October 16, 2025 • 20 mins
This week, the World Bank and the International Monetary Fund are holding their annual meetings in Washington, DC and so is the Institute of International Finance. It’s brought a who’s who of central bankers and finance ministers to the US capital — in the midst of a government shutdown — to discuss the most pressing issues facing the global economy.
Bloomberg reporters and editors from all over the world have also made the pilgrimage to Washington, including Brendan Murray, who oversees global trade coverage, along with Joe Weisenthal and Tracy Alloway, the hosts of Odd Lots.
On today’s Big Take podcast, they join host David Gura to share what they’re hearing at official events and on the sidelines of these meetings and what it reveals about the health of the economy and global markets.
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Speaker 1 (00:00):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:09):
Right now, many of the most prominent and powerful people
in economics and finance are in Washington. The World Bank
and the International Monetary Fund are holding their annual meetings,
and so is the Institute of International Finance. It's a
who's who of central bankers and finance ministers and a
chance for them to coordinate how they respond to big
issues in the global economy. On the sidelines, Treasury Secretary
(00:32):
Scott Bessett tried to rally support from US allies and
condemn China for proposing new export restrictions on critical minerals.
Speaker 3 (00:40):
This should be a clear sign to our allies that
we must work together, and work together we will. There
will be a series of meetings this week during World
Bank IMF week, and.
Speaker 2 (00:52):
We are all on It's a moment for policymakers to
take stock of the global economy and what's driving in.
Andrew Bailey, the Governor of the Bank of England, is
one of them.
Speaker 3 (01:02):
We've got to look at productivity growth and I think
we have to say what's the next likely general purpose technology? Well,
it's related to AI. It seems to me.
Speaker 2 (01:12):
Who else has been making the pilgrimage to Washington this week.
Bloomberg reporters and editors from all over the world, including
Brendan Murray, who heads up our coverage of global trade,
along with Joe Wisenthal and Tracy Alloway, hosts of Odd Lots,
and they've been watching the dynamics between President Trump and
other world leaders, many of whom are still trying to
strike trade deals with the US.
Speaker 4 (01:33):
President Trump is kind of realizing that if you're important
enough in the global financial system, and you drive hard
enough of a bargain, you can basically get what you want.
Speaker 2 (01:44):
Tracy and Joe say, these meetings are taking place at
a time when big multilateral institutions, including the World Bank
and the IMF, are under threat, and at a time
when the US capital is in disarray. The federal government
is shut down.
Speaker 1 (01:59):
I think this is like this direct link that you
can draw between the fact that the government is shut
down right now for who knows how long, and the
fact that all of these sort of institutions underneath them
there's this erosion, and that is why there's so much
concern about the stability of these entities.
Speaker 2 (02:21):
I'm David Gerrett, and this is the big take from
Bloomberg News Today on the show, a look at the
health of the economy and global markets, with Tracy Alloway
and Joe Wisenthal of Odd Lots and Bloomberg's Brendan Murray
what they're hearing at panels and lectures and on the
sidelines of these big meetings about what the future holds
for the economy and the international financial system and for
(02:43):
the IMF, the World Bank, and the IIF themselves. Bloomberg's
Brendan Murray is spending this week in Washington, in DC's
Foggy Bottom neighborhood, which is home to the World Bank
and the International Monetary Fund. I asked him what he's
(03:04):
been hearing at their annual meetings.
Speaker 5 (03:06):
So basically, all the main topics that are affecting the
world economy are on the agenda here. I would describe
the mood as sort of cautiously optimistic so far, with
the caveat that we haven't seen the worst of what
people think might happen in the situation that we're in,
with tariffs being completely unpredictable, rising government debt, and all
(03:32):
the other financial strains that are coming to bear on
some of these economies. So there's a lot of concern
that we're seeing sort of a slow burn happen rather
than a sudden shock to the global economy.
Speaker 2 (03:44):
As we move from the IMF toif Tracy is cautious
optimism ruling the day. There at that meeting as well.
Speaker 4 (03:51):
Well, I wasn't something called Debt Con which is held
every year over at Georgetown. It features a lot of
sought debt con bt coo N. This was Debt Con
eight from Crase you were wondering.
Speaker 2 (04:07):
Must be.
Speaker 4 (04:09):
But it features a lot of you know, policymakers, officials,
sovereign debt lawyers, those types of people. And there were
a couple of people from the IMF there, and I
asked them to give me some sort of on the
ground color of what they were hearing in their own meetings,
and they said that everyone was kind of surprised by
how optimistic Crystallina Georgieva, the director, sounded in her sort
(04:34):
of opener where they upgraded the economic outlook for the
world and basically said, you know, things are looking pretty
resilient so far. We've managed to weather all these tariffs
quite well. But they were telling me that a few
days before there was a curtain raiser by one of
the deputy directors, and he struck a very very different tone,
more quietly behind closed doors, and it was a little
(04:57):
bit more dire, a little bit more passive. I don't
if you can be a little bit more dire, certainly
more pessimistic than what we heard in the official you know,
economic projection update. So take of that what you will.
Speaker 2 (05:10):
Right, let's talk a bit about the economy sort of.
Brennan will turn to you first. I've covered these meetings
before and they're kind of this interesting prism through which
you can get a sense of how the global economy
is doing and what people think about it. So there's
the anecdotal side of things. Then you're getting these forecasts,
these data from the institutions themselves. Could you just walk
us through what the IMF said, it's chief economists said
(05:30):
about how it's thinking about the path forward here for
the global economy.
Speaker 5 (05:34):
The IMF chief economists laid out basically four major risk
areas that they're looking at.
Speaker 6 (05:41):
Besides straight tensions, I want to quickly flag four other
downside risks.
Speaker 5 (05:46):
Now, the IMF is kind of like the lifeguard, you know,
they sort of blow the whistle when you get a
little bit too far out beyond the waves, or you
get too close to a riptide. They sort of this
is what they do. And they pointed to the AI
boom and they said, you know, this looks a lot
like the com bubble of twenty five years ago.
Speaker 6 (06:01):
It was the Internet then, it is AI now.
Speaker 5 (06:04):
They pointed to the erosion of credibility and institutions, which
is a way of saying, you know, Donald Trump is
chipping away at the Fed's credibility when it tells it
to lower interest rates.
Speaker 6 (06:17):
We are seeing rising pressures on central banks.
Speaker 5 (06:20):
They also talked about the rise of government debt and
how there needs to be more fiscal buffers.
Speaker 6 (06:26):
In too many countries, insufficient progress has been made to
rebuild fiscal space.
Speaker 5 (06:31):
And just generally they look at the tone the breakdown
in global integration as a risk overall that could sort
of create this permanent or structural headwind to growth potential
over the longer term. So instead of growing, you know,
at a healthy three to three and a half to
four percent clip, we're looking at three two and a
(06:54):
half to three percent over the medium to longer term.
Speaker 6 (06:56):
The tariff shock is here, and it is further dimming
already weak growth prospects.
Speaker 5 (07:02):
So those are the main sort of themes that the IMF,
the lifeguard of the global economy, is raising and wants
governments to adopt sort of policies that are aware of
those risks.
Speaker 1 (07:14):
I think there's like this direct link that you can
draw between the fact that the government is shut down
right now for who knows how long, and the fact
that all of these sort of institutions is Brendan described
like the erosion underneath them. There is this erosion, and
that is why there's so much concern about the stability
(07:35):
of these entities, because the political will to support them
does not exist. And I don't think it's just a
US story either. I think around the world you would
see the same sort of attacks on either independent or
multilateral institutions. I think it's happening everywhere.
Speaker 2 (07:51):
Tracy, let me pick up on that and Joe suggesting
it's not just a US story. But we do see
the US playing this incredibly outsized role in determining the
course of the global economy right now. And I wonder
what you make of that. Is that novelists you see
it when it comes to what the US is pioneering
in terms of trade policy, and it's tariffs that's put
in place. How much determinisment has about the future of
(08:12):
the global economy, I.
Speaker 4 (08:13):
Mean, I think it has an enormous amount.
Speaker 3 (08:15):
Right.
Speaker 4 (08:15):
Trump is kind of realizing that if you're important enough
in the global financial system and to drive hard enough
of a bargain, you can basically get what you want.
But we are seeing more and more countries potentially trying
to solve some of their problems or maybe achieve some
of their strategic targets by doing it unilaterally. Right, and again,
(08:36):
the US is kind of the poster child for this.
So take a look at Argentina. Milay was in town
to finalize the twenty billion dollar swap slash bailout that
he's getting from the US. Argentina has gotten many many
bailouts from the IMF. Previously, I'd lost count I know,
(08:57):
I tried to count them up and I stopped when
I went past twenty. So there we go, Argentina serial
defaulter Cereal Bailey. But now the US is stepping in
and saying like, all right, well, we're going to use
the US Treasury to give you this twenty billion dollar
What is essentially alone, and we're not going to tie
any conditions to it because you are a strategic ally
(09:19):
of ours. And in fact, Trump actually said this week,
not only are we not tying conditions to it, the
only real condition we seem to have with it is
that Malay actually wins the midterms, which is highly, highly
unusual in the way America sort of exercises its international influence.
So I think we're probably going to see more of that.
Speaker 2 (09:41):
Gran What do people at the IMF make of this? Here?
You have the US effectively going alone after seeing the
IMF get burned over and over again. What are these
global policy makers make of what the US is doing here?
Speaker 5 (09:52):
Yeah, I think you see a lot of sort of
strained attempts at putting on a brave face with what
the US is doing, and you hear policymakers say things like, well,
you know, the US has a huge economy, but it's
really only fifteen percent of global trade, and the rest
of global trade is happening at a fairly robust rate
without the US. I think what you're seeing is, on
(10:15):
one hand, the sort of shock at what's happening and
the upending of the global order, and an effort to
hold together the order that has kept it, you know,
globalization moving for decades.
Speaker 2 (10:30):
Now coming up the markets AI and how these international
organizations view their future at a time when they face
so much hostility. This week, as meetings got underway at
(10:51):
the International Monetary Fund, the World Bank, and the Institute
of International Finance, the trade war between the US and
China escalated. That spooked in Ess, who it seemed had
gotten pretty used to all the back and forths and skirmishes.
I asked Joe and Tracy why this moment had such
a profound impact on the markets.
Speaker 1 (11:09):
There are probably two things that have driven the market higher.
Which is one is AI we all know about, and
that is an industry that is an investment mega trend
that does not seem to be particularly sensitive to tariffs.
And then I think people had sort of forgotten about tariffs,
and you know, the idea that it all gets smoothed
out in the end wasn't that big of a deal.
(11:30):
It's sort of minor. It doesn't really affect the growth areas.
But I think you could argue that, yes, we did
have a lot of volatility last week, but in the
grand scheme of things, not that much so. I think
it was just sort of like under the conditions in
which there's so much enthusiasm, so much specuative money, so
much hot money flowing into risky assets, the reminder that yes,
(11:51):
trade is a live issue. Many of these things haven't
been settled to us is vulnerable still to the cutoff
of various things such as rare earth metalism and so forth.
I would say it gave people a little time for
a breather.
Speaker 4 (12:04):
I thought you were going to say it was a
healthy correction, Joe.
Speaker 1 (12:06):
It was a healthy if we're on TV, that's what
is a healthy. We needed that, we needed this correction.
This is very healthy, Yeah, Tracy.
Speaker 2 (12:15):
When you look at the agenda for the IF meeting,
the IMF meeting, World Bank meeting, there are a lot
of mentions of AI, of artificial intelligence, and there is
kind of this infusion of more skepticism, or if not
more skepticism, at least a sense that all of this
money has been spent, is being spent and it has
to amount to something sooner rather than later. Yeah, are
we talking about it differently?
Speaker 4 (12:35):
You need to see actual cash flows at some point.
I mean, I think what's really changed is people are
starting to get more nervous about some of the very
intricate and complex financing arrangements that we're seeing, you know,
stuff where like in video sells chips to so and
so and then they use that money to make a
loan to so and so, and then they send.
Speaker 2 (12:53):
That money back to her.
Speaker 4 (12:54):
It's very circular, very incestuous, and it's the kind of
thing that's going to remind people of you know, previous bubbles.
So that's happening. What I would say is there is
still so much enthusiasm out there about the future potential
of AI, and the vast majority of investors that you
speak to will say something like, oh yeah, sure, it
(13:15):
might be frothy now. You know, maybe some of these
financing arrangements you know, are pumping up values or concealing
real cash flow and things like that. But we know
this is going to be the next big thing. We
know they are going to be winners emerging from the space.
In the same way that even though we had the
dot com bubble burst, we had winners that emerged from
(13:37):
that early era of the Internet and went on to
make a lot of money. So I think everyone is
sort of diving in on the assumption that they can
either get out first before everyone else, or they're the
ones that are going to be able to identify the real,
true winning players in all of this.
Speaker 1 (13:54):
We haven't had that moment yet where some big corporate
and or someone says, you know what, we are not
getting an ROI from this. No one has ever said
in a major way, you know what, this is not productive.
If there is like a bubble, if people are getting
out over their skis, it would end in theory at
(14:15):
that moment that some really big investor says, you know what,
this is like a this is just a thing that
predicts the next word and doesn't really do much. That
hasn't happened yet. And so there's that faith, and there's
the ongoing investment, and there's that fear of missing out,
and so far that aspect of it hasn't really changed.
Speaker 2 (14:32):
Brendan. There's still some blindness, I guess that we have
about what this is going to mean for the economy.
As you kind of dig through what's in the IMP's
latest forecast, the kind of commentary around it, are we
any closer to maybe not knowing but having a sense
of what this is going to mean for productivity. If
all that's promised comes to pass.
Speaker 5 (14:50):
You know, we can theorize that all of this investment
that's going into data centers and all the capacity that
needs to be built up, you know, will create a
productivity boomlet at least no one really knows. It sounds
great on paper, and for the US to lead that.
Donald Trump is very proud to be part of it
(15:10):
and invites it. But what he really needs to do
is create the blue collar you know, the sort of
romanticized version of factory jobs that he promised his base,
and we've yet to see that. Politically, what matters more
than anything right now is factory expansions in the US
(15:31):
between now and next November, and we'll know the answer
to those sooner than we will know the answer to
the productivity impact of AI.
Speaker 2 (15:38):
Tracy, I can't resist asking you about something else that's
in the backdrop here, and that is the earnings that
we've gotten from the big banks this week, and there
are more to come from regional, smaller banks in the
coming days. But we've seen them beat a lot of
analyst expectations. Goldman had a record quarter, Morgan Stanley had
a record quarter. It's because of trading, but it's because
of deal making as well, And I'm curious how you
(15:59):
think about that and what it says about the environment
we're in. We're seeing these institutions doing so well here
in the third quarter of twenty twenty five.
Speaker 4 (16:09):
Mostly what it says is that in a period of
sluggish growth, or in a period where you are anticipating
further sluggish growth, one way to actually grow your way
out of that is acquisitions, right, buy more companies, get bigger,
have more pricing power. This has been the sort of
dominant theme of I guess late stage American corporate capitalism
(16:30):
for a while now. We saw that for the past
few years. Immediately after the pandemic, people were trying their
best to get pricing power in the market. Then they
raise prices. Maybe they sell fewer items, but they make
that up in terms of the pricing, and it seemed
to work out well for a lot of them. We
had record corporate profits. So I'm not really surprised that
(16:51):
we're seeing a continuation of that strategy. What it means
for overall inflation, especially when the Trump administration has been
telling people that tariffs aren't going to cause your prices
to rise the foreign countries pay them. I think we're gonna.
Speaker 1 (17:07):
See It does feel like when we had the initial
sort of Trump rally right after the election, one of
the hopes was like, oh, we're going to see like
Wall Street deregulation.
Speaker 2 (17:18):
Right.
Speaker 1 (17:19):
This is like one of if you think about like
the pillars of the stool or the legs of the
stool of why there was this boom, It's like, Okay,
we're gonna get tax cuts, We're gonna get deregulation. It
feels like the deregulation component is being delivered upon when
you look at all of this deal making activity, when
you look at sort of the enthusiasm with various things
related to fintech and crypto, in which it doesn't really
(17:41):
feel like there's any rules anymore at all, and if
you broke the rules in the past, they're probably not
gonna do anything about it. This sort of the animal
spirits and the deregulation element of this, that part seems
to be a real vindication of that thesis.
Speaker 2 (17:57):
I think of how contemptuous President Trump is about out
international organizations, how much he's made an effort to undermine them.
We had Scott Best at the Treasury Sectory come to
the IMF a few months ago and say we're not
going to effectively, we're not going to burn this place down,
but we want to make some significant changes to it. Brendon,
let me put the last question to you, in light
of all of that hostility, if that's the right word,
(18:18):
how do you think the IMF and the World Bank
and the if these institutions think about their future. Yes,
in the near term, but the medium term as well.
Speaker 5 (18:26):
What we've seen in the past six months is the
US kind of going at things unilaterally, saying, look, we're
in this for ourselves. You guys, can you know, whether
we're talking about NATO or whether we're talking about trade,
you know, you're on your own basically, and we'll take
care of ourselves and you're going to have to learn
to do the same for yourself. And I think what
(18:47):
we're going to see in the months ahead is there
aren't going to be times when the US is going
to need its traditional allies. We're seeing it with China
and rare Erse right now. Scott Bessett was saying, you know,
we need a cord dated response to counter what China
is trying to do with controlling rare earths, and so
you know, can you have it both ways? Can you
(19:07):
put tariffs on your allies them not retaliate and then
ask them to cooperate with you when you need them to.
And I think we're going to find out, and this
applies to whether it's the IMF, the World Bank, or
the World Trade Organization or any of these multilateral institutions.
We're going to find out if the US can really
have it both ways because economies like the European Union,
(19:28):
they're taking note of all this and they will bake
that into their calculus as to Okay, well you want
us to cooperate, now, how about giving us a little
bit of relief on tariffs. So there's going to be
this kind of push and pull between unilateralism and the
old vestiges of multilateralism I think going forward.
Speaker 2 (19:46):
Brendan, Joe Tracy, thank you very much, and I'm looking
forward to debt Con nine.
Speaker 1 (19:50):
Thanks for having us, Thanks so much.
Speaker 5 (19:52):
Thanks David.
Speaker 2 (19:59):
This is the Big Take from Bloomberg News. I'm David Gerra.
To get more from the Big Take and unlimited access
to all of Bloomberg dot com, subscribe today at Bloomberg
dot com slash podcast offer. If you'd like this episode,
make sure to follow and review The Big Take wherever
you listen to podcasts. It helps people find the show.
Thanks for listening. We'll be back tomorrow
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:09):
Right now, many of the most prominent and powerful people
in economics and finance are in Washington. The World Bank
and the International Monetary Fund are holding their annual meetings,
and so is the Institute of International Finance. It's a
who's who of central bankers and finance ministers and a
chance for them to coordinate how they respond to big
issues in the global economy. On the sidelines, Treasury Secretary
(00:32):
Scott Bessett tried to rally support from US allies and
condemn China for proposing new export restrictions on critical minerals.
Speaker 3 (00:40):
This should be a clear sign to our allies that
we must work together, and work together we will. There
will be a series of meetings this week during World
Bank IMF week, and.
Speaker 2 (00:52):
We are all on It's a moment for policymakers to
take stock of the global economy and what's driving in.
Andrew Bailey, the Governor of the Bank of England, is
one of them.
Speaker 3 (01:02):
We've got to look at productivity growth and I think
we have to say what's the next likely general purpose technology? Well,
it's related to AI. It seems to me.
Speaker 2 (01:12):
Who else has been making the pilgrimage to Washington this week.
Bloomberg reporters and editors from all over the world, including
Brendan Murray, who heads up our coverage of global trade,
along with Joe Wisenthal and Tracy Alloway, hosts of Odd Lots,
and they've been watching the dynamics between President Trump and
other world leaders, many of whom are still trying to
strike trade deals with the US.
Speaker 4 (01:33):
President Trump is kind of realizing that if you're important
enough in the global financial system, and you drive hard
enough of a bargain, you can basically get what you want.
Speaker 2 (01:44):
Tracy and Joe say, these meetings are taking place at
a time when big multilateral institutions, including the World Bank
and the IMF, are under threat, and at a time
when the US capital is in disarray. The federal government
is shut down.
Speaker 1 (01:59):
I think this is like this direct link that you
can draw between the fact that the government is shut
down right now for who knows how long, and the
fact that all of these sort of institutions underneath them
there's this erosion, and that is why there's so much
concern about the stability of these entities.
Speaker 2 (02:21):
I'm David Gerrett, and this is the big take from
Bloomberg News Today on the show, a look at the
health of the economy and global markets, with Tracy Alloway
and Joe Wisenthal of Odd Lots and Bloomberg's Brendan Murray
what they're hearing at panels and lectures and on the
sidelines of these big meetings about what the future holds
for the economy and the international financial system and for
(02:43):
the IMF, the World Bank, and the IIF themselves. Bloomberg's
Brendan Murray is spending this week in Washington, in DC's
Foggy Bottom neighborhood, which is home to the World Bank
and the International Monetary Fund. I asked him what he's
(03:04):
been hearing at their annual meetings.
Speaker 5 (03:06):
So basically, all the main topics that are affecting the
world economy are on the agenda here. I would describe
the mood as sort of cautiously optimistic so far, with
the caveat that we haven't seen the worst of what
people think might happen in the situation that we're in,
with tariffs being completely unpredictable, rising government debt, and all
(03:32):
the other financial strains that are coming to bear on
some of these economies. So there's a lot of concern
that we're seeing sort of a slow burn happen rather
than a sudden shock to the global economy.
Speaker 2 (03:44):
As we move from the IMF toif Tracy is cautious
optimism ruling the day. There at that meeting as well.
Speaker 4 (03:51):
Well, I wasn't something called Debt Con which is held
every year over at Georgetown. It features a lot of
sought debt con bt coo N. This was Debt Con
eight from Crase you were wondering.
Speaker 2 (04:07):
Must be.
Speaker 4 (04:09):
But it features a lot of you know, policymakers, officials,
sovereign debt lawyers, those types of people. And there were
a couple of people from the IMF there, and I
asked them to give me some sort of on the
ground color of what they were hearing in their own meetings,
and they said that everyone was kind of surprised by
how optimistic Crystallina Georgieva, the director, sounded in her sort
(04:34):
of opener where they upgraded the economic outlook for the
world and basically said, you know, things are looking pretty
resilient so far. We've managed to weather all these tariffs
quite well. But they were telling me that a few
days before there was a curtain raiser by one of
the deputy directors, and he struck a very very different tone,
more quietly behind closed doors, and it was a little
(04:57):
bit more dire, a little bit more passive. I don't
if you can be a little bit more dire, certainly
more pessimistic than what we heard in the official you know,
economic projection update. So take of that what you will.
Speaker 2 (05:10):
Right, let's talk a bit about the economy sort of.
Brennan will turn to you first. I've covered these meetings
before and they're kind of this interesting prism through which
you can get a sense of how the global economy
is doing and what people think about it. So there's
the anecdotal side of things. Then you're getting these forecasts,
these data from the institutions themselves. Could you just walk
us through what the IMF said, it's chief economists said
(05:30):
about how it's thinking about the path forward here for
the global economy.
Speaker 5 (05:34):
The IMF chief economists laid out basically four major risk
areas that they're looking at.
Speaker 6 (05:41):
Besides straight tensions, I want to quickly flag four other
downside risks.
Speaker 5 (05:46):
Now, the IMF is kind of like the lifeguard, you know,
they sort of blow the whistle when you get a
little bit too far out beyond the waves, or you
get too close to a riptide. They sort of this
is what they do. And they pointed to the AI
boom and they said, you know, this looks a lot
like the com bubble of twenty five years ago.
Speaker 6 (06:01):
It was the Internet then, it is AI now.
Speaker 5 (06:04):
They pointed to the erosion of credibility and institutions, which
is a way of saying, you know, Donald Trump is
chipping away at the Fed's credibility when it tells it
to lower interest rates.
Speaker 6 (06:17):
We are seeing rising pressures on central banks.
Speaker 5 (06:20):
They also talked about the rise of government debt and
how there needs to be more fiscal buffers.
Speaker 6 (06:26):
In too many countries, insufficient progress has been made to
rebuild fiscal space.
Speaker 5 (06:31):
And just generally they look at the tone the breakdown
in global integration as a risk overall that could sort
of create this permanent or structural headwind to growth potential
over the longer term. So instead of growing, you know,
at a healthy three to three and a half to
four percent clip, we're looking at three two and a
(06:54):
half to three percent over the medium to longer term.
Speaker 6 (06:56):
The tariff shock is here, and it is further dimming
already weak growth prospects.
Speaker 5 (07:02):
So those are the main sort of themes that the IMF,
the lifeguard of the global economy, is raising and wants
governments to adopt sort of policies that are aware of
those risks.
Speaker 1 (07:14):
I think there's like this direct link that you can
draw between the fact that the government is shut down
right now for who knows how long, and the fact
that all of these sort of institutions is Brendan described
like the erosion underneath them. There is this erosion, and
that is why there's so much concern about the stability
(07:35):
of these entities, because the political will to support them
does not exist. And I don't think it's just a
US story either. I think around the world you would
see the same sort of attacks on either independent or
multilateral institutions. I think it's happening everywhere.
Speaker 2 (07:51):
Tracy, let me pick up on that and Joe suggesting
it's not just a US story. But we do see
the US playing this incredibly outsized role in determining the
course of the global economy right now. And I wonder
what you make of that. Is that novelists you see
it when it comes to what the US is pioneering
in terms of trade policy, and it's tariffs that's put
in place. How much determinisment has about the future of
(08:12):
the global economy, I.
Speaker 4 (08:13):
Mean, I think it has an enormous amount.
Speaker 3 (08:15):
Right.
Speaker 4 (08:15):
Trump is kind of realizing that if you're important enough
in the global financial system and to drive hard enough
of a bargain, you can basically get what you want.
But we are seeing more and more countries potentially trying
to solve some of their problems or maybe achieve some
of their strategic targets by doing it unilaterally. Right, and again,
(08:36):
the US is kind of the poster child for this.
So take a look at Argentina. Milay was in town
to finalize the twenty billion dollar swap slash bailout that
he's getting from the US. Argentina has gotten many many
bailouts from the IMF. Previously, I'd lost count I know,
(08:57):
I tried to count them up and I stopped when
I went past twenty. So there we go, Argentina serial
defaulter Cereal Bailey. But now the US is stepping in
and saying like, all right, well, we're going to use
the US Treasury to give you this twenty billion dollar
What is essentially alone, and we're not going to tie
any conditions to it because you are a strategic ally
(09:19):
of ours. And in fact, Trump actually said this week,
not only are we not tying conditions to it, the
only real condition we seem to have with it is
that Malay actually wins the midterms, which is highly, highly
unusual in the way America sort of exercises its international influence.
So I think we're probably going to see more of that.
Speaker 2 (09:41):
Gran What do people at the IMF make of this? Here?
You have the US effectively going alone after seeing the
IMF get burned over and over again. What are these
global policy makers make of what the US is doing here?
Speaker 5 (09:52):
Yeah, I think you see a lot of sort of
strained attempts at putting on a brave face with what
the US is doing, and you hear policymakers say things like, well,
you know, the US has a huge economy, but it's
really only fifteen percent of global trade, and the rest
of global trade is happening at a fairly robust rate
without the US. I think what you're seeing is, on
(10:15):
one hand, the sort of shock at what's happening and
the upending of the global order, and an effort to
hold together the order that has kept it, you know,
globalization moving for decades.
Speaker 2 (10:30):
Now coming up the markets AI and how these international
organizations view their future at a time when they face
so much hostility. This week, as meetings got underway at
(10:51):
the International Monetary Fund, the World Bank, and the Institute
of International Finance, the trade war between the US and
China escalated. That spooked in Ess, who it seemed had
gotten pretty used to all the back and forths and skirmishes.
I asked Joe and Tracy why this moment had such
a profound impact on the markets.
Speaker 1 (11:09):
There are probably two things that have driven the market higher.
Which is one is AI we all know about, and
that is an industry that is an investment mega trend
that does not seem to be particularly sensitive to tariffs.
And then I think people had sort of forgotten about tariffs,
and you know, the idea that it all gets smoothed
out in the end wasn't that big of a deal.
(11:30):
It's sort of minor. It doesn't really affect the growth areas.
But I think you could argue that, yes, we did
have a lot of volatility last week, but in the
grand scheme of things, not that much so. I think
it was just sort of like under the conditions in
which there's so much enthusiasm, so much specuative money, so
much hot money flowing into risky assets, the reminder that yes,
(11:51):
trade is a live issue. Many of these things haven't
been settled to us is vulnerable still to the cutoff
of various things such as rare earth metalism and so forth.
I would say it gave people a little time for
a breather.
Speaker 4 (12:04):
I thought you were going to say it was a
healthy correction, Joe.
Speaker 1 (12:06):
It was a healthy if we're on TV, that's what
is a healthy. We needed that, we needed this correction.
This is very healthy, Yeah, Tracy.
Speaker 2 (12:15):
When you look at the agenda for the IF meeting,
the IMF meeting, World Bank meeting, there are a lot
of mentions of AI, of artificial intelligence, and there is
kind of this infusion of more skepticism, or if not
more skepticism, at least a sense that all of this
money has been spent, is being spent and it has
to amount to something sooner rather than later. Yeah, are
we talking about it differently?
Speaker 4 (12:35):
You need to see actual cash flows at some point.
I mean, I think what's really changed is people are
starting to get more nervous about some of the very
intricate and complex financing arrangements that we're seeing, you know,
stuff where like in video sells chips to so and
so and then they use that money to make a
loan to so and so, and then they send.
Speaker 2 (12:53):
That money back to her.
Speaker 4 (12:54):
It's very circular, very incestuous, and it's the kind of
thing that's going to remind people of you know, previous bubbles.
So that's happening. What I would say is there is
still so much enthusiasm out there about the future potential
of AI, and the vast majority of investors that you
speak to will say something like, oh yeah, sure, it
(13:15):
might be frothy now. You know, maybe some of these
financing arrangements you know, are pumping up values or concealing
real cash flow and things like that. But we know
this is going to be the next big thing. We
know they are going to be winners emerging from the space.
In the same way that even though we had the
dot com bubble burst, we had winners that emerged from
(13:37):
that early era of the Internet and went on to
make a lot of money. So I think everyone is
sort of diving in on the assumption that they can
either get out first before everyone else, or they're the
ones that are going to be able to identify the real,
true winning players in all of this.
Speaker 1 (13:54):
We haven't had that moment yet where some big corporate
and or someone says, you know what, we are not
getting an ROI from this. No one has ever said
in a major way, you know what, this is not productive.
If there is like a bubble, if people are getting
out over their skis, it would end in theory at
(14:15):
that moment that some really big investor says, you know what,
this is like a this is just a thing that
predicts the next word and doesn't really do much. That
hasn't happened yet. And so there's that faith, and there's
the ongoing investment, and there's that fear of missing out,
and so far that aspect of it hasn't really changed.
Speaker 2 (14:32):
Brendan. There's still some blindness, I guess that we have
about what this is going to mean for the economy.
As you kind of dig through what's in the IMP's
latest forecast, the kind of commentary around it, are we
any closer to maybe not knowing but having a sense
of what this is going to mean for productivity. If
all that's promised comes to pass.
Speaker 5 (14:50):
You know, we can theorize that all of this investment
that's going into data centers and all the capacity that
needs to be built up, you know, will create a
productivity boomlet at least no one really knows. It sounds
great on paper, and for the US to lead that.
Donald Trump is very proud to be part of it
(15:10):
and invites it. But what he really needs to do
is create the blue collar you know, the sort of
romanticized version of factory jobs that he promised his base,
and we've yet to see that. Politically, what matters more
than anything right now is factory expansions in the US
(15:31):
between now and next November, and we'll know the answer
to those sooner than we will know the answer to
the productivity impact of AI.
Speaker 2 (15:38):
Tracy, I can't resist asking you about something else that's
in the backdrop here, and that is the earnings that
we've gotten from the big banks this week, and there
are more to come from regional, smaller banks in the
coming days. But we've seen them beat a lot of
analyst expectations. Goldman had a record quarter, Morgan Stanley had
a record quarter. It's because of trading, but it's because
of deal making as well, And I'm curious how you
(15:59):
think about that and what it says about the environment
we're in. We're seeing these institutions doing so well here
in the third quarter of twenty twenty five.
Speaker 4 (16:09):
Mostly what it says is that in a period of
sluggish growth, or in a period where you are anticipating
further sluggish growth, one way to actually grow your way
out of that is acquisitions, right, buy more companies, get bigger,
have more pricing power. This has been the sort of
dominant theme of I guess late stage American corporate capitalism
(16:30):
for a while now. We saw that for the past
few years. Immediately after the pandemic, people were trying their
best to get pricing power in the market. Then they
raise prices. Maybe they sell fewer items, but they make
that up in terms of the pricing, and it seemed
to work out well for a lot of them. We
had record corporate profits. So I'm not really surprised that
(16:51):
we're seeing a continuation of that strategy. What it means
for overall inflation, especially when the Trump administration has been
telling people that tariffs aren't going to cause your prices
to rise the foreign countries pay them. I think we're gonna.
Speaker 1 (17:07):
See It does feel like when we had the initial
sort of Trump rally right after the election, one of
the hopes was like, oh, we're going to see like
Wall Street deregulation.
Speaker 2 (17:18):
Right.
Speaker 1 (17:19):
This is like one of if you think about like
the pillars of the stool or the legs of the
stool of why there was this boom, It's like, Okay,
we're gonna get tax cuts, We're gonna get deregulation. It
feels like the deregulation component is being delivered upon when
you look at all of this deal making activity, when
you look at sort of the enthusiasm with various things
related to fintech and crypto, in which it doesn't really
(17:41):
feel like there's any rules anymore at all, and if
you broke the rules in the past, they're probably not
gonna do anything about it. This sort of the animal
spirits and the deregulation element of this, that part seems
to be a real vindication of that thesis.
Speaker 2 (17:57):
I think of how contemptuous President Trump is about out
international organizations, how much he's made an effort to undermine them.
We had Scott Best at the Treasury Sectory come to
the IMF a few months ago and say we're not
going to effectively, we're not going to burn this place down,
but we want to make some significant changes to it. Brendon,
let me put the last question to you, in light
of all of that hostility, if that's the right word,
(18:18):
how do you think the IMF and the World Bank
and the if these institutions think about their future. Yes,
in the near term, but the medium term as well.
Speaker 5 (18:26):
What we've seen in the past six months is the
US kind of going at things unilaterally, saying, look, we're
in this for ourselves. You guys, can you know, whether
we're talking about NATO or whether we're talking about trade,
you know, you're on your own basically, and we'll take
care of ourselves and you're going to have to learn
to do the same for yourself. And I think what
(18:47):
we're going to see in the months ahead is there
aren't going to be times when the US is going
to need its traditional allies. We're seeing it with China
and rare Erse right now. Scott Bessett was saying, you know,
we need a cord dated response to counter what China
is trying to do with controlling rare earths, and so
you know, can you have it both ways? Can you
(19:07):
put tariffs on your allies them not retaliate and then
ask them to cooperate with you when you need them to.
And I think we're going to find out, and this
applies to whether it's the IMF, the World Bank, or
the World Trade Organization or any of these multilateral institutions.
We're going to find out if the US can really
have it both ways because economies like the European Union,
(19:28):
they're taking note of all this and they will bake
that into their calculus as to Okay, well you want
us to cooperate, now, how about giving us a little
bit of relief on tariffs. So there's going to be
this kind of push and pull between unilateralism and the
old vestiges of multilateralism I think going forward.
Speaker 2 (19:46):
Brendan, Joe Tracy, thank you very much, and I'm looking
forward to debt Con nine.
Speaker 1 (19:50):
Thanks for having us, Thanks so much.
Speaker 5 (19:52):
Thanks David.
Speaker 2 (19:59):
This is the Big Take from Bloomberg News. I'm David Gerra.
To get more from the Big Take and unlimited access
to all of Bloomberg dot com, subscribe today at Bloomberg
dot com slash podcast offer. If you'd like this episode,
make sure to follow and review The Big Take wherever
you listen to podcasts. It helps people find the show.
Thanks for listening. We'll be back tomorrow
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