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Chapter 1: What is the main topic discussed in this episode?
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Subject to credit approval, Apple Card issued by Goldman Sachs Bank USA, Salt Lake City branch. Terms and more at applecard.com. Bloomberg Audio Studios Podcasts, radio, news. Gita Gopinath was an academic at Harvard. She was known within the racket, we all knew that, but found immense acclaim as the former Deputy Managing Director of the International Monetary Fund.
She brought an academic gravitas to it that was just absolutely wonderful. As they do, they wanted her to stay at IMF, she had to return to Harvard. Professor Gopinath joins us in this time of international turmoil. Geeta, thank you so much for joining this morning. What was it like your first day back at Harvard? You go from Gorgie Ava and 400 PhDs telling you what to do at the IMF.
What was it like in front of the kids at Harvard the first day? Hi, Tom. Always, I always miss speaking to you. So it's great to kick off with, you know, this kind of a question that I don't usually get from anybody else. What was it like? I mean, did you, Stanley Fisher says that Samuelson used to throw chalk. What did you do with the dumb students after the fancy people at the IMF?
It's actually been going great. I am enjoying very much being back at Harvard. And it also helps to be able to speak a little more freely than one does when you're at the IMF. So I'm enjoying this moment a lot. And also, I love working with the students and getting back into research. And it's something I did miss. Well, that's where I wanted to go there.
The research of say, Rudy Dorn, Bush back ages and ages or can Rogoff and others is there is a cycle to financial upset, a cycle to financial contagion with the private credit percolation. And again, a war is tangible. Are we at another inflection point where we see crisis in finance? The troubles with private credit were actually there even without the right current war in Iran.
We were seeing signs of distress in terms of loan defaults. I mean, this has always been an incredibly opaque sector. And when we worried about where we could see another crisis coming around the corner, it was about this huge growth in non-bank financial institutions that now own
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Chapter 2: What insights does Gita Gopinath share about her transition from IMF to Harvard?
over 50 percent of the world's assets and especially in a private credit private equity hedge funds which are highly leveraged and valuations that are stretched so it is a combination that really can get you know things can get pretty tenuous if we have major shocks of the kind we're looking at right now and as the iea said we've just had the biggest oil shock in history
And, you know, thankfully, our economies are not as dependent on oil as it was in the 1970s. And therefore, we could weather more of it now than we did back then. But this is a huge major event to the global economy.
I want to bounce off what you were just saying about the war and its effect on the global economy, because even a long war, would that have a limited consequence for global GDP or will there be longer term damage done? A lot depends upon how long oil prices stay high, right? It had come down to around 85 yesterday and then it shot back up to 100 and now covering around 96.
So, you know, coming into 2026, the assumption was that 2026 would be a year when oil prices would average $65 a barrel. I think in the best case scenario, we're looking at it averaging now $75 a barrel, which just from the oil channel shaves off about 0.1 to 0.2 percentage point to global growth.
But if this continues, and I don't think this requires, we're not talking necessarily that everything gets sorted out in a week, but if this continues well past a few weeks,
we're looking at now average for the year hitting 85 now that's beginning to show off like 0.3 percentage point to global growth 0.4 percentage point and global inflation starts going up by 50 basis points 60 basis points so this needs a solution relatively soon otherwise we're all looking at countries around the world dealing with many countries dealing with stipulationary shocks
what about emerging economies they would be vulnerable here to persistent high energy prices right emerging markets have especially the ones of course that are importers i mean other countries who are exporters benefit from the higher oil prices but the ones that are importers and these include you know india many of the east asian economies of course china also is a big
importer of energy, though they have big strategic reserves, so they're kind of a little more insulated. But yes, so they tend to be importers. They also are much more energy dependent. Their economic output is much more energy dependent than the rich nations of the world are. And we've also seen the dollar appreciate. So it's a combination of oil prices going up and the dollar appreciating.
And that's leading to really scarcity. I mean, we're seeing rationing in many emerging countries around the world. It's not just you can simply pass through very high oil prices. An exceptional day for Bloomberg surveillance. Edward Morse was with us earlier. Charles Cantor of Neuberger Berman as well.
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Chapter 3: How are rising oil prices impacting the US economy?
But at the same time, I want to make sure that they're also developing their own cognitive skills. I think the risk is that we're going to outsource everything to a smarter friend and in the end not learn anything. So we have to strike the balance right. 100% agree. Thank you so much for that.
Professor Gopinath at Harvard University, her public service for India and America noted at the International Monetary Fund. Donald Trump is rewriting the Washington rulebook and reshaping the global economy. If you're trying to connect the dots behind the headlines, Bloomberg's Trumponomics podcast is here to help. I'm Stephanie Flanders, Head of Government and Economics at Bloomberg.
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