War sends cargo to the skies
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How does military conflict affect global cargo routes?
I'm just going to go ahead and say that risk is still macroeconomic worry number one. From American Public Media, this is Marketplace.
In Los Angeles, I'm Kyle Rizzo. It is Tuesday. Today, this one is the 3rd of March. Good as always to have you along, everybody. We are four days into things in the Middle East, and the only thing that is clear is that there are a whole lot of things that aren't clear. So we're going to talk about that and what that means economy-wise. Greg Ip is at The Wall Street Journal. He also joins us on the occasional Friday. Hey, Greg.
Hey, Kyle. How are you?
I'm all right, thanks. Test my premise, risk. What is your assessment of the risk tolerance, the risk atmosphere out there?
Well, you wake up to a new war in the Middle East and obviously people are worried and that adds to the risk in the whole geopolitical economic situation. And this comes at a time when people are already kind of on edge about like the AI bubble bursting or maybe everybody losing their jobs to AI, still some inflation pressure out there. So it kind of adds to an overall mix of anxiety out there. Now, all that said, I would say that the reaction in the two days of trading we've had since the war began has been muted. On Monday, oil rose, but it didn't rise as much as a lot of analysts had expected. Stocks fell off, sold off, but at the end of the day, mostly unchanged. Tuesday, we wake up and it's almost like a delayed reaction.
It's just, oh, wait a minute, there's a war going on. Oil goes up some more and stocks fell. But even so, you know, I've been through a lot of these things over the years. Right now, it still feels like a muted reaction by the markets to what's going on in Iran.
Talk to me about the dollar and bonds, would you? Because the dollar has been rallying. Bond yields are going up, which means people are selling bonds. Explain all that.
Sure thing. So let's talk about the bonds part. That's a little bit easier to explain. So when people worry about inflation, for example, because oil prices are going up, they worry that the Federal Reserve will not be able to lower interest rates as much if interest rates aren't going to go down. That means bond yields are probably supposed to be higher than they already are. When bond yields go up, prices go down. And that is exactly what we've seen happen in the last couple of days. A small decline in bond prices, a small increase in bond yields. So if you were hoping for some relief last week, mortgage rates dropped below 6%. Don't expect them to go much lower. Maybe they go a little bit higher the next day or two.
The issue with the dollar is an interesting one, Kai, because the dollar did go up, which is sort of what is supposed to happen when there's a war because the dollar is a safe haven. But it's been a break from the prior year when you had all this geopolitical conflict and the dollar was going down. And what that, I think, told us was that the U.S., at least for most of the past year, was now being – seen as the source of instability because of trade wars and stuff like that, not the place you go to escape instability. The last two days are a little bit of a break from that.
The the caveats of this next question, of course, is that you're a business economics guy and not a geopolitics guy. But what what do you imagine the market? Hmm.
What are the implications of air cargo demand in conflict zones?
How to phrase this. What do you imagine the president's pain point to be vis-a-vis the markets? Is he looking at stocks? Is he looking at bond yields? Do you think there's a thing that's going to make him go, you know what, let's get out of this in a hurry?
You know, I think all those things are going to like bear on that, Kai. I think the president goes into this war on the premise that within four to six weeks, he can achieve most of his aims, which is really basically the capitulation of the regime in Iran to his key demands, stopping nuclear enrichment, stopping ballistic missile development, stopping support for proxies. And so I suppose I would assume that he steeled himself there.
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Chapters
7 chapters
1
How does military conflict affect global cargo routes?
0:01–3:14
2
What are the implications of air cargo demand in conflict zones?
3:14–7:08
3
How do geopolitical tensions influence oil prices and market reactions?
7:08–11:37
4
What are the current trends in retail earnings and consumer behavior?
11:37–15:22
5
How are vehicle sales impacted by economic uncertainty?
15:22–18:30
6
What is the conflict between Compass and Zillow about?
18:30–22:52
7
How do exclusive listings affect home buyers and sellers?
22:52–25:58