Chapter 1: What is the main topic discussed in this episode?
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Even if you didn't read the 830 pages, it had a lovely purple lavender cover. And you could walk around campus toting your Absfeld and Rogoff, and you'd get cool points just for that. Joining us now, one of the foundation academics we have on our International Macroeconomics Program, Maurice Obstfeld, he's with the Peterson Institute, with Posen and Blanchard.
He is at Berkeley forever and always. Professors, thank you so much for joining us. What I see percolating right now, Maurice Obstfeld, is real tensions about supply lines falling apart, supply lines fragile because of tariffs. The interstitial wiring of our trade system, is it broken?
It's not broken yet, but it's under strain. It's under strain because of tariffs. It's under strain because of geopolitical tensions. It's under strain because of the trade war. And we can see this in the threats flying back between President Trump and China right now over everything from shipping to rare earths to cooking oil.
there just seems to be two americas one affected by goods and trade and worry and angst and another a financial boom like morgan stanley can we exist like this
Well, the U.S. economy has become increasingly financialized over the decades. And at some level, the U.S. is the world's banker at this point. And interestingly, finance hasn't seen the kind of backlash that we've seen against trade. Trade is blamed for deficits with other countries. It's blamed for the decline of manufacturing.
You know, we don't see people wanting to curb financial transactions. Quite the contrary. We're seeing deregulation, stablecoins, and the like. So there really is a divorce between those two sectors. And, you know, the question I have is, can that go on forever? Yeah. Or will the trade tensions eventually feed into the financial sphere? I think they will.
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Chapter 2: What are the current tensions affecting supply lines in trade?
You know, we see this across the board for positive and negative. The Treasury right now is bailing out Argentina for largely political reasons. So I think the bottom line is that foreign countries no longer trust the U.S., as a responsible steward of the global economy. They're going to seek to decouple and insure themselves against policy volatility emanating from right here.
Maurice, I got to go to breaking news. Paul, can I ask a rude question of Professor Hobsfeld?
Yeah.
Professor, an Eichengreen question for you. Maurice Hobsfeld on gold at $4,200 an ounce. What would Barry say?
I'm not going to speak for Barry, my good and longtime friend, but I think he would say that I guess I am speaking for him. Let me speak for myself. Barry and I agree about a lot of things, not everything. You know, gold is a bellwether of fear, and the escalation in its price is far beyond what you would expect to see coming from inflationary fears, although I think that's part of the picture.
I think it betokens a shift into something that is perceived as safer than the dollar and not subject to extraterritorial action by the U.S. We've seen the escalation in price. We've also seen increasing purchases of gold by emerging market central banks. A lot of that is China, but not all of it is China. And so that, I think, tells us something about the fear out there.
And, you know, the escalation in Bitcoin prices is a similar phenomenon.
Professor, we've got to leave it there. Too short a visit. Thank you so much. Thank you to you and the Peterson Institute, Adam Posen, Professor Blanchard, and others for just great support of what we do. Maurice Absfeld, forever from the University of California at Berkeley.
I'm Carol Masser. And I'm Tim Stenevek, inviting you to join us for the Bloomberg Businessweek Daily Podcast.
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