Chapter 1: What insights does Robert Rubin provide on the current state of the US economy?
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I'm not saying that's the case now. These markets may go on forever. Maybe we finally found Nirvana. But I'll tell you, my view of whatever it's worth, I think one has to think very carefully about what you think the risks are, what you think the rewards are, and try to make reasonable judgments. And I'm not predicting in any way what the markets are going to do.
I'm just going to say that I think that the risks are enormous. And I think, I guess I do think, I do think, that's not I guess, I do think that the markets don't properly weight those.
So let's talk about some of the specific risks. People, when the tariffs were announced on Liberation Day, April 2nd, there was this feeling that business would collapse.
It wasn't my view, but go ahead.
Well, why has the market been so surprised? Why have companies been so surprised themselves? CEOs I talk to say, we've been shocked that things kind of keep going.
Yeah, people, let me, Lisa, they may keep, I think the tariffs are extremely unwise. I think open trade has served our country extremely well over many, many, many, many decades. I do think there's some caveats to that. I do think you need to protect supply chains when they have national security or economic security dimensions through subsidies or trade restrictions. But having said that,
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Chapter 2: How does Robert Rubin view President Trump's tariff policy?
And you're paying a price for it in terms of, as I said a moment ago, risk to growth and at least I think the possible, certainly higher cost to consumers and to producers and possibly triggering inflationary expectations. What is a tariff? Assuming that it gets passed on, which if you talk to our clients, I think virtually all this is going to get passed on over time. It's a regressive tax.
And it's a regressive tax which has adverse effects on growth, as I say a moment ago, on inflation.
So I'm trying to pair this with the idea that we're seeing mergers and acquisitions accelerate. We hear a growing number of companies talk about, and corporate executives, a re-acceleration in the consumer. How do these two things go together?
I don't think it's complicated. When I was at Goldman Sachs, we had economists and we had terrific people, strategists and everything. They were always telling me what they thought was going to happen in the short term. And I would always say, you're very nice people, and I think that's nice of you to do. And our clients are interested, so you should do that.
But I myself wouldn't base my decisions on them. Things... Short term and short term effects, Lisa, could be whatever they're gonna be. The question is what's gonna happen over time? And I think over time, for the reasons I've said, I think tariffs are a very substantial negative and I think that open trade, with the caveats that I mentioned, I think open trade has served us very well.
How much are companies rethinking their U.S. footprint in a new kind of way?
Well, my impression, and I get this largely from speaking, I don't speak to many companies myself, but our people are just enormously plugged into corporate America. And I also have three advisory relationships with pretty substantial investment, I guess you'd call them funds. I think a lot of people are rethinking how much they want to be allocated to the United States.
And you see it a little bit, by the way, in the dollar. The dollar has, after all, suffered through this thing. I don't think too much of it has happened so far. But I think at the risk that we're taking, and I think what's so sad to me, Lisa, is we have such tremendous strength and so many advantages.
And I think the damage we're doing is very substantial, attacking our research, attacking science and basic research, attacking our universities, immigration policy that makes no sense whatsoever. We should have an economic, we should have economic, we should have immigration that serves our economic needs, and then we should have
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Chapter 3: What risks does Rubin associate with tariffs on economic growth?
I'll give you my personal opinion, whatever it's worth, but it's really mostly based on just what I think about AI. I think AI has the potential for tremendous positives in terms of productivity, which, by the way, could be partially responsive, albeit not fully responsive, to our fiscal trajectory.
And our fiscal trajectory, on multiple basis, seems to me as a tremendous risk to our economy over time. So this could be partly responsive to that. productivity, increased growth, increased revenues, and so forth. But I think a lot of, yeah, I do think it's going to have very substantial job replacement effects. A lot of things that are being done now by people are going to be done by AI.
And AI, as you know, what is the human mind? The human mind is neural systems, right? What is AI? AI is neural systems. And if you take AI and you pursue it, and some of you know much more about this than I do, but you pursue, you build bigger and bigger
data centers and more and more capacity, you create neural systems that are able to do not only the more mundane task, Lisa, but many of the kinds of complex thinking that we're accustomed to associating with human beings. And that, as you know, is sort of the question of AGI. And admittedly, you can define AGI a lot of different ways. I get that. But wherever you want to define it,
I don't need to question that AI is moving, at least in my opinion, I may be wrong, but I don't think I'm wrong, moving very quickly toward ever more sophisticated capabilities that can more and more replicate the neural processes of the human mind.
Which is the reason why when you talk to some Fed officials on and off the record, more off the record, they will talk about running the economy hot or prioritizing the labor market as a way to ameliorate some of the potential benefits job losses from AI because it encourages companies to invest more in their workers and keeps people employed so people won't be left behind as much.
I mean, do you buy into that kind of idea and sort of endorse the idea of having a more accommodative monetary policy at a time like this?
Yeah, I get the point. And this is a good debate. This is the kind of things that if you have sensible people sitting in a room, you can really discuss in very interesting ways. No, I actually don't agree with Lisa. I'm much more concerned about the possibility of inflation.
And if you run the economy too hot, and you get higher rate of inflation, and that in turn has a weaker dollar, and it has higher interest rates, I think that can have a lot more adverse effect than the benefits you're getting from Fed funds rates being lower and whatever you think might contribute. So you might actually accomplish the opposite of what you wish.
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Chapter 4: How do tariffs impact inflation and consumer prices according to Rubin?
But it'll be some analog to that. So I believe that's the most likely outcome. And China has enormous... Look, China has some great strengths. We all know that. But it also has enormous problems. We also all know. And Europe... You know, Europe, from 2019 to 2022... productivity in Europe grew 0.4%. Productivity in the United States grew 6%.
And the Mario Draghi report, which was designed to deal... I was with Mario the other day. We spent an hour together. I just told him about this because he was in New York and we got together. It was designed to address the productivity problems in Europe. They've done virtually nothing on it. So, yeah, I'd still bet on us, but I think we... I'd still bet on us. I'd still rather be here.
I am here in terms of my own personal resources. But I think what we're doing to ourselves is very seriously troubling.
There's a lot of question around gold and the fact that a lot of people are going into it and whether this is sort of a signal of something with the debasement of the dollar or of people's state of mind. Yeah, I know. What's the message?
What's the signal from gold? I don't know the foggiest notion. Look, gold has always been this sort of so-called refuge from the dollar. I assume the dollar, I mean from uncertainty. And, you know, it's had thousands of years of history of that. Is the current action of gold a signal of something? I have not the foggiest notion.
I personally wouldn't own it, but that's just, because I've never, gold has no use value. It's only a psychological, but look, I'm not demeaning it. It's for thousands of years. It's been a psychological refuge from uncertainty. But I don't know if it, I wouldn't call it, I mean, I think one could think rationally and thoughtfully about all these things.
I personally wouldn't weigh the price of gold in my thinking about what the odds are.
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