February 21, 2025 • 13 mins
Goldman Sachs Group Vice Chairman Robert Steven Kaplan speaks inflationary pressures, policy under the Trump administration, GDP growth and more with Bloomberg's Tom Keene and Paul Sweeney
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Episode Transcript
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Speaker 1 (00:00):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:08):
He is absolutely unique as a president, president, former president, governor,
vice chairman and chairman of the FED, and that no
one in the multiple years I've been covering it synthesized
Wall Street business and economics like Robert Kaplan. He was
at the Dallas FED with a real sense of the
(00:29):
border political economics, the heritage of the Dallas Fed around
Robert McTeer and the Georgia School, their research capabilities, and
were thrilled he could join us this morning for an
extended conversation. It's been way too long, Robert. Let me
cut to the chase. The definitive series, which Jerome Powell
speaks of. Is the Dallas trim mean? You are expert
(00:53):
on that with your research staff. Does the Dallas trim
mean for Robert Kaplan? Does it indicate a vector of
disinflation or a new worry back to the time of
say Wayne Angel and a higher inflation rate.
Speaker 3 (01:08):
It probably suggests inflation is a new word sticky, meaning
it's kind of going sideways.
Speaker 4 (01:17):
And we're not making improvement.
Speaker 3 (01:21):
And I would guess that if prices edge up a
little bit, it's going to be more supply side issues
from here than demand side issues.
Speaker 2 (01:32):
What I'm looking at, Robert Kaplan, is the ambiguity, the swirl,
if you will, of American economics with our politics. Is
the sum total of what our listeners and viewers understand
on this Friday. Is it towards a depressed real GDP
because of policy uncertainty.
Speaker 4 (01:53):
Yeah. So there are five big structural changes going on.
Speaker 3 (01:58):
That's a very unusual and just tick off. We're restructuring
the way we do fiscal spending and it's going to
have some jarring effect, but we're going to have less
fiscal spending. If they succeed, that would tend to lower growth.
We're going to do a regulatory review in every industry
to try to produce more productivity growth That actually might
(02:19):
be helpful. There's going to be an effort to control
the workforce. Obviously, no more people coming in across the
border entering the workforce, and we're going to deport That
tends to lower growth unless we have an effort to
revitalize legal immigration. And then we're going to try to
(02:41):
restructure the energy ecosystem in this country to lower costs.
Speaker 4 (02:45):
That's probably helpful. And then the last thing is.
Speaker 3 (02:48):
The tariffs, and the tariffs have a price effect, but
I would guess these terraffs and the uncertainty with them
on margin lower growth.
Speaker 4 (02:59):
So you've got a bunch of.
Speaker 3 (03:00):
Cross currents, and I would guess the net of it
all is I would guess, yeah, growth is probably slowing
a little bit right now, and the uncertainty as well
as when you cut government spending and you reduce workforce
growth or you reduce the growth of it, you know,
you limit you limit GDP growth. The effort is I
(03:22):
don't know if that's that concerning, and that I think
the effort of this administration is to try to create
more organic, more private sector growth, less government led growth,
so quote unquote healthier growth, but top line growth probably
is going to be somewhat weaker, I would guess, so.
Speaker 1 (03:39):
Robert, giving that backdrop in the five big structural changes
that you just outlined, if I'm the Federal Reserve, do
I just sit on the sidelines and kind of let
it all play out because the market is kind of
suggesting that the Fed's not going to do a lot
this year.
Speaker 4 (03:54):
Yeah, yeah, I think the right thing.
Speaker 3 (03:56):
Yeah, the FED is quietly drifting state left, and that's Okay.
The center stage is structural changes, executive branch changes away
from the FED, and in a period like this, I
think the wisest thing the FED could do, yes is
(04:17):
be comfortable standing pat be careful about what they say,
because I think commenting too definitively on how these structural
changes are going to play out, it's too early to
do it. Tariffs is a good example. We don't need
to know what the tariffs are going to be. And
so yeah, I think the Fed will do less. I
(04:38):
think that's fine, and I think Jay Palell's communication on
that has been good recently, where he's made clear we're
in no hurry.
Speaker 4 (04:45):
And people should be prepared.
Speaker 3 (04:47):
Their focus should be more on what's going on the
executive branch.
Speaker 4 (04:51):
And second comment I'd make, if.
Speaker 3 (04:53):
There's a rate I'm focused on, I'm much more focused
on the ten year treasury rate than i am the
Fed funds rate.
Speaker 1 (05:01):
Interesting. So, Robert, as we sit back here and we
think about the economic backdrop.
Speaker 4 (05:07):
Here, how do you view the consumer right here?
Speaker 1 (05:11):
I mean, we've heard about and talked about and noticed
in the data this K shaped economy.
Speaker 4 (05:17):
How do you think about the consumer. There's two big groups.
Speaker 3 (05:21):
It's confusing because there's two big groups, probably unlike maybe
anything I've seen in my career. There's one group that's
sixty five that's rough numbers, sixty five seventy million workers
that make fifty five grand a year or less, and
they are struggling to make ends meet. They've lost at
(05:42):
least twenty five percent purchasing power. They don't tend to
own financial assets. That group is spending, but they're watching
every dollar they're going to McDonald's and they're agonizing over
even McDonald's trading down. That's sixty five to seventy million
workers and consumers. There's another sixty five to seventy million
(06:05):
consumers fifty five and older, own their home, have a
fixed rate mortgage, half financial assets, and this recent period
has been pretty good. Yes, there's infliction, but their financial
appreciation their financial.
Speaker 4 (06:18):
Assets is offset it.
Speaker 3 (06:20):
And because their mortgage is fixed, they're really not that
sensitive to higher rates, and they are spending much more aggressive,
I guess, aggressively on services and other products. And that's
why when you see corporate earnings reports, it's confusing.
Speaker 4 (06:34):
Which of these two groups are you serving.
Speaker 3 (06:37):
If you're serving that first group, you're likely seeing a
much more challenging business. If you're serving the second group,
you know, business looks better to you.
Speaker 2 (06:46):
Robert Kaplan with us, of course, the vice chairman of
Golden Sachs, with far More's relationship with the Dallas Fed,
all sorts of academics through the year, his Harvard. We're
thrill these with us, and we said good morning to
you on YouTube in your home, at your office, all
of gold and Sacks tuned in on YouTube. I mean,
you know that's happening right now. Robert Capplin I got
(07:07):
in the New Foreign Affairs last night. It's a very
strong issue, folks in these tumultuous times. Marianna Mazakata, who
Robert Kaplan is not on the same page with the
esteemed left economist, huge economic history student Marianna Mazacato with
a wonderful essay.
Speaker 4 (07:25):
Of where we need to go.
Speaker 2 (07:26):
And Robert Caplan. I'm sure you don't agree with all
that Professor Mazacata wrote up in the New Foreign Affairs.
But the one thing she talked about, you're the most
qualified person I know is the financialization that we've seen
in the last ten, twenty, even thirty years, even before
the Great financial crisis. How do you explain the financialization
(07:51):
of the American culture and the winners you just described
in the millions of losers out there that are a reality.
Speaker 3 (08:00):
Well, so I'll put it. I'll put it this way.
And you've heard me talk about this before. I listen,
I work on an a firm now, and we run
a business, and I've run other businesses. Human capital is
the most important asset you have. And that's true for
the United States, it's true for the state of Texas
and so on. And early childhood literacy, secondary education, skills, training,
(08:27):
a digital divide, allowing people to be more productive that
is key to a growing middle class in building the economy.
And what we're seeing a little bit in the last
number of years is a divergence financially between that I
just mentioned.
Speaker 4 (08:46):
Those two groups working people.
Speaker 3 (08:50):
That don't take government money have probably been employed, done
everything right their whole career, but they don't have a
lot of savings. They may not own their home, and
they're reading in the newspaper about another group of people
out there who are rising by bounds in terms of
(09:10):
their financial wealth and financial assets. And it seems like
capitalism isn't quite working for them, and I think education
is one of the vehicles to try to address this.
But one of the issues with decelerating workforce growth is
education tends to be paid for at the state level
(09:34):
and city level. If you're a growing city or state,
you got the money to spend on getting affordable childcare,
full day versus half day, pre K.
Speaker 4 (09:45):
All these critical things.
Speaker 3 (09:47):
But if you're in a state which is probably forty
plus states whose populations are flat.
Speaker 4 (09:52):
To down, you may not have the money.
Speaker 3 (09:54):
And then philanthropy, which I'm actively involved in, can help
pick up the slack. But but I think we should be
focusing more on our human capital and a little less
on financial er and Paul.
Speaker 2 (10:07):
That's the common ground between Mazocato and Kaplin, no question
about that. The individual education effort.
Speaker 1 (10:14):
Robert, I know in your role as vice chairman of
Goldman Sachs, who speak to CEOs around the world, what
is their view of I don't know, the ability to
take risk to maybe think about M and A as
a growth scenario. Where are they in terms of how
they feel about their business and their ability to take
risk over the next couple of years.
Speaker 3 (10:35):
Okay, So on the positive side, I think the prospect
of a more balanced regulatory environment, more cost benefit analysis,
more in their words, more sensible regulation. They're they're okay
with tough regulation, but there has to be a rationale
for it. I think they're excited about that. On the
(10:56):
other hand, they're dealing with another They're dealing with the
Trey uncertainty. And if you're going to domicile more manufacturing,
for example in the United States, you really need the
corridor of Mexico and Canada for integrated supply.
Speaker 4 (11:12):
Chains and logistics.
Speaker 3 (11:14):
And when they see threat of tariffs on for example, Mexico,
which they hope doesn't happen, which could undermine logistics and
supply chains, it gives them pause and makes them want
to just slow down a little bit and be more careful.
And the other big thing is AI and technology. Now
(11:34):
we've had technology innovation for years, but if you're a
CEO right now, you've got to spend on AI in
your business. You're not sure which use cases will work
and which won't, but you got to do it. And
so I think you're going to see though a lot
of merger activity by companies who feel that, boy, if
(11:54):
we're going to take scheer in the years ahead. If
we're going to grow in the years ahead, we're more
likely to have to take share, and we're gonna have
size and scale, and the ability to ford AI investment
is more important than its ever and I think you're
going to see a desire for many companies bigger to
try to deal with that.
Speaker 2 (12:12):
I gotta squeeze this in too important. There seems to
be another threat happens every two, three, five years. It's
not specific to mister Trump on FED independence. How does
the institution of the Fed, mister Kaplan protect itself and
stay independent versus the McChesney Martin challenges decades ago.
Speaker 4 (12:33):
Yeah.
Speaker 3 (12:33):
So the thing that's always challenging at the FED, and
this isn't new, is regulatory supervisory policy at the FED
is not politically independent and has not been independent. The
tilt of it changes whether it's Obama to Trump, then
back to Biden, now back to Trump. And that you'll
(12:56):
see on setting the FED funds rate though, and the
stance of monetary policy. I think it's critical of this
country that stay political independent. Now the president can jawbone
and pressure and that's not new. May be more intense
right now, and the FED will do its job and
should to try to extent. They can't ignore that make
(13:20):
decisions only. The biggest threat to the FED, I actually
think sometimes is not from outside. Then you have to
be careful as a governor or a president. Don't try
to say things publicly you think might go over better,
or worry about the pressure. Just do what you think
is right. And as long as they manage themselves, I
(13:42):
think they'll go through this in an independent way.
Speaker 2 (13:45):
Out of time, Robert Kaplin, next time you're on, We're
doing a complete hour on do.
Speaker 4 (13:49):
We need the docks?
Speaker 2 (13:50):
Robert Kaplan of the Dallas Fed, always in forever and
now vice chairman of his Goldman Sachs
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:08):
He is absolutely unique as a president, president, former president, governor,
vice chairman and chairman of the FED, and that no
one in the multiple years I've been covering it synthesized
Wall Street business and economics like Robert Kaplan. He was
at the Dallas FED with a real sense of the
(00:29):
border political economics, the heritage of the Dallas Fed around
Robert McTeer and the Georgia School, their research capabilities, and
were thrilled he could join us this morning for an
extended conversation. It's been way too long, Robert. Let me
cut to the chase. The definitive series, which Jerome Powell
speaks of. Is the Dallas trim mean? You are expert
(00:53):
on that with your research staff. Does the Dallas trim
mean for Robert Kaplan? Does it indicate a vector of
disinflation or a new worry back to the time of
say Wayne Angel and a higher inflation rate.
Speaker 3 (01:08):
It probably suggests inflation is a new word sticky, meaning
it's kind of going sideways.
Speaker 4 (01:17):
And we're not making improvement.
Speaker 3 (01:21):
And I would guess that if prices edge up a
little bit, it's going to be more supply side issues
from here than demand side issues.
Speaker 2 (01:32):
What I'm looking at, Robert Kaplan, is the ambiguity, the swirl,
if you will, of American economics with our politics. Is
the sum total of what our listeners and viewers understand
on this Friday. Is it towards a depressed real GDP
because of policy uncertainty.
Speaker 4 (01:53):
Yeah. So there are five big structural changes going on.
Speaker 3 (01:58):
That's a very unusual and just tick off. We're restructuring
the way we do fiscal spending and it's going to
have some jarring effect, but we're going to have less
fiscal spending. If they succeed, that would tend to lower growth.
We're going to do a regulatory review in every industry
to try to produce more productivity growth That actually might
(02:19):
be helpful. There's going to be an effort to control
the workforce. Obviously, no more people coming in across the
border entering the workforce, and we're going to deport That
tends to lower growth unless we have an effort to
revitalize legal immigration. And then we're going to try to
(02:41):
restructure the energy ecosystem in this country to lower costs.
Speaker 4 (02:45):
That's probably helpful. And then the last thing is.
Speaker 3 (02:48):
The tariffs, and the tariffs have a price effect, but
I would guess these terraffs and the uncertainty with them
on margin lower growth.
Speaker 4 (02:59):
So you've got a bunch of.
Speaker 3 (03:00):
Cross currents, and I would guess the net of it
all is I would guess, yeah, growth is probably slowing
a little bit right now, and the uncertainty as well
as when you cut government spending and you reduce workforce
growth or you reduce the growth of it, you know,
you limit you limit GDP growth. The effort is I
(03:22):
don't know if that's that concerning, and that I think
the effort of this administration is to try to create
more organic, more private sector growth, less government led growth,
so quote unquote healthier growth, but top line growth probably
is going to be somewhat weaker, I would guess, so.
Speaker 1 (03:39):
Robert, giving that backdrop in the five big structural changes
that you just outlined, if I'm the Federal Reserve, do
I just sit on the sidelines and kind of let
it all play out because the market is kind of
suggesting that the Fed's not going to do a lot
this year.
Speaker 4 (03:54):
Yeah, yeah, I think the right thing.
Speaker 3 (03:56):
Yeah, the FED is quietly drifting state left, and that's Okay.
The center stage is structural changes, executive branch changes away
from the FED, and in a period like this, I
think the wisest thing the FED could do, yes is
(04:17):
be comfortable standing pat be careful about what they say,
because I think commenting too definitively on how these structural
changes are going to play out, it's too early to
do it. Tariffs is a good example. We don't need
to know what the tariffs are going to be. And
so yeah, I think the Fed will do less. I
(04:38):
think that's fine, and I think Jay Palell's communication on
that has been good recently, where he's made clear we're
in no hurry.
Speaker 4 (04:45):
And people should be prepared.
Speaker 3 (04:47):
Their focus should be more on what's going on the
executive branch.
Speaker 4 (04:51):
And second comment I'd make, if.
Speaker 3 (04:53):
There's a rate I'm focused on, I'm much more focused
on the ten year treasury rate than i am the
Fed funds rate.
Speaker 1 (05:01):
Interesting. So, Robert, as we sit back here and we
think about the economic backdrop.
Speaker 4 (05:07):
Here, how do you view the consumer right here?
Speaker 1 (05:11):
I mean, we've heard about and talked about and noticed
in the data this K shaped economy.
Speaker 4 (05:17):
How do you think about the consumer. There's two big groups.
Speaker 3 (05:21):
It's confusing because there's two big groups, probably unlike maybe
anything I've seen in my career. There's one group that's
sixty five that's rough numbers, sixty five seventy million workers
that make fifty five grand a year or less, and
they are struggling to make ends meet. They've lost at
(05:42):
least twenty five percent purchasing power. They don't tend to
own financial assets. That group is spending, but they're watching
every dollar they're going to McDonald's and they're agonizing over
even McDonald's trading down. That's sixty five to seventy million
workers and consumers. There's another sixty five to seventy million
(06:05):
consumers fifty five and older, own their home, have a
fixed rate mortgage, half financial assets, and this recent period
has been pretty good. Yes, there's infliction, but their financial
appreciation their financial.
Speaker 4 (06:18):
Assets is offset it.
Speaker 3 (06:20):
And because their mortgage is fixed, they're really not that
sensitive to higher rates, and they are spending much more aggressive,
I guess, aggressively on services and other products. And that's
why when you see corporate earnings reports, it's confusing.
Speaker 4 (06:34):
Which of these two groups are you serving.
Speaker 3 (06:37):
If you're serving that first group, you're likely seeing a
much more challenging business. If you're serving the second group,
you know, business looks better to you.
Speaker 2 (06:46):
Robert Kaplan with us, of course, the vice chairman of
Golden Sachs, with far More's relationship with the Dallas Fed,
all sorts of academics through the year, his Harvard. We're
thrill these with us, and we said good morning to
you on YouTube in your home, at your office, all
of gold and Sacks tuned in on YouTube. I mean,
you know that's happening right now. Robert Capplin I got
(07:07):
in the New Foreign Affairs last night. It's a very
strong issue, folks in these tumultuous times. Marianna Mazakata, who
Robert Kaplan is not on the same page with the
esteemed left economist, huge economic history student Marianna Mazacato with
a wonderful essay.
Speaker 4 (07:25):
Of where we need to go.
Speaker 2 (07:26):
And Robert Caplan. I'm sure you don't agree with all
that Professor Mazacata wrote up in the New Foreign Affairs.
But the one thing she talked about, you're the most
qualified person I know is the financialization that we've seen
in the last ten, twenty, even thirty years, even before
the Great financial crisis. How do you explain the financialization
(07:51):
of the American culture and the winners you just described
in the millions of losers out there that are a reality.
Speaker 3 (08:00):
Well, so I'll put it. I'll put it this way.
And you've heard me talk about this before. I listen,
I work on an a firm now, and we run
a business, and I've run other businesses. Human capital is
the most important asset you have. And that's true for
the United States, it's true for the state of Texas
and so on. And early childhood literacy, secondary education, skills, training,
(08:27):
a digital divide, allowing people to be more productive that
is key to a growing middle class in building the economy.
And what we're seeing a little bit in the last
number of years is a divergence financially between that I
just mentioned.
Speaker 4 (08:46):
Those two groups working people.
Speaker 3 (08:50):
That don't take government money have probably been employed, done
everything right their whole career, but they don't have a
lot of savings. They may not own their home, and
they're reading in the newspaper about another group of people
out there who are rising by bounds in terms of
(09:10):
their financial wealth and financial assets. And it seems like
capitalism isn't quite working for them, and I think education
is one of the vehicles to try to address this.
But one of the issues with decelerating workforce growth is
education tends to be paid for at the state level
(09:34):
and city level. If you're a growing city or state,
you got the money to spend on getting affordable childcare,
full day versus half day, pre K.
Speaker 4 (09:45):
All these critical things.
Speaker 3 (09:47):
But if you're in a state which is probably forty
plus states whose populations are flat.
Speaker 4 (09:52):
To down, you may not have the money.
Speaker 3 (09:54):
And then philanthropy, which I'm actively involved in, can help
pick up the slack. But but I think we should be
focusing more on our human capital and a little less
on financial er and Paul.
Speaker 2 (10:07):
That's the common ground between Mazocato and Kaplin, no question
about that. The individual education effort.
Speaker 1 (10:14):
Robert, I know in your role as vice chairman of
Goldman Sachs, who speak to CEOs around the world, what
is their view of I don't know, the ability to
take risk to maybe think about M and A as
a growth scenario. Where are they in terms of how
they feel about their business and their ability to take
risk over the next couple of years.
Speaker 3 (10:35):
Okay, So on the positive side, I think the prospect
of a more balanced regulatory environment, more cost benefit analysis,
more in their words, more sensible regulation. They're they're okay
with tough regulation, but there has to be a rationale
for it. I think they're excited about that. On the
(10:56):
other hand, they're dealing with another They're dealing with the
Trey uncertainty. And if you're going to domicile more manufacturing,
for example in the United States, you really need the
corridor of Mexico and Canada for integrated supply.
Speaker 4 (11:12):
Chains and logistics.
Speaker 3 (11:14):
And when they see threat of tariffs on for example, Mexico,
which they hope doesn't happen, which could undermine logistics and
supply chains, it gives them pause and makes them want
to just slow down a little bit and be more careful.
And the other big thing is AI and technology. Now
(11:34):
we've had technology innovation for years, but if you're a
CEO right now, you've got to spend on AI in
your business. You're not sure which use cases will work
and which won't, but you got to do it. And
so I think you're going to see though a lot
of merger activity by companies who feel that, boy, if
(11:54):
we're going to take scheer in the years ahead. If
we're going to grow in the years ahead, we're more
likely to have to take share, and we're gonna have
size and scale, and the ability to ford AI investment
is more important than its ever and I think you're
going to see a desire for many companies bigger to
try to deal with that.
Speaker 2 (12:12):
I gotta squeeze this in too important. There seems to
be another threat happens every two, three, five years. It's
not specific to mister Trump on FED independence. How does
the institution of the Fed, mister Kaplan protect itself and
stay independent versus the McChesney Martin challenges decades ago.
Speaker 4 (12:33):
Yeah.
Speaker 3 (12:33):
So the thing that's always challenging at the FED, and
this isn't new, is regulatory supervisory policy at the FED
is not politically independent and has not been independent. The
tilt of it changes whether it's Obama to Trump, then
back to Biden, now back to Trump. And that you'll
(12:56):
see on setting the FED funds rate though, and the
stance of monetary policy. I think it's critical of this
country that stay political independent. Now the president can jawbone
and pressure and that's not new. May be more intense
right now, and the FED will do its job and
should to try to extent. They can't ignore that make
(13:20):
decisions only. The biggest threat to the FED, I actually
think sometimes is not from outside. Then you have to
be careful as a governor or a president. Don't try
to say things publicly you think might go over better,
or worry about the pressure. Just do what you think
is right. And as long as they manage themselves, I
(13:42):
think they'll go through this in an independent way.
Speaker 2 (13:45):
Out of time, Robert Kaplin, next time you're on, We're
doing a complete hour on do.
Speaker 4 (13:49):
We need the docks?
Speaker 2 (13:50):
Robert Kaplan of the Dallas Fed, always in forever and
now vice chairman of his Goldman Sachs
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