'm a huge fan of that.
I would love to support Trump's vision in that, but it's going to take time. So that is Steve Borelli. He is CEO of Cuts Clothing in Southern California. I also know another clothing manufacturer, Ken Rogoff with us here.
His book is Our Dollar, Your Problem, who said, I'm really nervous. My whole business is Vietnam. Well, that's where they make all my clothing. And if you have 45 percent tariffs across the board of 45 percent at one point, I'm out of business. So how nervous are small business people that you talk to about the uncertainty right now? Well, the small businesses are really uncertain.
I have a friend who imports wine, really small business, but it takes a couple of months for the ships to arrive. She doesn't have the capital to pay for it and then charge people. She needs to charge them in advance. She doesn't know what to charge them because she doesn't know what the tariffs are going to be. So I think that's affecting the whole economy. And do you think that, you know, the whole pause until July and if it stays 10 percent tariffs across the board, is that is the certainty livable?
Absolutely. So, you know, it's sort of a dirty little secret among economists because we all like globalization and free trade. Ten percent tariffs wouldn't have massive effects. For one thing, we're a really big country. We import a lot, but compared to what we make, it's not really that much. And 10 percent's not such a big amount.
Wouldn't bring things out. It's the uncertainty. That's what's really crippling the economy. What do you look at to see if the economy is serving, is doing what it's supposed to be doing? For example, there are outside inflation that was really positive numbers for Biden, but most people did not, were not satisfied with the matter regulation, the amount of green programs and the DEI that they were forced to abide by. But a lot of the numbers look strong in terms of growth.
What do you look for, Ken, to see if an economy is strong? Well, I think it was a lot of other things. I mean, the open borders policy was just incomprehensible. We could not get his attention on it.
I couldn't get his attention on it. And it was popular in some circles in my neighborhood in Cambridge, Massachusetts. Why don't I say it when I went to Harvard? When I had neighbors, you know, who are very smart, who just somehow thought if somebody got to our border, we should just let them in.
So that was the, the DEI had clearly gone too far. I mean, I think I see it everywhere. I mean, so I don't want to comment on Harvard specifically, but you only work there still because I still work there. I've been there 25 years.
No, Harvard's an amazing place. I think there's a lot of good cause there, but it went too far. And speaking of the infrastructure, they spent a lot of it on infrastructure, but what did they build? I mean, so I think there was a rural internet project, which was to bring internet to rural America.
Great idea. $42 billion. They spent it. I don't think they built anything. What about the electric cars? 69 charging stations built the chips factories. Great idea.
That's a really good idea. Trump wanted that bringing chips here, but then they put all these bells and whistles on like one was that if you take money and from the chips act to build a factory, you have to have high quality onsite daycare for the construction workers. I mean, so it's like this, you know, they're, they're really lucky to get something done.
And I think Americans knew that they could see it. Ken, so glad you came in. Hopefully it's not the last time.
Hopefully it'll come in again. Pick up his book, Our Dollar, Your Problem. It is time to take the quiz. It's five questions in less than five minutes.
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