Why Adam Posen Thinks Inflation Will Surge Back to 4%

The future is always tough to predict, but generally when it comes to inflation, a lot of the debate is about how long it will take the Federal Reserve to get back to its 2% target. In other words, people generally agree on the direction, but disagree on the speed. But our guest on this episode violently disagrees with the consensus direction. Peterson Institute President Adam Posen thinks inflation will be back at 4% by the end of the year. He first unveiled his thesis in a piece co-written with Lazard's Peter Orszag last month. Posen argues that the lagged effect of tariffs, immigration, further fiscal easing, and declining Fed credibility will combine to cause prices to reaccelerate. In this conversation, we speak with Posen about his thesis, and why he thinks the reports of economic softening are mistaken. We also talk about the broader geopolitical landscape and whether Europe is ready to really change its relationship with the United States. More: A Very Non-Consensus Inflation Call Subscribe to the Odd Lots NewsletterJoin the conversation: discord.gg/oddlotsSee omnystudio.com/listener for privacy information.

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• 0:00Joe Weisenthal?

  There are some market stories where you want every detail. Tracy and I have made quite a few podcasts on that basis, but sometimes you've only got 10 minutes and need to know what's moving markets and why. That's the Barclays Brief Podcast. Every week, experts from Barclays Markets and research get you up to speed on what matters and what to watch next. About the time it takes to grab a coffee, so search Barclays Brief wherever you get your podcasts.

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• 1:07Speaker 01

  and hiring practices, but according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company, and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at chatgpt.com.

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• 2:42Joe Weisenthal?

  Hello and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

• 2:47Tracy Alloway?

  And I'm Tracy Alloway.

• 2:48Joe Weisenthal?

  Tracy, you know, future economy, it's always uncertain. Path of the path of inflation, path of employment, always big debates. I think what's really interesting right now compared to a few years ago, maybe is, you know, at various times, it's like inflation is going to come down, but there's a fight over how fast, right? And now you have a situation which there are people who argue both sides. Some people's like, oh, no, we're on a, you know, we're heading down, the sort of Neil Deta camp, et cetera. And others are like, look, we're reaccelerating. It's going to get hot again. And we're recording this February 11th. We just had a fairly strong jobs print, et cetera. And so some people are making the reacceleration argument.

• 3:26Tracy Alloway?

  We are so back, so back. Well, that jobs report, I mean, it was a blowout numbers. Yeah. 130,000 jobs added in January versus expectations for 65,000. And even if you drill down into it, like, it looks pretty good, right? But you're absolutely right. So we used to argue about how far we would travel in one direction, you know, inflation. Yeah. Is it going to be 4%? Is it going to be 5%? Whatever. And now we're sort of arguing about which direction we're actually going to go.

• 3:56Joe Weisenthal?

  Totally. And I think like, if you just look like, okay, one jobs report can't, you know, take it with a grain of salt. There is, there does seem to be a lot of evidence of some softening in the labor market by a lot of different measures, et cetera. Housing market continues to be fairly soft. On the other hand, look at various commodities, you know, look at copper, look at a bunch of other stuff. Look at trucking prices, freight picking back up, et cetera.

• 4:21Tracy Alloway?

  I wrote about this in the Odd Lots newsletter.

• 4:23Joe Weisenthal?

  Yeah, there's lots of things that are going in the other direction. And you would say, look, this looks like reflation.

• 4:29Tracy Alloway?

  Yep. So we are going to be speaking with someone who had a non-consensus call about a month ago. But again, I think it's becoming maybe more consensus by the day, by the hour, as we get these types of reports.

• 4:41Joe Weisenthal?

  Totally. Well, we really do have the perfect guest to sort of give us a different take, a sort of, I would say it's still a little bit out of consensus call, but definitely not the direction that a lot of people want to see. Definitely not the direction if you think that the Fed should cut rapidly this year. Maybe we'll talk some Fed stuff. We're going to be speaking, of course, to Adam Posen. He is the president of the Peterson Institute and recently co-authored a piece with Peter Orszag. 4% inflation? What? Adam, thanks for coming back and joining us here in studio. 4% inflation, really?

• 5:15Speaker 05

  Thanks, Tracy. Thanks, Joe, for having me back. Yeah, I mean, I've got friends who say I should have just said 3.5 and that would have been enough out of consensus.

• 5:25Joe Weisenthal?

  Save some credibility for yourself.

• 5:26Speaker 05

  Exactly. But I think it's realistic to think about 4% by the end of the year on headline CPI. And just going to the spirit of what both of you were saying, I think the direction of travel is up, not down, and pretty clearly that way. There's obviously, like you just said, today's job report, but I think that there's a broader pattern. The issue isn't, you know, like you say, one month. It's more about why the jobs report looks the way it does. And if you look at prime age, like Tracy was saying about drilling down in the numbers, if you look at prime age labor force participation, which to me is one of the most important statistics you can look at, it's still pretty high. And

• 6:09Speaker 05

  there is this risk of women dropping out of the labor force to look after kids and elderly and sick people if they don't restore some of the Obamacare insurance subsidies. And there is a conundrum that if you're

• 6:27Speaker 05

  Either they haven't deported yet or managed to drive out yet as many migrants as they think, or you're losing labor there too. So it's hard for me to see this as a very weak job market. The kinds of things people point to, like the slowing of wage growth, or the vacancies over as compared to unemployment, I think are not indicative of a demand-side slowdown. They're indicative of what economists call mismatch, meaning less good functioning in the labor market. So just to give you two quick examples. African-American unemployment is up relative to average unemployment.

• 7:10Speaker 05

  Historically, for both nasty and good reasons, that's been the case. But it had come way down. So the question is, is it going up because they're the canary in the coal mine? Or is it because something specific hit African-Americans? And unfortunately, I think it's something specific contributed to African-American unemployment, which is DOGE may not have cut overall government spending, but it massively reallocated where our government spends. So Department of Education gone, a lot of environmental gone, a lot of Health and Human Services gone. And these are things where you had a lot of government contractors that were African-American owned or run or heavily populated.

• 7:54Speaker 05

  And so I think part of the reason African-American unemployment is up, and that doesn't mean it's okay. It just means it's not a sign of demand shock, or declining, or soft market, is because of this hit to this specific part of the workforce. Similarly, and I know you have had episodes talking about this issue, we see the phenomenon of young people having less hiring, particularly college-educated people, young people not getting hired as much. And I think there's two things going on there. One is, I mean, it's real. Again, like with African-American unemployment, I'm not saying it's not real. I'm just saying it's not telling you about the demand situation.

• 8:33Joe Weisenthal?

  It is idiosyncratic, rather than cyclical.

• 8:35Speaker 05

  Right, well said, very tech speak. So, you know, I think part of it is that... We've the the rise in you younger people unemployment, college age, younger people unemployment has been a very steady rise for a few years. It's actually a very, it's not like suddenly, oh, it got soft. It's been coming up slowly since roughly 2023. And to me, that has to do with the hiring and rematching coming out of COVID. That people moved a lot, companies moved a lot of people into new jobs and they hired extra people in some sense. And so there's this overhang and that's particularly affecting young people. I mean, AI is in there. I'm just, that's not the thing.

• 9:19Speaker 05

  So anyway, I'm not trying to cherry pick data, but I'm just trying to say that if you match that with the more well-known data, the layoffs are relatively low. The wage growth is slowing, but it's not going to zero. That participation rate is high, that the monthly job numbers are fluctuating, but on the new baseline that we all rightly should be looking at solid. I don't see it as a weak, weak labor market.

• 10:01Tracy Alloway?

  There are some market stories where you want every detail. Joe and I have made quite a few podcasts on that basis, but sometimes you've only got 10 minutes and just want to know what's moving markets fast. That's the Barclays Brief podcast. Every week, experts from Barclays Markets and Research get you up to speed on what's happening and what to watch next. Concise, focused and brief. Search Barclays Brief wherever you get your podcasts.

• 10:28Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs, and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw, innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting and hiring practices.

• 11:11Speaker 01

  But according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company. And Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute, brought to you by ChatGPT. Get started at ChatGPT.com.

• 11:51Tracy Alloway?

  So you just talked about the labor side, but your forecast for 4% inflation by the end of this year is comprised of many different things. So walk us through what exactly you're looking at to get that call.

• 12:04Speaker 05

  Thanks, Tracy, for the opportunity, which Odd Lots gives to give more than two points. But I think the message is there are, I want to start with, though, is there are so many points. If you kind of step back, right? And you say, all right, if I'm making a forecast for inflation over the next year or two, there's how soft or tight the labor market is. There's how hot the economy's running, and those two obviously overlap. There's, are we getting supply shocks like tariffs or anti-migration policy? There's what's fiscal policy's doing? And then there's what's monetary policy doing? And very importantly, how credible is it? How's it being transmitted? So you go down that list, and there's all, to me, there's just an awful lot of inflationary stories.

• 12:47Speaker 05

  So tariffs, anti-migration policy, there was a debate, or at least a bunch of people asserting, oh, it didn't really matter. Look, inflation's not up that much. Well, my view, and I argued this in a Bloomberg Business Week piece a few weeks ago, is that we never should have expected the impact of these policies to be so fast. And in fact, if you go back, not that we forecast it perfectly by any means, but if you go back to the stuff my colleagues McKinnon and Nolan and others at the Peterson Institute published a year and a half ago on what would be the likely effect of the tariffs or the migration policies, they were building in a one-year lag from when the policies

• 13:31Speaker 05

  took effect. And so roughly next quarter is when we should start to really see the policy hit. And we're seeing anecdotally in the beige books from the Fed, in statements by the Amazon CEO, and my co-author on part of this, Peter Orszag, who runs Lazard, has many contacts in the business community who are talking about this. It takes time to make up your mind what you're going to do, even if you're a big company, let alone if you're a small company. It's very hard. So like, do I get a new supplier? Do I move production to China, out of China? Do I move it into Mexico? Do I move it into the US? Can I find a substitute? Do I raise prices now? Do I wait till my competitors raise

• 14:13Speaker 05

  prices? Can I get an exemption from the tariffs if I go meet with Howard Lutnick? All this stuff takes time to work through. And the same thing is true for, and that's even before you factor in like inventories of imported goods, and they're waiting to see whether Trump actually sticks with the tariffs or not before they make a decision. And I would argue that the same is true for migrant families or migrant workers, undocumented migrant workers, that they have hard to, leave aside the human aspect, which is amazingly horrible, but just on the economics, they have to make up their minds. Is ICE really coming for me? Are they coming to my town? Is my employer going to protect me? How long

• 14:55Speaker 05

  do I have before they get here to accumulate dollar pay before I have to leave? Can I hide and keep working? If I go, do I go legally? Do I take my kids with me? Do I not take my kids? Do I try to come back? Again, these are irreversible decisions. It takes time, and you want to see uncertainty. Change, or at least get settled before you make the decision. So to me, I think these inflationary pressures from the anti-migration policy and tariffs are already here, but that they're going to accelerate and be more visible. Then to be much quicker with the other points, fiscal policy, I think the Republican majorities

• 15:37Speaker 05

  in the Congress and the President are going to want to pass a big blowout checks to people ahead of the midterm election. I think they are going to pass some restoration of the lower-middle-class subsidies for Obamacare insurance because it's really hurting people and it's really making people angry. You put those two together, that's well towards 2% of GDP in additional deficit. So say you risk-weight it. Say you put a 50% chance on the checks being handed out. And you put, I'd say, an 80 to 90% chance on some amount of Obamacare subsidies coming back. You put in that weighted average, that still gets you an additional percent plus of GDP on the deficit that people weren't figuring.

• 16:21Speaker 05

  Then you got a weaker dollar. Then you've got the Fed, and this is something we've talked about a few times when you've been kind enough to have me on. The interest rate, for all Trump talking constantly about it and pressuring the Fed, doesn't summarize sufficiently the state of monetary conditions in the economy. So you've got all this private credit, you've got all the AI investment being funded either out of retained earnings or out of issued bonds, not based on credit, not based on normal bank borrowing or big stuff. And as Joe says, you have a soft housing market, but mortgage rates in real terms have been coming down.

• 17:05Speaker 05

  And it's not like mortgage money is unavailable. So it's not a tight credit environment. And so then finally, regrettably, we have to take into account all the attacks on the Fed and the changes at the Fed. And I'm not too into personalities. I don't think it matters that much which individual, but the structural forces on the Fed for change. And you have to believe that makes the credibility, the likelihood that they're going to react in the right direction to this inflation soon enough, lower. So boom, boom, boom, boom, boom, boom.

• 17:42Joe Weisenthal?

  So there was a great summary or overview of your view, and there's plenty of follow ups to ask about that. But let's just talk about the tariffs. So I certainly take your point that it would take any company a while before they decide their pricing strategy. Incidentally, not, you know, some companies, you know, about almost a year after the tariffs are going in the other direction, Pepsi, for example. So they cut prices. So now clearly, like some companies are deciding they cut. But just on tariffs, you know, even theoretically, like, yes, I can understand the argument. This is a good reason to raise prices. On the other hand, tariffs are a tax, and generally, we think of taxes as disinflationary. They

• 18:22Joe Weisenthal?

  take money out of the economy. Here's why I guess the question is, every company would love to be able to pass on higher costs. Does there need to be something on the demand side for them to be able to? Because another possibility is they just have to eat it in margins because the consumer is not willing, or, you know, as the Pepsi consumer evidently, they don't want to continue to pay high prices for end goods. Like, are tariffs per se inflationary? Or are they only inflationary if there's sort of a demand boost, something like the checks or the Obamacare subsidies coming back, et cetera?

• 18:56Speaker 05

  That's a really good added layer sophistication to this, Joe. And you're absolutely right. It varies from company to company, from industry to industry. The decisions, part of the decision-making process is what is the competitive landscape? And we do see, I'm proud to say PepsiCo is one of the many corporate supporters of the Peterson Institute. I'm a big fan. Good disclosure there. No, no, I have to be honest and I'm proud to be honest. All our donors are listed on our website. But anyway, PepsiCo is arguably facing a lot of fundamental trends in the food industry and having to do with GLPs, having to do with health perceptions and things that of course are going to overwhelm for them.

• 19:41Speaker 05

  And they actually are not that exposed to tariffs compared to some other companies because they're not importing sugar and they're not importing inputs the way, say, an auto company is. But anyway, but just that that just illustrates your point that it is going to vary from company to company. And my argument was just that as a general thing for any given company, it's not a trivial decision. You don't just go. But your point, your further point, Joe, that it's sort of conditional on demand is absolutely right. So there's two aspects to that. One is just literally what you said, that if it turns out there's slack demand, you

• 20:21Speaker 05

  may not see the rise in pricing as much because you just, the company, any given company additionally has to decide, you know, how much am I going to lose market share if I raise prices? But additionally, there is an interactive effect that when you are, when this is why I made so much about the labor market initially with Tracy. It's, it's a question of not so much the demand side as your input side, right? Are we in a tight labor market? Are we in a tight supplies market for commodities? Do these things matter?

• 21:01Speaker 05

  And, and are expectations about inflation in the economy more broadly moving towards the high side? And, and so again, just to come back, your bottom line point is right. It's interactive. And that's why when you talk about inflation, you want to have all these components.

• 21:19Tracy Alloway?

  I have to say, I spent $35 on three bags of chips and two dips on the weekend for the Super Bowl.

• 21:26Speaker 05

  Holy geez.

• 21:27Tracy Alloway?

  To be fair, I got them from a gas station, so there was a markup, but it was so worth it. They're so good. I don't eat chips that often, but when I do.

• 21:37Speaker 05

  Yeah, yeah. They're so good. Yeah, no, we had, we had, we had Frito scoops. Oh, yeah. Those are so good. Very thick. Super Bowl.

• 21:46Tracy Alloway?

  Okay, now, now we're just talking about snack foods.

• 21:48Speaker 05

  Which is fine.

• 21:49Tracy Alloway?

  Okay, what about tariffs, tariff inflation?

• 21:52Joe Weisenthal?

  Frito-Lay, Pepsi.

• 21:53Speaker 05

  Oh, that's true.

• 21:54Joe Weisenthal?

  Yeah.

• 21:55Speaker 05

  That's true.

• 21:56Tracy Alloway?

  Just from a math perspective, what you often hear is that, well, you know, you might have a price impact from tariffs, but it doesn't matter that much because it's a one-off and then, you know, the next year, the base effect kind of goes away. But does it matter if we get 4% at the end of the year? Or would you expect this to be a sort of the start of a durable price increase cycle?

• 22:19Speaker 05

  Well, I think, yes, it is a start of a durable, as you put, a price increase cycle. And again, it's partly to do with the general conditions and it's partly to do with the nature of the tariffs and the shock. So I think in a world where the labor, the labor market is not high unemployment, lots of slack, whatever anybody says, in a world where they are going to be putting fiscal fuel on the fire, in a world where whatever you think about the transition from Jay Powell to nominated Kevin Morris and the attacks on the Fed, you cannot believe that the Fed's

• 22:59Speaker 05

  credibility of commitment to low inflation is as strong as it was a few years ago. All of those things suggest that any given shock, any given price shock, will, to me, translate into higher and more persistent inflation than it would, say, a few years ago in a different circumstance. The second point is, and there's this, I forget what it's now called, but there used to be the million prices project at Harvard Business School that's been looking at the price pass through, and there have been others looking at it, and people at Peterson as well. The second thing is, the migration shock, if it turns out they do drive out a million

• 23:41Speaker 05

  people, million workers, is going to have much bigger first round effects than the tariff shock. The tariff shock, I think reasonable estimates are they've already had one point years' worth of CPI effects roughly over the past year. I think if they really are pushing out the migrants, and we can go to why I keep putting it conditionally and saying I'm not sure they have yet, but if they really are, we're talking about something potentially four to six times as large. But then, the final thing I want to emphasize, Tracy, is on the, when you say about durable

• 24:22Speaker 05

  size of inflation, it is a question of what people expect the monetary policy response to be. Yeah. And so, we have a very important lesson from the 80s, from 40 years ago, last time we had high inflation in the US. Even under Paul Volcker, they disinflated in 1982 after an oil shock, but they didn't take it all the way down. They stopped when it got to around 4%. And so then, when the inflation came back in 85, it turned out to be more persistent and higher. And Volcker and the Fed had to do more to raise rates, most people would argue.

• 25:06Speaker 05

  I mean, clearly, they did raise rates more, but most of us would argue, part of the reason for that was because it was the second round of inflation, and they hadn't fully stomped it out the first time. And I think you can make the case, again, this is speculative, but I think there's a historical parallel here. If we get this kind of inflation shock now... Coming its five years or four years instead of three years, but four years after the last inflation, having again, the inflation not come all the way down to 2% target in this case, I think the upside risk is higher. So.

• 25:43Joe Weisenthal?

  This is interesting, you know, when, uh, when we were at Jackson Hole, the last time we saw you.

• 25:47Speaker 05

  Yeah.

• 25:48Joe Weisenthal?

  Or that we did an episode with, I mean, Akamara.

• 25:51Speaker 05

  Right.

• 25:51Joe Weisenthal?

  And talking about this idea of like, the value of central bank credibility and there's like kind of a fixed stock of it, or the stock of credibility can deplete over time and it might take a while to refill the reservoir, so to speak. So what you're saying is sort of dovetails with that, which is that if you don't sort of, in fairly short order, smash it back to 2%, that there is this sort of like persistent cost that you might pay the next time there's a shock.

• 26:19Speaker 05

  That's, that's gen- that's generally what we see in the data. And Professor Akamara may have a different take on this, but, uh, but what to my understanding of the research, including by a colleague of mine at Peterson, Joseph Gagnon, on some of these issues, is if you fail to stomp it down, the anchoring, as the phrase is, of, of inflation expectations is lower. And so a lot of people focus on the U. Michigan survey of inflation expectations, or the New York Fed survey. Uh, we had, oh God, I can't remember her name, I apologize, from U. Michigan, who, who runs that survey, speak at the Peterson Institute last Friday.

• 27:01Speaker 05

  There's a video if you want it here. And, and she could point to the fact that the long-term inflation expectations haven't moved that much.

• 27:10Joe Weisenthal?

  Yeah.

• 27:11Speaker 05

  My view is that only tells you so much because it's, it's, people have.

• 27:22Speaker 05

  Rational inattention. They don't spend their lives thinking about inflation unless they have to spend their lives thinking about inflation. And so the question is more, when inflation comes, how do they react? And so besides the work of my colleague, Joseph Gagnon, there's a professor at Berkeley, Yuriy Gorodnikchenko, and his co-authors, who did a really interesting paper last summer, I think ahead of Jackson Hall at a different Fed conference, showing that there was this persistently higher upside risk on inflation expectations.

• 27:56Tracy Alloway?

  Since we're on monetary policy, you touched on this earlier, but one of the very interesting things in your argument is, you know, you contend that the transmission mechanism isn't quite what it used to be, possibly because of the expansion of private debt, it's less linked to bank rates, bank lending rates. Talk more about that, because if I see an inflationary environment, and you say, the durability of that inflation depends on what the central bank does in response, even if they raise rates, is that going to be enough to stamp it out? Because as we've seen, and we've asked a number of central bankers this question at this point, but financial conditions are still really, really.

• 28:37Speaker 05

  Exactly. No, I think you're absolutely right. And I know you recently did an episode with former Fed Vice Chair Rich Clarida. And when he was Vice Chair, he tried to promote this idea of, I think, I don't know if they actually called it this, but essentially a monetary conditions index, I think it had 14 pieces to it. But basically, trying to get at what you just said conceptually, that if you, in the textbook, the central bank has three channels through which it tightens policy. One is, it directly affects the amount of bank deposits and bank lending. The second is, there are repercussions through the yield

• 29:20Speaker 05

  curve, that if you move the short end of the yield curve, it decreases the further out the yield curve and duration you go, but there is some repercussions along the curve. And then the third is this expectations channel. Does, do people believe ultimately that the Fed will get things under control? But at the same time, that's the textbook. The working central bankers, and this overlaps somewhat with the people who wrote the textbooks, although I'm not one of them. But the working central bankers, going back again, Paul Volcker, are very concerned about monetary transmission in the plumbing, meaning which parts of the financial system

• 30:00Speaker 05

  get affected, how much by moves in interest rates or quantitative tightening or regulatory rules. And so Volcker famously was very upset when money market mutual funds came into play because the idea was those wouldn't be as affected by Fed interest rate moves. I think a much more serious issue right now is the existence of private credit where not only it exists, but And is growing. And is growing, but that we have very little supervisory or regulatory transparency into it. So the central bank or anybody doesn't really know how much is out there, where it's going,

• 30:43Speaker 05

  what terms, how shaky some of it might be. But anyway, so the point is, think about it again with respect to the housing market. So we had a very strong Fed tightening a couple of years ago. And normally, up until a couple of years ago, one of the first places you would see that would be that there would be layoffs in single family and general residential construction because these tend to be small firms that are very credit dependent, very both demand, their customers are dependent on mortgages and supply, they need credit to do what they do. And usually, the first, one of the very first effects on the real economy of a Fed

• 31:26Speaker 05

  tightening would be contraction in that sector. We didn't see it. We saw a very large Fed tightening and essentially no unemployment rise in housing and not very much change in housing starts. And that's been replicated across a number of sectors, what used to be called interest rate sensitive sectors in the economy. And so if you go back to where I started and you say there are these multiple channels, right? So two of the three channels arguably are weaker than they used to be. So the impact on the banking system is less representative of the impact on credit availability in the economy.

• 32:06Speaker 05

  The impact on expectations for reasons we were just talking about may not be as rapid or as strong. Again, the Fed can get it back, going to how Joe summarized Emmy's work. I mean, you can get it back, but you probably have to do something to get it back. So you're left with this middle channel, which is the yield curve. And even in normal times or less chaotic times, there never was a lockstep between what happened at the short end of the curve and what happens at the long end of the curve. And Fed Dallas President Lori Logan gave a speech a few weeks ago, I think, on some of the aspects of this, where she's

• 32:45Speaker 05

  an expert. But the bottom line, I keep using that phrase, sorry, but the bottom line is, again, directionally, if the Fed tightens, all three of these channels will have some tightening effect. But there's good reason to think that none of these effects will be as powerful bang for your rate hike as it used to be.

• 33:25Speaker 01

  This is the Bloomberg Tech Minute, brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Businessweek's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting and hiring practices, but according to recruiters,

• 34:10Speaker 01

  advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company. And Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute, brought to you by ChatGPT. Get started at ChatGPT.com.

• 34:48Joe Weisenthal?

  Let's talk about AI spend. The numbers were already going to be eye-watering for 2026. And now they're going to be more eye-watering than that. And we got numbers from Alphabet and Amazon that were just much higher than.

• 35:00Speaker 05

  Right.

• 35:01Joe Weisenthal?

  I mean, we're talking like, you know, this moves GDP. It's a GDP-altering numbers. Like, talk to us about how you see the ripple out effects from that spending.

• 35:09Speaker 05

  So it's fascinating. And I actually listened to you all for some of your insights when you talk to people more in that space than I am. As a macroeconomist thinking about it. So the first point, starting again with the monetary transmission aspect is so much of this is self-financed or easily financed. So so Google's now issuing, I guess, this 100-year bond.

• 35:30Joe Weisenthal?

  Yeah.

• 35:31Speaker 05

  I hope so, in the sense of I hope everybody's still around in 100 years and gets paid back, and that would be nice.

• 35:37Tracy Alloway?

  I will be, I'm pretty sure.

• 35:39Speaker 05

  Yeah, well.

• 35:39Joe Weisenthal?

  You know, it's a it's a British bond. It's a sterling-based bond because of those, the LDIs. They love their long duration.

• 35:46Speaker 05

  Yeah, yeah, yeah, they're forced to hold it.

• 35:48Tracy Alloway?

  The point is, like, most of it has been cash financed.

• 35:50Speaker 05

  Of course, yeah, yeah. So my point was even the parts that are not cash financed are being very easily financed. So that's the first point. There is no credit crowding out in the rest of the economy because of this. There is no credit constraint on them doing this. That has an interesting implication, which I've mentioned at various times in recent months. That makes it all the more striking how little investment we're getting from the rest of the economy. I mean, so if you think about sort of the litany of reasons that a Trump administration official ex-Anti could give for why there should be investment boom beyond AI, right? We've made permanent the tax cuts that are favorable to corporate investment.

• 36:35Speaker 05

  We are deregulating. We are doing things to make the labor market more friendly to employers. We've got cheaper energy prices until AI pushes up some of that. But broadly speaking, we've got cheaper domestic energy supply. And we got a Fed that until recently looked like it was cutting rates. So beyond AI, there should have been an investment boom. And my view is that a lot of the Trump administration's creation of massive uncertainty, including through the tariffs and the anti-migration policy, but in other fields as well, is why you don't have an investment boom outside of AI. And it's not because of tight credit. And people should be taking that more seriously.

• 37:20Speaker 05

  Again, that doesn't change what you just said, Joe. It's eye-watering what AI does. So that doesn't mean the total GDP has to contract, but I think people should notice the fact that we haven't had an investment boom. My colleague Karen Dynan at Peterson presented on some of this in her forecast in October. We haven't had the investment boom outside of AI. Then the big ticket, there are a number of things we can think about, but the big-ticket issue, which some Fed officials and Trump officials have been talking about, is productivity growth. How much does this generate productivity growth? How soon? How job-displacing is it? What's the effect on inflation? So let me give you my take.

• 38:04Speaker 05

  My view is we're in the process of the baton sort of being handed in the, imagine a summer Olympics, a relay race, and the one runner hands the baton. I think a lot of the labor market changes that took place during and after COVID, nobody knew they would be ex-Anti, but ex-post, they turned out to be pro-productivity growth. There was a lot of good reallocation of workers. And I think that's running out because that was a one-off thing. And so now the AI is increasingly the main source of the productivity growth. But I also think, going back to something you were saying earlier about the tariffs, When you have a supply shock, positive or negative,

• 38:47Speaker 05

  it's indeterminate how much of that shows up in prices versus real things. So like, we've had this discussion about tariffs. Could it be a one-off? Could it be recessionary from the tariffs and therefore not price inflationary? We can go into why I don't think that's right, but you have to do the same process thinking about productivity growth. It's a positive supply shock, but how much of it shows up as real income gains and how much of it shows up as disinflation has to be determined. And my reading of the history is when you get a leap forward in a general purpose technology, you get the real income gains upfront and you get the disinflationary part later.

• 39:32Speaker 05

  Because, I mean, not all the real income gains, but it's primarily real income gains initially. Because what happens, again, going back to stuff we were talking about, it takes businesses a while to figure out, how do I use this technology? How do I change my production process? How do I change my hiring and training process? What are the new products I can offer? But there's cool products that people want and use right away. So if you think about the internet in the 90s, when Solo famously said, "The computers are everywhere but in the statistics." Well, you know, a bunch of us were starting to use computers, getting productivity gains,

• 40:12Speaker 05

  but it took several years before Walmart and UPS and science firms figured out how to make use of this and to change their processes. So, sorry to be so long-winded, but I think this is overlaps with a lot of stuff that you hear a lot to talk about with some of your other guests. These are non-trivial business decisions, non-trivial investment decisions. And so if I'm sitting at the Fed, yes, in theory, I don't know whether tariffs are going to be mostly recessionary or mostly inflationary. For the reasons we've discussed, I think they're going to be mostly inflationary starting now unless recessionary.

• 40:55Speaker 05

  If you're talking about AI, I think if I was, if I were a central banker again, and I had to make a call, or I am making a forecast call now, I think you're going to see the real income effects in the next couple of years predominantly, and not so much the disinflationary effects. Then they'll coming, they're coming, but they're not there yet.

• 41:18Tracy Alloway?

  Can we go back to the transmission mechanism and the yield curve for a second? Because one of the reasons we wanted to talk to you, it's not just because of the report, but also because you're a former central banker, used to be with the Bank of England, the Monetary Policy Committee over there. There is talk at the moment of a new treasury accord, and WASH has kind of signaled some interest in this. So that would basically be tying the Fed's balance sheet to treasury financing in some way, coordinating, presumably to, you know, lower short-term rates and allow the treasury to issue more bills and thereby lower the deficit. Is that a good idea?

• 41:58Speaker 05

  No.

• 41:59Tracy Alloway?

  Okay. Explain.

• 42:02Speaker 05

  Yeah. So during the Euro crisis, when I was at Bank of England, I gave a speech that central bank independence is about the power to say no, but you didn't have to always say no. Right? So you don't want to be, I made the analogy a teenager or a toddler, but I think I used teenager. You know, you don't assert your independence by no matter what your parent says to you disagreeing. So the idea that there should be some coordination between treasury and Fed, or between the central bank and the finance ministry, is not unreasonable. But the idea that there should be an ongoing accord, as opposed to say, an emergency response during the financial crisis during

• 42:44Speaker 05

  COVID, is what's scary. And it's scary because if you go back to the work on central bank independence, there's a huge amount of data analysis on this and historical records, and I was one of the many contributors to that literature. Turns out there are two things that predict whether a central bank is inflationary or not. And one is, does the governor or the chair get fired and replaced a lot?

• 43:17Speaker 05

  Out of turn, out of the normal sequence. And the other is, does the central bank buy bonds pretty directly from the treasury? And there's whole lists of all these other aspects of central bank independence about voting rules and transparency, and those don't have any predictive power. But those two things, do you directly buy government bonds? And do you have a lot of turnover at the top leadership? Do predict higher inflation? And we saw this on the leadership side with Erdogan in Turkey and Modi in India in recent years, where they forced rapid turnover.

• 43:59Tracy Alloway?

  How many central bank heads did Turkey actually go through? Does anyone remember?

• 44:03Speaker 05

  It was four or five, I think. In India's case, it was like three, and again, in very short spans of time. So, you know, the idea that we have an orderly transition from Powell to Warch at the end of Powell's term as chair, I mean, that's not what we're talking about. But I think it is important to contextualize the things the Treasury Secretary Besen and the administration are talking about vis a vis the Fed are things that historically, over time, in other countries have produced high inflation. So I can make it more complicated than that, but just full stop. But so then there comes the question of how much can you fix a fiscal problem through short-term debt management and financial engineering?

• 44:46Tracy Alloway?

  Right.

• 44:46Speaker 05

  And the answer is you can't. So generally, you, and this goes to stuff that both Warch and Besen complained about in public going into the elections in 2024, which was they complained that the Yellen Treasury was financing-

• 45:05Tracy Alloway?

  Activist treasury issuance, yeah. And then they, they still kept issuing lots of bills. They did the same thing.

• 45:10Speaker 05

  Yeah. And, and I, beyond pointing out the hypocrisy, which I guess is par for the course, I think they had more validity with what they were saying before than what they're saying now. And, and again, it's not a good sign about the fiscal sustainability of the US if what you're trying to do is, you know, get the loan with the free toaster to, to bridge over your monthly credit card bill. There is risk to doing more short-term issuance. So, I mean, it's worth thinking back a few years ago, right? When rates were incredibly low. And the Treasury started considering issuing 100-year bonds or very long-term bonds, or at least increasing the issuance of 30 years versus short bills to fund

• 45:54Speaker 05

  infrastructure, to fund long-term investment. And there was pushback from something called the Treasury Borrow Advisory Committee, T-BAC, exactly. And the Treasury Secretary at the time, I think it was Jack Lew, said, okay, we're not going to do it. And the pushback was twofold. First, the general principle that the US government should be issuing across the range of maturities on a very deliberate basis to continue to maintain the US Treasury's international and national role as the most liquid, most deep, most

• 46:34Speaker 05

  stable asset in the world. And that if you start gaming it for short-term advantage, you lose that. And that will show up in higher borrowing costs, because then the number of people who park in Treasuries, because it's domestic and foreign, because it's the safe, stable asset, goes down, because it's less safe and less stable. But then there is also the rationale that you don't know what's going to happen. I mean, look at the fluctuations we had from surplus at the end of the 90s to rising interest rates in the early 2000s, to incredibly low interest rates for a decade after the financial crisis,

• 47:16Speaker 05

  to now rising. You know, this is not smart if you can borrow long to borrow short.

• 47:23Tracy Alloway?

  We are recording this on Jobs Day, of course, the new Jobs Day, which is Wednesday.

• 47:28Speaker 05

  Jobs Wednesday.

• 47:29Tracy Alloway?

  Yeah, February.

• 47:30Speaker 05

  My mind is blown.

• 47:32Joe Weisenthal?

  I don't like it. I don't like it.

• 47:33Tracy Alloway?

  Yeah, it feels weird. But we just got some Truth Social posts out of Trump. Saying, these are great job numbers, much better than expected. America should therefore be paying the lowest interest rate.

• 47:46Joe Weisenthal?

  Yeah, and I see the views rates as like a reward.

• 47:49Tracy Alloway?

  Yeah.

• 47:49Joe Weisenthal?

  Reward for good work. We could go on, I have so many questions, we could go on a long time. But I wanted to sort of get your take on, especially like around Davos, some of the tensions around Greenland and Europe and all of that. And it occurs to me like one of the themes of this conversation, particularly as it relates to tariffs and also immigration is that people don't make up their minds at once, right? Corporate leaders don't just say, okay, tariffs are up, because these are big decisions.

• 48:12Speaker 05

  And they're uncertain. You don't know if Trump's going to give it away or not.

• 48:15Joe Weisenthal?

  Yeah, that's right. There's a huge lag. And then, once you make the decision, that's like

• 48:19Speaker 05

  You're stuck.

• 48:19Joe Weisenthal?

  Big stakes. And I've been thinking about this, like, in the context of Europe, because obviously, Europe still has this very tight economic and security relationship with the United States. And the European leaders kind of have to make a bet, which is, is Trump the new normal here in the United States? Or will the next president have a, adopt a posture, an economic and security posture that's sort of like the old president? So no one, no one really knows for sure. But this is like a high consequence choice to make, because if the next president is going to be sort of a more, you know, more normie on this stuff, then maybe, you know what? We just sort of grin and bear it for the next few years and then, or at some point, if the relationship is going to be dramatically changed, Europe really needs to rethink, like, how much it spends on military?

• 49:04Joe Weisenthal?

  And maybe rethink about, oh, do we want a closer orientation with China? Whatever it is. And a big decision to make. So I'm curious, like, your take, like, European leaders right now, they haven't pulled the ripcord yet on the United States. There's a lot of frustration, but they haven't. We had, we still have this tight relationship. Is it, are we getting closer to where European leaders might think, look, this is never going to go back? Maybe sort of the Carney speech, it's like, we're never going to go back to the old relationship with the United States. We're in a new world.

• 49:32Speaker 05

  It is the great big picture question, Joe. And I have been writing on this and talking with European leaders on this. I published a piece in Foreign Affairs in September called The New Economic Geography, in which I talked about if, I argued that this is a fundamental lasting change. Because the US is ceasing to be the insurance provider in both security and economic terms that it was. And that

• 50:03Speaker 05

  I think it's very fair to say unrealistic. Whatever happens in terms of successor to the current administration, even if the successor administration, whether it's another Republican, a Democrat, some kind of new party centrist, whatever it is, is not going to immediately credibly reverse everything that's been said and done. And so it's analogous, the parallel you were giving, I think is right. And there's a fundamental economic theory by Dixon and Pindic called about investment, that investment under uncertainty you delay because in a sense it's irreversible. Once you, once, once something happens and you commit down a certain path, it's not

• 50:48Speaker 05

  literally irreversible, but it, it, it locks you in. It's not just sunk cost fallacy, it's rational. So going from the abstract to the real, we're coming up on the new Munich Security Conference, annual Munich Security Conference. And in March 2024, Vice President J D Vance gave a speech there and the preceding week in Paris, in which he basically March 2025. 2025, sorry, right, we're in 2026, you're absolutely right, March 2025. In which he basically said, you know, NATO, Ukraine, but NATO cannot count on us the way they used to. And he gave arguments for why, why that was good for NATO and good for the US and all

• 51:29Speaker 05

  that, and we can debate that, but it was a very shocking big shift. And then, as you mentioned, Prime Minister Carney, now the most famous ex-central banker in the world, gave a speech in Davos a few weeks ago, which was very much about the trying to say for Canada, it was a general loss of this framework that we've all functioned in. And interestingly, almost exactly a year ago, I was in Ottawa, brought in by the Canadian government to brief them on the likely implications of the Trump. It was right before the election where Carney moved from appointed to ongoing prime minister. But anyway, at that time, I, you know, I was dealing with absolutely shocked Canadians.

• 52:16Speaker 05

  And like you said, right? So the first time during Trump's one, people said discounting, the adults are in the room, maybe it'll change. Under Biden, things did change, but on tariffs and a lot of things, it had been a one-way ratchet. They didn't go back. They were upset about a lot of the IRA stuff. Absolutely. And it was unilateral and I think short-sighted. But anyway, and the Biden team did a lot of bad, continued a lot of bad things and did a lot of bad things. They weren't as hostile on the security front. They were transatlanticists there. But on the economic front, they didn't really roll back. And in some ways, they made worse some of what Trump won did. And so by the time you get to a year ago, which is even before

• 52:58Speaker 05

  Vance's Munich speech, the Canadians are saying to themselves, oh, my God, we, this is a perfect example. We just realized we have no internet pipes that don't run through the US. We either have US satellites or we have US cables. We literally have no access to the internet without the US permission. And that encapsulates what's going on, right? That you took for granted that if you were not Russia or Iran, the US would not weaponize things against you. And that's no longer a feasible thing. So going specifically to Europe, this is the biggest challenge to Europe since the war. This is a situation

• 53:42Speaker 05

  where a lot of European officials, very much in line with your characterization, Joe. A year ago, we're still in denial, or we're still having a lot of conversations with people like me about, is this going to last? Can we wait it out? Is this going to turn around? At this point, nobody believes it's going to turn around. Or at least, nobody believes it's going to turn around sufficiently and last in a way that the Europeans can count on whoever's next, the same way they took for granted. Now, the Trump people would say, that's good. They're not taking us for granted. But from an economic point of view, that it was a good thing. The large parts of the world could take the US enforcing the rules

• 54:25Speaker 05

  of the game, providing some basic security of navigating the seas and property rights and trade relations and access in and out of treasuries, access in and out of US markets, that we took all that for granted was a huge boon to business. It was a huge boon to investment. It was a huge boon to two-way trade.

• 54:46Speaker 05

  So it's a very big deal. And so a number of people in Europe are involved in various projects trying to come up with what's next. And two colleagues of mine at Peterson are very active. Olivier Blanchard, the famous French economist, who's now back in France, is leading an effort on what future for Europe. My colleague Jacob Kirkegaard, who's based in Brussels, does a lot of work on how much common European funding is going into the military and how sustainable is that. The big thing, one of the things Jacob points out is you do have a split in Europe, not so much about how much they distrust Trump or distrust the US, lost faith in the US,

• 55:28Speaker 05

  but over how imminent they see the military threat from, say, Putin. So the amount of spending that these countries are doing on military is a declining function of how close they are to Russia. I mean, you can literally do the scatter plot. Poland and the Baltics and Swedes and the Norwegians, Norway's not part of Europe, but it's part of NATO, anyway, are spending a lot more. Germany's in the middle, Spain and Portugal are not spending. But you're back in a world of that kind of geo and geopolitics really mattering. And the final thing I would say in this, because we're coming up on the Munich Security Conference, is ahead of this, there was an announcement of a new idea backed by Merz

• 56:13Speaker 05

  in Germany and Macron in France, of sort of a leadership committee in Europe moving ahead. So it would be Germany, France, Poland, Spain, Italy, basically the big countries, plus Netherlands. And that was a no-go for decades in Europe, that things had to be done by involving everybody, things had to be done by qualified majority or unanimity. And this is a statement, problems are moving too fast. We have to stand up. And so my view, which is ultimately more optimistic than a lot of Europeans, is that what Europe chooses to do, they have a lot of agency.

• 56:58Speaker 05

  They will have a lot to determine the outcome of how bad things go for them and for the rest of the world as Trump and Xi end up pursuing similar bad economic policies.

• 57:11Tracy Alloway?

  I mean, it is very telling about our current moment in time that we're talking about the Munich Security Conference as like a macro economic indicator at all.

• 57:20Speaker 05

  Right, absolutely right.

• 57:21Tracy Alloway?

  It used to be just for foreign policy wonks.

• 57:23Speaker 05

  Right, exactly. Now it's for econ wonks as well.

• 57:26Tracy Alloway?

  That's right. Also, why are they holding it on Valentine's Day weekend?

• 57:30Speaker 05

  Oh, no, they do all these things. It's like, it's like the ECB's Cintra Conference is always on July 4th weekend. It's just they ostentatiously don't watch the Hallmark Channel. It's just no good.

• 57:41Joe Weisenthal?

  Adam Posen, thank you. That was fantastic. That was a great conversation. We could ask you so much more, but really appreciate you coming on Odd Lots again.

• 57:48Speaker 05

  Really glad to be with you both on Odd Lots. Keep up the good work and thank you for having me.

• 57:53Joe Weisenthal?

  All right. Take care.

• 57:54Tracy Alloway?

  Thanks so much, Adam.

• 58:07Joe Weisenthal?

  Tracy, I thought that was a great conversation. Your point there at the end dovetailed with something else he said about the sort of the link now between security and macro.

• 58:17Tracy Alloway?

  Yeah.

• 58:17Joe Weisenthal?

  I was thinking about that observation, and we should definitely do more on this, you know, Canada not having access to the internet unless it's through the US. So how do you solve that? Well, like you spend and you build new pipes, you build new undersea cables, you build more satellites, but that's spending, right? That's inflationary.

• 58:33Tracy Alloway?

  Inflationary impulse, yeah.

• 58:34Joe Weisenthal?

  And so, you know, again, it's the same thing with, we talked about it with Jeff Currie, Europe spending trillions on defense. These concerns about whether the degree to which countries can rely on the US anymore, the way you address these concerns is a lot more spending.

• 58:48Tracy Alloway?

  Absolutely. To me, we are seeing some inflationary signs, right? Like, we talked about them at the beginning and you can't really ignore them. I guess the, the big question is how much of this is like a temporary, like blip in terms of building back inventories?

• 59:03Joe Weisenthal?

  Yeah.

• 59:03Tracy Alloway?

  You know, maybe people ran them down all last year because they didn't know exactly what was going to happen with tariffs, but now, now they really have to stock back up. And so you're getting this like one-time inflationary hike? Or is this the start of something that's kind of, I know we keep using the word durable?

• 59:23Joe Weisenthal?

  No, but it is the right question. It is the

• 59:24Tracy Alloway?

  Yeah, totally. And like, if you look at something like trucking rates, and again, like, we're interested in trucking rates. We did a lot of episodes on it, but also they're just a good macroeconomic indicator. We've seen some glimmers of a recovery there. So freight rates are starting to go up, but everyone's kind of saying, well, we need to see like, six weeks of sustained improvement. So I think that's kind of like, the question right now, February 11th, do we get more sustained inflationary indicators over the next month or two?

• 59:58Joe Weisenthal?

  Absolutely. And, um, you know, again, I, you know, it's interesting, even if we'd had this conversation, say, a month ago, something like that, when, you know, it looked like, maybe there was more, you know, the, the, the story of job market softening was less unambiguous, or something like that. When you think about the new Fed chair, it's like, okay, do we need rate cuts right away? It's like, ah, 25 basis points, 50 basis point. Maybe they could be a little lower. It's not, you know, the world. If there is a re-acceleration, if we actually are seeing gathering steam again, and the incoming Fed chair still has this impulse that like, you have to like, cut rates, you have to establish. I mean, Trump joked, but not really a joke, but he's like, oh, I'd sue if Kevin Warsh doesn't cut rates. If you have this sort of rate cuts into a period of,

• 1:00:43Joe Weisenthal?

  we're actually seeing re-acceleration, that's like a very different story.

• 1:00:46Tracy Alloway?

  No, absolutely.

• 1:00:47Joe Weisenthal?

  Yeah, you put more fuel on the fire. So a lot of sort of interesting risks out there.

• 1:00:51Tracy Alloway?

  Yeah, people were kind of ambivalent about a rate cut, even when the labor market was softening.

• 1:00:56Joe Weisenthal?

  Yeah, exactly.

• 1:00:57Tracy Alloway?

  And then if you say you're going to cut rates when it's re-accelerating, well, we could go on.

• 1:01:01Joe Weisenthal?

  We can go on.

• 1:01:02Tracy Alloway?

  Shall we leave it there?

• 1:01:03Joe Weisenthal?

  Let's leave it there.

• 1:01:03Tracy Alloway?

  This has been another episode of the Odd Lots Podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.

• 1:01:09Joe Weisenthal?

  And I'm Joe Weisenthal. You can follow me at the Stalwart. Follow our guest, Adam Posen. He's at Adam Posen. Follow our producers, Carmen Rodriguez at Carmen Armin, Dashell Bennett at Dashbot, and Kale Brooks at Kale Brooks. For more Odd Lots content, go to Bloomberg.com/oddlots, where we have a daily newsletter and all of our episodes. And you can chat about all of these topics 24/7 in our Discord, discord.gg/oddlots.

• 1:01:33Tracy Alloway?

  And if you enjoy Odd Lots, if you like it when we talk about the Munich Security Conference as a macroeconomic indicator, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad-free. All you need to do is find the Bloomberg Channel on Apple Podcasts and follow the instructions there. Thanks for listening.

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