October 8, 2025 • 46 mins
Watch Tom and Paul LIVE every day on YouTube: http://bit.ly/3vTiACF.
Bloomberg Surveillance hosted by Tom Keene & Paul SweeneyOctober 13th, 2025
Featuring:
1) Rich Clarida, Global Economic Advisor at PIMCO and former Fed Vice Chair, joins for an extended discussion on the US economy, market rally, and gold. Gold surged above $4,000 an ounce, with its 53% gain this year putting the traditional safe haven on course for its strongest annual advance since 1979.
2) Jane Foley, Head of FX Strategy at Rabobank, talks about gold topping $4,000 and how it's affecting FX trades.
3) Neil Shearing, Group Chief Economist at Capital Economics, discusses the global effects of tariffs and how economies are pricing in protectionism. Concerns have been growing that $16 trillion surge in the S&P 500 from its April lows had gone too far. Tuesday’s drop came amid mounting chatter about lofty valuations around artificial intelligence, with some market participants seeing an echo of the excesses that led to the dot-com crash 25 years ago.
4) Suzy Welch, professor at NYU Stern School of Business, joins to talk about her essay on Gen Z, their values, and whether they are employable.
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg
Surveillance Podcast. Catch us live weekdays at seven am Eastern
on Apple car Play or Android Auto with the Bloomberg
Business app. Listen on demand wherever you get your podcasts,
(00:25):
or watch us live on YouTube.
Speaker 2 (00:27):
Joining us now, wasting too much time, I'm sorry, folks.
Richard Clarida of Columbia University, of PIMCO and of course
the former vice chairman of the FED, Professor CLARDA. Were
thrilled to have you in today. Can I go nerd
for a moment? Sure? Okay. I never talk about the
Nobel Prize in economics. It's like bad luck, and I'm
not doing that with somebody qualified to get the call
(00:49):
from Scandinavia. But I want to go back. This is
really important, Richard Clarida. There can be like in nineteen eighty,
I've had the honor of talking to Joe Stiglitz about
Gross and Stiglitz, which in nineteen eighty I'm not kidding, folks,
it was like a four page paper. It was small,
it was focused. And then with you and you know,
(01:12):
I don't want to get into you know this or
that there's Clarita Girtler and A Gali okay, up at
Brown University. When you make a paper like that that
is treasured by this is on DSGE folks, it's treasured
by all of economics, how do you get that paper done?
(01:32):
That ends up being like, hey, should they win a
Nobel Prize? What was the process of doing? You know,
name the paper, but I'll go to Girtler The Science
of Monetary Policies just one example.
Speaker 3 (01:46):
Well, it was an interesting time because the authors Mark Gertler,
Jerdi Galli and I were sort of either early or late.
But we felt there was a vacuum in academic economics
in that it treated monetary policy as a black box,
and we thought these guys are trying to do something sensible.
So we actually worked out essentially a forward looking tailor
(02:07):
rule to describe actual monetary policy. And it turned out
that it actually did a good job and it made
a lot more sense than the black box. But when
we wrote that paper, I don't think we had any
idea that it would have the impact.
Speaker 2 (02:17):
That it did. We thought it could get ignored, okay,
away from you. In modern economics, there's a nineteenth century
what's called plug and chug which you have an equation, folks,
and you fill in the little blanks of the algebraic
equation the tailor rule. You can't do that because you
don't know where the output gap is right right out? Yeah,
is Jerome Powell flying blind?
Speaker 3 (02:40):
Well, he's certainly flying with an obscured vision out the cockpit,
for sure. And I think there's always some uncertainty about
things like what is our star? What's the full natural
rate of unemployment? But it's probably elevated now. And the stakes,
let's be honest, I guess, let me cut to the punchline.
The stakes are higher now because of the fact that
(03:00):
for the last four years inflation has been above target,
and of course in twenty twenty one and twenty twenty
two it served and was not transitory. And so I
would argue that the stakes are higher now for the
FED than they have been.
Speaker 2 (03:11):
Really, going back to Paul Volker forty years.
Speaker 4 (03:14):
Ago, does the government shutdown impact the Fed's ability to
manage its mandate here in terms of managing interest rates?
Speaker 3 (03:23):
The longer it goes on, the more that becomes a factor.
In particular, because a lot of the data comes from
the government, including you know, inflation data and the labor
market data. Now, the FED, like many other organizations and
in the private sector, looks at a wide range of
high frequency data. You get ADP, you get a lot
(03:44):
of different indicators of the labor market. But yes, the
longer this goes on, the more challenging it is to
determine exactly where the economy is.
Speaker 4 (03:53):
What do you think is the bigger risk for this economy?
Is it from the Fed's perspective, is it the labor market?
Is this inflation? Are they evenly balanced here? What do
you think the bigger risk?
Speaker 3 (04:02):
Well that was what was important about the September meeting
because up until September, Jay Powell and many on the
committee had said, look, we have dual mandate employment and inflation,
and they seem to be roughly in balance. And at
the September meeting they said, we're now more concerned about
the balance of risk in the labor market. And I
respect that, But the reality is inflation now using the
(04:25):
FEDS preferred measures two point nine percent, that's where it
was eighteen months ago. It's well above two and so
there is a risk to both sides. There's a risk
if you don't cut rates the unemployment rate goes up
a lot. There is a risk that if you do
cut rates a year from now, inflation stuck in the threes.
Speaker 2 (04:42):
Richard Claiter, with this talk, is a former vice chairman
of the FED. For an extensive conversation. When we invented this, Paul,
I mean to go from Man Deep Singh with his
brilliance on AI to Professor Claiter, I mean, this is
the way you roll, That's how you do it. This
is how you do it. We said good morning to
all of you across America worldwide as well. Okay, I'm
in the basement of the of our building in London
(05:03):
with a guy named Jean Claude Trichet, the engineer from Leon.
He's brilliant. He goes Tom, I think you call me Tom.
I can't remember, and he says it is about diffusion,
and we're talking about productivity. I hate the phrase K
shaped economy because it implies a symmetric distribution baloney. The
(05:24):
productivity that we're all witnessing right now. Maybe Jeff Sachs
would be good at this. Yeah, the productivity that we're witnessing.
You can't tell me it's evenly diffused. Across some mirror.
How asymmetric are we in this productivity? Boom?
Speaker 3 (05:41):
Well, I think you're one hundred percent right. You know
the term in economics, you know, is is it labor
augmenting technical change?
Speaker 2 (05:49):
And I think the answer is yes.
Speaker 3 (05:50):
But more labor is augmented, another lager over time may
be substituted for. And I think that is really the
potential disruption from AI is not only does it lift
out at per hour, but it also could result in
at some point in some displacement as well. So I
think it's too soon to tell, but the minimum we
know it's not evenly distributed.
Speaker 2 (06:09):
Dominic Constume over at Missou and now Brilliant out of Oxford,
Doctor Constum would say, there's a capital deepening issue here.
Explain to our audience this wall of AI money and
what that does to the capital dynamics of America.
Speaker 3 (06:24):
Well, the interesting point is, you remember a couple decades ago,
the talk in the US was about the witless economy,
that we could get all this GDP without bricks and mortar.
And it turns out that at least for this part
of the new economy, you need a lot of bricks,
a lot of mortar, a lot of servers, and a
lot of power generation. So in some ways to get
to the very new economy, you need old economy capital spending.
(06:46):
And that's a pretty interesting period to be in. We
think it's going to go on for five to ten years,
but it's a different economy than we were used to
thinking about in the last twenty years.
Speaker 4 (06:56):
You strip out the AI spend, a lot of folks
will tell you this economy not that strong. Capital spending
is not that good.
Speaker 2 (07:03):
How do you think about that arithmetically? That's correct.
Speaker 3 (07:06):
You know, in the first half of the year GDP
growth was about one point six one point seven. If
you strip out tech investment then it was somewhere between
zero and half of that, and you have to adjust
for imports. But clearly in the first half of the
year it's really been an AI driven capex economy.
Speaker 4 (07:25):
So one of the issues out there that I guess
it's got to push the background a little bit, maybe
just because fatigue is tariffs and the impact on the economy.
We have not necessarily seen meaningful inflation resulting from the tariffs.
Growth seems to be kind of hanging in everything. Strong
gd for in a few weeks ago. How do you
(07:47):
think tariffs will impact the economy if at all.
Speaker 3 (07:51):
The economy has been refreshingly and surprisingly resilient. I don't
think there's any doubt about that. So at PIMCO, we've
revised up our outlook. You know, Atlanta Fed is now
saying Q three could come in north of three percent.
Speaker 2 (08:09):
So I actually think it actually in part.
Speaker 3 (08:11):
Is because of at the same time we've had the
tariff hit to the economy, we've also had a justifiable
optimism about tech and capital spending, so that that's been
an important feature. I think the other important feature is that,
you know, some of the tariffs have been absorbed either
by the profits of US companies that had a lot
(08:32):
of profits to absorb or foreign exporters. And then the
third piece is we're probably not yet at the at
the endpoint of teriffs. They will continue to show up
in the inflation data at least for a while, but
I think increasingly I and the Federal of the view,
and that the FEDS what's important that this is really
not going to be an inflationary story. It's a price
(08:52):
level adjustment that we're sort of in the middle innings
of getting through.
Speaker 2 (08:56):
Against some nerd knowledge here, folks, Good morning Global Wall Street.
Richard Clara with this with PIMCO, and of course forever
with his Columbia University. Okay, my path in foreign exchange
is Mundel, Mundel, Fleming, Jacob Frankel. Out of Chicago, a
guy named Rogoff shows up, No excuse me than Rudy
Dornbush up at Amputeen this upstart Rogoff and so getting
(09:19):
ops felt out at Berkeley. They show up and it
goes on and on and on. Let's take it back
to Colombia, where you have this incredible that you helped build,
this incredible synthesis of international economics. Explain to America with
Xavier Salah, m Lartin or Robert Mundel the Giant would
say about how screwed up, messed up Japan is. With
(09:44):
weekend log convex interest rates moving higher, the real rage
chart published out of Tokyo today by Bloomberg is grim.
Explain why our listeners and viewers should care about the
fragility of Japan.
Speaker 3 (10:01):
Well, because Japan is obviously a major economy, but it's
also an even bigger part of you know, international financial system.
With the yen an important currency, especially in risk off episodes.
Speaker 2 (10:12):
Somebody has to hold all the jgbs.
Speaker 3 (10:15):
That the government has been issuing, and so what happens
in Japan also spills over into US capital markets and
the global economy. And I think what's important for the
listeners to understand now is that markets and investors have
had sort of a rule of thumb about Japan, which
is it sort of goes off in its own it's
got deflation. Eventually they'll figure out their fiscal situation. And
(10:38):
now Japan has broken out of deflation. They now have inflation,
they have positive interest rates, and they're now very much
a player in the global financial system.
Speaker 5 (10:47):
Is there is there.
Speaker 2 (10:48):
Any precedent for a successful reflation. I don't see it
in the literature. It's original to Japan, isn't it.
Speaker 3 (10:58):
Well, Japan was went through about a two decade period
where they had deflation. It wasn't a spiral, but prices
were negative. I think to me, Tom, one of the
interesting things about Japan is although the boj was trying
to reflate the economy, the politicians in the public actually
didn't get a vote. They actually liked deflation. You know,
if you've got you've got your savings in yen under
(11:19):
the mattress. You know, deflation is good for you. So
I think a challenge right now in Japan is they finally,
after twenty five years, achieved the positive two or three
percent inflation. But it's creating substantial political tension as well.
Speaker 2 (11:31):
Well, I can't emphasize that that was brilliant. We'll try
to do that single best idea. We'll see if the
interns get the cut today. Well, the societal change. I
was at the White House correspondence dinner and you got
this whole security idiocy because the President's there and Martin
Feldstein's standing in front of me. I think rogue off
was my guest. Martin Feldstein's standing in front of me.
(11:53):
We'd all had six martinis. And he turns around and
he says, Tom, Japan has been lost for two decades. Yep,
that was a societal struggle.
Speaker 5 (12:03):
Is Japan now found?
Speaker 4 (12:05):
Is it out of the wilderness at this point?
Speaker 6 (12:07):
Do you think?
Speaker 3 (12:08):
Well, as I mentioned, you know, narrowly, it certainly is
no longer in deflation.
Speaker 2 (12:12):
It has positive interests.
Speaker 3 (12:15):
I will say, just an anecdote, if I'm allowed an anecdote,
I visit Japan almost every year for the last thirty years.
Speaker 2 (12:21):
And most recently this summer.
Speaker 3 (12:22):
I was struck by not only the boom in the economy,
but it is a real tourist magnet now. In fact,
if anything, in Japan, the politics is such that there
are too many tour right, which is a problem they
did not have for twenty five years.
Speaker 2 (12:35):
Professor, I got to ask you, or I should say
Vice Chairman, I've got to ask you. Lisa Cook gets
an extended stay at the Fed. What is the significance
of Lisa Cook remaining at the Federal Reserved table.
Speaker 3 (12:47):
Well, obviously the case is at the Supreme Court, and
so we'll know next year where they end up. But
what's important is, you know, she continues to serve as
a governor and continues to vote on monetary policy.
Speaker 2 (13:00):
And I think that that is right. I think that's appropriate.
Did Columbia pay for Sala E. Martin's bright colored jackets?
Is that part of his deal?
Speaker 3 (13:09):
During my time as chair, we did not subsidize the
jackets or the m and ms that he distributes to class.
Speaker 2 (13:17):
But I'm not sure about the current practice. This is
your dovo. Sally Martin's like three quarters of a mile away,
and he's there in bright orange, just like there's the
growth guy from Columbia, Richie Claire brilliant. Thank you so much, really,
treasure of the comments there. Maybe we'll get him back
once we figure out who Scandinavia annoints this week as well.
(13:37):
Clarida is with Pimco. Stay with us. More from Bloomberg
Surveillance coming up after this.
Speaker 1 (13:50):
You're listening to the Bloomberg Surveillance podcast. Catch us Live
weekday afternoons from seven to ten am Eastern Listen on Apple,
Karplay and Android Otto with the Work Business up or
what Us Live on YouTube.
Speaker 2 (14:03):
Joining us now. Finally, Jane Foley out of FX strategy
at Robbo Bank in London. I can't say enough, folks
about the difference here in the Rabobank of the Netherlands.
They go back to commercial hedging utilizing foreign exchange back centuries.
It's a whole different twist here on the dynamics. Jane Fowley,
(14:24):
I want you to explain the sowhat to our American
listeners and viewers and those in London frankly as well
of a week Japanese yen our two point nine standard deviations,
What why do I care that dollar yen could go
to one fifty five shockingly week Japan?
Speaker 7 (14:45):
Well, I mean, gently excuse me. That's the talk this
morning that we could see a move back to one
fifty five. And it is all because the market thinks, well,
you know, the end characterve is back on. You know,
we're going to not get the Bank of the Bank
of Japan interest rate hiking October after But I would
warn but I think this is a really dangerous strategy
in it. Why is it dangerous because if you think
(15:08):
about the position of the LDP leader now, and she
is of course quite likely to be voted in as
the Prime minister maybe next week, although there's some issues
there with her coalition, But assuming she is the prime minister,
you've got to wonder does she actually want a weaker yen?
Now the market is assuming that she is going to
follow the policies of her mental Aarby. But of course
(15:31):
when Abe was the prime minister, things were very different
in Japan. They were still trying to fight deflation. Now
Japan has got inflation, and she is very concerned that
a lot of this inflation is because of important inflation.
And of course, if you are worried about important inflation.
Why would you want a weaker currency, particularly when you
(15:54):
want to build a strong relationship with President Trump, who,
according to the Japanese prayers, may start Japan in his
visits to Asia and perhaps at the end of this time.
So I think this could be quite a dangerous strategy.
I'm not quite so certain that beat the carriage trade
will be on so long.
Speaker 2 (16:10):
In Paul Toro Fujioko off for Tokyo Desk has a
brilliant story today showing the in the new inflation, the
inflation justed wages. The japan people are flat on If
that happened in America, they'll literally be revolt. They're flat
on their back with a negative real wage growth.
Speaker 4 (16:30):
Absolutely, Jane, we've got I think the story maybe this
week over it. Certainly this year has been gold. We've
got gold north of four thousand dollars per ounce. A
lot of folks are saying, hey, this is a safe haven,
maybe more so than the US dollar. What are folks
in your world thinking about the relationship between the US
dollar and gold.
Speaker 7 (16:49):
Well, certainly that seems to be you know, the fashion
trade right now. But I do think that there is
room for both and I do think that if we
did have, say a sudden step up of geopolitician, I
think we'd see the dollar and we'd see gold gold rallying,
although over time the dollar, you know, if the dollar
were to recover significantly, of course, I think there would
be forfit taking first of.
Speaker 2 (17:08):
All in gold.
Speaker 7 (17:10):
Now, gold I think is a real true diversification trade
this year, and I think this is where a lot
of the buying has come from. You know, if we
go back to the first five months of this year,
that there was this rotation trade away from the US
assets and maybe that's stop now bores turned around because
we do see you know, the AI trade, the S
and P making you such strong gains really since since June.
(17:32):
But I think there is diversification still amongst that. We've
seen various different stock markets, including the perform quite well
this year, and we've seen silver do well, We've seen
bitcoin do well, and I think there is a want
by many investors really to diversify their portfolios, and I
think that's where the strength in gold is coming from.
Speaker 4 (17:51):
Jane, We've we've seen the Bloomberg dollar index, you know,
kind of stabilize here over the last month, or two
here the dollars stabilized. Is this kind of a a
new level you think for the dollar?
Speaker 7 (18:03):
Yeah, you know, the dollar is the best performing G
ten currency on the one month view, despite the fact
that it's still the worst performing on the year to date.
And we have seen a lot of stability really over
the summer months. Really sort of July is and you know,
a lot has been said over the spring about the
hedging strategies or the change in hedging strategies by non
(18:24):
US dollar based fund managers, and that probably accelerated the
downside of the donor certainly through the spring. But if
we assume that for now, you know, that's done, maybe
it could start again. But if we assume it's done,
you know, I think what we've got now is short
covering in the dollar because there's an awful lot of
fed easine in the price. The market's still whether or
(18:47):
not inflation will come through.
Speaker 2 (18:48):
Tours jargon here, let's let's translate this. Jane. You're saying,
everybody bet the bank, bet the farm that there would
be strong dollar, and now they're turning that trade around
and going the other way.
Speaker 7 (18:59):
It seems that's what happened in the spring. So if
we go back to the global financial crisis, we've seen
you since then, a massive rally out performance of the
S and P five foundred and really a massive rally
in the value of the US dollars. So everyone was
buying American assets and during that period non dollar based assets,
so really Asian European fund managers, they were investing in
(19:21):
a lot more money. There was a lot more money
to be invested, and a lot of that was finding
its way into the US. And I think come the
beginning of this year, the market, okay, the dollar's done
so well in recent years, we weren't that hedged, and
at the start of this year they started to hedge
the dollars.
Speaker 2 (19:37):
Jane, we're running out of time. First of all, we
got to get you in the studio in New York
to do like a double barrel, like a whole hair
four with Jane Folly, a raval bank. Jane. People think
I got hired at Bloomberg because I'm like bow tie.
It's not true, folks. I mean meetings with like Matt Winkler,
Peter Grauer retiring chairman, and they're going dance all our
rods and cones. Where do you do that, You do
that in Jane Foley space. Foreign exchange, Jane, I'm seeing
(20:00):
huge tension. If I look at something obscure like sterling swissy,
I'm out strong, Swiss franc to new territory, new points
of tension. If I look at euro yen back up
to a one seventy seven week en, points of tension
(20:20):
in your world, What do those tensions mean in foreign exchange,
for the stock market, for the bond market.
Speaker 7 (20:29):
Well, I mean the Nikai T two five has perform
really quite well this year. But if you're an overseas
investor investing in Japanese assets, well, you're not going to
really like the en going lower. Now.
Speaker 2 (20:40):
The yen again.
Speaker 7 (20:40):
Seems out of place here because what we've seen is
some Safeyvin Ausset's doing quite well, the dollar stabilizing, the
Swiss frank doing well, goal doing well, but the yen
again on the back foot, and that to me is
another reason why this yen selloff is probably overdone.
Speaker 2 (20:56):
Okay, Jane Foley, thank you, thank you so much. Stay
with us. More from Bloomberg Surveillance coming up after this.
Speaker 1 (21:10):
This is the Bloomberg Surveillance podcast. Listen live each weekday
starting at seven am Eastern on Applecarplay and Android Auto
with the Bloomberg Business app. You can also listen live
on Amazon Alexa from our flagship New York station, Just
say Alexa play Bloomberg eleven thirty.
Speaker 2 (21:27):
Here's the way it rolls, folks, Economics, finance, investment, international relations.
It's no different than sports entertainment. Taylor Swift, did you
know she has a new album out?
Speaker 6 (21:39):
I heard that.
Speaker 2 (21:40):
I think we're efforting her right now, Miss Swift. If
you're listening, bring Jack with you as well. Taylor. Anyways,
people keep score and as a young kid that came
out of York University of York in England and all
of a sudden things are working. He's with Capital Economics,
which is a really wonderful firm writing clear stuff. He's
(22:00):
global group, such a group Chief Economistic Capital Economics, but
really made us a splash, like with the ft and
the thinking within England of what in God's name is
going on? The summary of it is a wonderful two
hundred and fifty pages. The Fractured Age Martin Wolf warbles
(22:21):
gaily on the cover. A guy named Robert Nibleta Chathamhouse
shows up so does bread sets her Neil shearing with
us in celebration of the fractured age? Did you time
the book release for the world falling apart?
Speaker 6 (22:36):
Some things with the book that you need an idea,
you need the support of your friends and family, and
you need a bit of luck. I'm luck in space.
Speaker 2 (22:45):
What is the distinction of this fractured age that's not
in the zeitgeist? Now, all the blood, the eighteen newspapers,
the media, people like us, what are we missing of
this fracture?
Speaker 6 (22:58):
So I think that the genesis the book was that
the rhetoric of deglobalization was everywhere right. Tariff's going up,
trade barriers going up, this idea that we're returning to
the nineteen thirties, countries are turning inwards. And when we
at capst Economics looked at the data, we saw global
trade volumes going up year on year on year. So
this idea, the thing that everyone's missing is the idea
(23:19):
that the world isn't deglobalizing. But clearly something is changing.
And as I argue in the Burke, and as we've
written about a cap of Economics, the thing that has
shifted is the relationship between the world's two major economies,
the US and China, they've become superpower rivals, and that's
causing those economies to both put apart or fracture, and
then other economies to have to pick aside.
Speaker 4 (23:40):
Essentially, So again, we all grew up in a world
of globalization. That's just that's several generations have grown up
in that world. Is that still the world we're in
in terms of globalization, because it again it doesn't feel
that way.
Speaker 6 (23:54):
Well, globalization has certainly shifted, and if you look at
trade flows you can see them see the evidence that
shifting globalization. So up to about four years ago, about
three quarters of US cell phones came from China. Less
than one in four cell phones are going to be
produced in China that are consumed in the US this year,
with more coming from Vietnam and India. So we're still
(24:16):
consuming vast amounts of cell phones and imported vast amounts
of cell phones, but the location of the production is shifting,
and it's shifting for these security reasons.
Speaker 4 (24:25):
Can the global economy truly be global if there is
this seemingly broadening divide between China and the West.
Speaker 6 (24:35):
Well, there's going to be greater frictions within global trade
and capital flows and technology flows, maybe people flows too.
As I argue in the book, the key economic, key
driver of the economic consequences of this fracturing it's going
to be twofold. One is how do other countries align?
Can the US block, which is enormous, kind of hold
together or does Trump push everyone apart?
Speaker 5 (24:56):
And then the second, as you allude.
Speaker 6 (24:58):
To Poored, is the contours of the fracturing. If it's
contained to things like cell phones and batteries and chips
and semiconductors and pharmaceutical products, then I think the economic
costs are going to be quite limited to be manageable.
If we get a much wider fracturing that encompasses many
more areas than the economic costs will be much larger.
And if the two sides ever come to conflict, then
(25:20):
all bets are off. We shouldn't worry about the economic costs.
Speaker 2 (25:22):
We're sharing with us. The fractured age is the book
two hundred and fifty pages. Mister wolf Over at Financial
Time says an exceptionally sensible, clear headed, and original thinker.
I'll vote for that is well. One of your Catholic
economics essays Europe flat and is back. We see that
with the politics of France and I looked at it's
(25:43):
sterling swissy today and my word, it looks like Britain
after World War Two. How fragile is the continental and
United Kingdom economy right now?
Speaker 6 (25:54):
I think about the UK to one side. The UK
we have our own fiscal challenges, but actually I don't
think they're quite as a cut as say France. Yeah,
there's plans on the way to reduce the deficit in
the UK. The question is, really you're optimistic the UK
can get it det I think we can get to
kind of muddle our way through. There's enough fiscal fudge
going around that we can kind of muddle our way.
Speaker 2 (26:12):
Through this one.
Speaker 6 (26:13):
France, it seems to me, is a bit more intractable.
They've had four governments now of four on the back
of efforts to try to reduce the budget deficit. The
parliament is fractured, there's a presidential election due in twenty
twenty seven. All of this political dysfunction is fodder for
nationalists populist and let's see what happens in the twenty
twenty seven election. I don't think that we're going to
(26:33):
have a repeat of the Eurozone crisis. I don't think
we're going to get big debt to faults in banking crises.
The banks in France look pretty well capitalized. They don't
hold much government debt, but it's a fiscal crisis that
is brewing.
Speaker 2 (26:44):
Albums. If the right takes over in France, I mean
within the five party parliamentary system, the right in Hungry,
the right in Poland, the right, I mean there's a
huge fear almost of it. I'll call it a Trumpian
right in.
Speaker 6 (26:59):
Europe, absolutely, and we're seeing it happen. That's what we're
seeing this play out in real life. That I think
the question is what type of rights that might might
govern Italy is an interesting example here. We've had a
kind of populist right wing government for the last couple
of years under Georgia Maloney. Actually they've governed in economic
matters in their relatively orthodox way. So I think it
(27:21):
depends as much upon how they govern in if they
win power as to what the rhetoric do.
Speaker 4 (27:28):
You think This is a seminal point for France right
now to either stay the course and hope for the best,
or make it some significant changes. Is this a pivot moment.
Speaker 6 (27:40):
I think we are kind of we're approaching one of
those pivot moments, certainly when it comes to the political
structure of France. If you look at the rise of
the right, and you look at the rise of the
right across Europe, I mean, the center is kind of
holding so far. The center health in the German elections
last year. The center's held so far in France. The
question is would it continue to hold through to twenty
twenty seven in those elections you're sharing.
Speaker 2 (28:02):
And the government shutdown of the United States.
Speaker 5 (28:05):
Of America, well, I've just spent two hours.
Speaker 6 (28:08):
I came. I flew into Dallas on Monday evening. I
spent two and a half hours at immigration.
Speaker 2 (28:14):
Yeah, did you say hello to Lisamated?
Speaker 6 (28:17):
Exactly. So it's so it's having a real world consequence
now in terms of the impact on the economy. When
we look through the history of government shutdowns, we can't
really see them in the economic data. It tends to
be a bit of dislocation that gets made up in
subsequent months. But again, a bit like France, this speaks
to political dysfunction, and it is as acute here in
the US as it is in Europe.
Speaker 2 (28:37):
Congratulations, you're sharing the fractured age. Can't say enough about it.
Really an abrupt read in well timed to say the least.
Stay with us. More from Bloomberg Surveillance coming up after this.
Speaker 1 (28:59):
This is the Bloomberg Surveillance Podcast. Listen live each weekday
starting at seven am Eastern on Applecarplay and Android Auto
with the Bloomberg Business app. You can also watch us
live every weekday on YouTube and always on the Bloomberg Terminal.
Speaker 2 (29:13):
That special moment here for Bloomberg Surveillance this morning, our
essay of the year I'm thrilled to announces, will do
that here in a moment. Stay with us across America
around the work. Can I just suggest this hour of
Bloomberg Surveillance sponsored by generous.
Speaker 5 (29:29):
Electric Shorts Finances Chins.
Speaker 2 (29:30):
We'll do that maybe as well. Futures up, ten down,
Futures up, one hundred and thirty eight. Bloomberg Surveillance this
Morning brought you by IBKR. Well the US Consumer Sentiment
Index it seeds sixty in October twenty twenty five at
IBKR Forecast Trader. The yes was recently at thirty three percent.
Start predicting today at ibkr dot com slash forecast. Last
(29:56):
training day for this contract is October twenty five, So
over a decade ago. David Brooks did an essay in
the New York Times. It was my essay of the
year on the nerds in the smooth Guys on Wall Street.
It was brilliant on the cultural divide on Wall Street.
I still quote it in speeches all the time. Brilliant essay.
(30:19):
This year, My essay of the year is on the
generational divide that we live every single day. Paul's limited,
I'm limited, Tucker. Do you have offspring?
Speaker 6 (30:31):
Ah?
Speaker 2 (30:31):
Yeah, okay, altering as well, joining us now with my
essay of the year. This was out of the Wall
Street Journal a number of days ago, and she's made
a huge splash with it. Is Professor Susie Welch of
NYU is gen z unemployable. It has created a firestorm
of comment. And I have to go to this because
(30:52):
the last time Susie, I think I saw you was
with a guy named Jack Welch. When did you decide
to go into the dark caver and of academics at NYU?
What was the pat You didn't have to do this?
Speaker 8 (31:04):
I did not I had been in broadcast journalism for
a bunch of years, and then I was running a
small tech music tech company, and the pandemic brought it
to its knees. And then Jack passed away, and I
went up to the woods of upstate New York with
all my kids and all their spouses and all of
our dogs. And then the pandemic ended and everybody went
back to life. I had been cooking up in my
(31:27):
mind a class called Becoming You, which was going to
help people figure out what to do with their lives,
which was what I was trying to figure out what
to do with my life.
Speaker 5 (31:34):
And I brought it to n Yu Stern and to.
Speaker 8 (31:36):
The dean there, who I knew from my previous life,
and I said, I've got this class I wish I
had taken in business school that has a methodology that
helps you figure out what to do with your life.
And he said, well, let's try it as an experiment.
Speaker 2 (31:46):
Before we get to the essay. Yes, what reeks in
this essay is academic rigidity. This is not some fancy
person like Susie Welch who decided to get some cushy thing.
There are some real work of often here. This is
like legit, accountable academic research, isn't it.
Speaker 5 (32:06):
Yes, I'm proud to say that it is.
Speaker 8 (32:08):
I mean it was conducted by myself and my team,
which includes all of the usual suspects of psychometricians and
data analysts and so forth. So we the research, I
think is I'm really proud of it.
Speaker 5 (32:18):
It's rock solid.
Speaker 2 (32:19):
Forty thousand people, seven thousand plus gen Z types. Yeah,
when did the shock set in over your outcome? And
describe there?
Speaker 8 (32:28):
Well, there's a bunch of you know, Look, I teach
gen Z every single day, I mean every semester. Are
hundreds of students, So my shock was perhaps less than
the rest of the team because I'm in the room
with them. Now, NYU students are not quite as representative
of gen Z as outside of NYU. These are MBAs,
so they tend to have a little bit more ger
(32:49):
going on. I think that when we saw the two
percent number which we can get to, we were all like,
we checked it about thirty five timesoose.
Speaker 5 (32:58):
We thought that is too much in that number.
Speaker 8 (33:00):
So what we did is we have a tool called
the Values Bridge, which we developed in our labs, and
what it does is it ranks your values from one
to sixteen, your personal values from one to sixteen. And
so we now seventy five thousand people have taken this test,
but at the time we did the research, it was
forty five thousand people. And we were able to cut
it by generation and we were able to see gen
Z's values ranked from one to sixteen. And their number
(33:21):
one value is something we call you ammonia, which encompasses
self care, recreation, leisure, fun employment. You know, just so
John Tucker, But I think we all know somebody who
was in eutamonia is their number one value. Number two
was authentic self expression voice as we call it, and
number three was the desire to organize their life around
helping other people, which is very admirable, I would say.
(33:42):
But after I saw those top three values, I thought,
I wonder what hiring managers are looking for, because my
students are going out into the world to get hired.
I have four adult children who are fighting out there
in the world every day. So we did a separate
study and we replicated it twice after that to say, okay,
here the definitions of all the values hiring managers in
knowledge industries mainly business, It was tech, it was accounting, finance,
(34:07):
and so forth. The consulting what values are you looking for?
Speaker 5 (34:10):
And lo and behold.
Speaker 8 (34:11):
They were looking for the number one value of achievement,
the desire to have success that other people can see.
Number two was a desire for learning, stimulation and growth.
And the third value was work centrism, the desire to
work hard. And when you cross reference those two data sets,
it ends up that it's just two percent of gen
Z that have the values that hiring managers are looking for.
Speaker 5 (34:32):
It's interesting.
Speaker 4 (34:33):
I've for gen Z adjacent kind of offspring. They're all employed,
but they tell me their first memories of my oldest
were nine to eleven. That's their first memory. Yeah, and
then they had, you know, the great financial crisis, right,
their parents are impact that everybody's parents are impact. And
then they had the pandemic. So they've had some stuff,
(34:54):
you know, and I wonder have that influence is kind
of how they look the view of the world.
Speaker 8 (34:58):
Yeah, I think they don't want to buy into a
deal that their parents bought into that didn't work out
for a lot of their parents.
Speaker 5 (35:04):
I mean, you can you can come up with.
Speaker 8 (35:06):
A hundred reasons why they have these values and they're
entitled to them. I think that the problem is values
have consequences, and so some of them also have affluence
as a top value, and then they are very frustrated
and frustrated to the point of kind of anger that
they don't get the they don't get to have affluence
also as an output. If you have the value of
self care number one, so they can have their value.
I don't you know how they can buy their values.
(35:27):
I get it, there's a million reasons. I mean, their
parents might be to blame. I mean, with the torrent
of letters that came to the letters to the editor
after the article ran, a lot of people had a
lot of people they wanted to blame for this phenomenon.
Speaker 4 (35:39):
What does corporate America do here? Is corporate America adjust?
Speaker 7 (35:43):
You think that?
Speaker 2 (35:43):
Or do the students adjust or do they.
Speaker 4 (35:46):
Just find to find some common ground?
Speaker 5 (35:48):
Maybe this is a million dollar questions.
Speaker 8 (35:49):
So I've talked to a lot of business leaders since
the piece came out, and so the companies with brand
equity who can go higher the two percent are out
looking for them earlier, and they one executive said to me,
this is a cage match. We're willing to fight all right,
they're going to go find that two percent. They're going
to they know where they are, they're going to go
get them earlier, and they're going to lock them down.
(36:09):
And then other companies are going to have to figure
out what to do about the fact that they're not
going to be hiring young people who share their company values.
And do they accommodate them or do they try to
slowly move them over to a different.
Speaker 5 (36:24):
Way of thinking. It's very hard to talk people out
of their values.
Speaker 4 (36:26):
However, Yeah, what do you find in the NBA program,
Because you said those people kind of self select, they
want to achieve, presumably, but again I would suspect you
see some of that in your class.
Speaker 8 (36:37):
I mean, I see a preponderance of pneumonia, self care
being a top value. I do have MBAs, okay and so,
and in particular the nbas we're majoring in finance. Those
they have a lot of the values that companies are
looking for, and they're picked off pretty early.
Speaker 5 (36:52):
But I don't think this.
Speaker 8 (36:52):
Is true in colleges in general, and I think there's
a few And this is what I mean is that
companies are going to figure out where the two percent
are and they're going to come get them and they're
going to at them early.
Speaker 4 (37:01):
So how about for these these kids, though, I mean,
do they recognize that maybe they are in fact different
from certainly maybe their parents and maybe their grandparents and others,
and they they're defiant and they're okay with them.
Speaker 8 (37:14):
No, they're defiant. I mean they're not just okay. They're
they're they're defiant. They're like you, I mean what the
letters from gen Z that I got, the emails were like, hey,
shut up over there, lady, because you ruined the world.
You boomer people ruined the world. And our response is this,
and why would we want your values? Look what you
did to us with climate change and terrorism and school shootings.
Speaker 5 (37:38):
You created this world? Why would we buy your version
of events?
Speaker 2 (37:42):
Welcome all of you across America. It is my essay
of the year. Susie Welch, professor at New York University.
Where that's it's in the Wall Street journals. Created a
firestorm of comment, including from the kids in my family
as well. Susie, I had the honor of talking to
a guy named Jack Welch and frankly on it fmled
as well. Is the magic of the corridor from Pittsfield, Massachusetts,
(38:05):
through Albany out the Mohawk River Valley every single nineteenth
early twentieth century industrial X exercise out to the Great
Eastman Kodec Company GE nineteen twelve invented a fine benefit
pension plan. Those companies Carrier in Syracuse, Coodek, and Rochester.
They took care of their employees. What you're going to
(38:27):
hear in your classroom, what I hear every day is
the loyalty has been broken because of the employers. What
do employers need to do to increase that two percent
to a much larger number.
Speaker 8 (38:41):
I think that they can't do what they would need
to do, which is promise a long term employment. I mean,
people feel loyal when they feel like, Okay, I'm investing
my time in a company, and I'm going to be
here in two or three years and my boss is
going to be here.
Speaker 2 (38:53):
Disclosure Bloomberg LP every day. It's a privilege. I mean,
that's where we come from, right, the three of us
in this were right.
Speaker 8 (38:59):
Well, you probably a sense that, look, this company is
healthy and it's thriving, and we're all going to be here,
and I'm willing to give myself to this organization and
to work the extra hours because we're all going to
be here together. And but for most people going into organizations,
there's this constant sense of fragility and we may not
be here.
Speaker 5 (39:15):
I could be gone tomorrow.
Speaker 8 (39:16):
Why would you invest in yourself in that? And so
that contract is pretty much over now. There are places
I think JP Morgan, Goldman Zachs you can go and
think I could try to build my whole career here.
Speaker 5 (39:28):
But there's not a lot of companies like that anymore.
Speaker 4 (39:30):
A lot of it is technology. There's so much technology
out there, there's so much. Is that a net positive?
Like do the kids in your class like that's a
net positive? AI is probably all over your daily issues
with your dealings with your students. Is that is technology
with the hindsight a net positive or net negative?
Speaker 8 (39:48):
This is I don't know the answer. Sometimes I think
it's a real net negative and what it's done to
how much we talk to each other. But I will
say that my students are terrified because of AI. Like right,
AI is taking the job they would do AI. You know,
a first year consultant or a first year analyst, they're
like deer in headlights, like what jobs are left for us?
(40:09):
How where are our entry points? That's why technology is scary.
Now when it comes to using AI for.
Speaker 5 (40:15):
Homework, that's a totally what is your experience? What do
you say?
Speaker 8 (40:19):
When it first came out, they were using it a lot,
and then as teachers we got very savvy about how
to phrase the homework, you know, from your personal experience.
And then I look at my students, I say, you know,
it's against the rules to use this on exams, and
I'm asking you personally, for reasons of integrity, do not
use AI.
Speaker 5 (40:33):
And generally they.
Speaker 2 (40:34):
Comb aerospace engineering At Boulder, I got through the Great
Books English course off the cliff notes. Did you mean
is there any difference between the cliff notes and AI?
Speaker 8 (40:47):
That's a good point. I think that AI does the
thinking for them. With the cliff notes, usually you would
then go into a classroom and you'd be forced to
discuss issues. But AI, right, you know, does the thinking
and the talking.
Speaker 2 (40:58):
Explain to me what I I also see, particularly what
I'm giving speeches between the American gen z yeah and
the hungry four is a stereotype the hungry for in
a kid's recent immigrants. Second they're not buying the gen
Z thing. They're focused and they're killing it in differential equations.
(41:19):
It's stern, all right.
Speaker 8 (41:20):
So this is what I want to say to that,
and I want to wait to the data comes in.
But we are currently running the exact same study in
three different places, one with first generation immigrants as part
of the gen Z and then we are attempting in
a collaboration with a different school to do it for
this exact study in India, and I don't know if
we'll be able to do it, but in China. And
(41:41):
I think that has implications for American competitiveness because if
it comes back, then in India eighty two percent of
gen Z has hiring managers values.
Speaker 5 (41:53):
Right, that's worriesome that.
Speaker 2 (41:55):
Susie Welcher is my essay of the year. It's in
the Wall Street Journal on gen Z. Thrilled could come
in to celebrate the research of it at New York University,
Paul finished it up. Please.
Speaker 4 (42:06):
I wonder if gen Z, because I live with them
every day, will be if their values will change as
they age and they say, ooh, I got a mortgage now, Okay, So.
Speaker 8 (42:18):
Values generally don't change, Okay, right, values are generally set
by time we're twenty five years old, because a lot
of things go into that too. What changes is how
much we express them or repress them. So I think
what will happen is gen Z will keep these values
because unless you have a seismic event, your values generally
stay the same your whole life. The seismic event may
be not getting a job, and then therefore they'll repress
(42:39):
certain values or they'll suppress them not happily.
Speaker 4 (42:43):
Do you see that as again, you're the one of
the top NBA programs in the world.
Speaker 2 (42:48):
Here my first sponsor, first people to step up.
Speaker 4 (42:54):
My point is half of Global Wall Street came out
of the Stern program.
Speaker 2 (42:57):
Everywhere.
Speaker 5 (42:57):
Absolutely, that's ever really true. I mean, as a student
body changed there? Do you think my students who I.
Speaker 8 (43:05):
Don't want to make generalizations, but my students who are
first generation generally are in that two percent, so they're
not changing anything. They're like, they've got their parents' values
and they're there to win, and they are clearly already there.
I don't see the change yet right now, I just
see a shock, you know, Okay, nobody doubts the research, right,
(43:25):
they don't know what they're going to do.
Speaker 2 (43:27):
Do you give out c's? Okay, I just you know,
just a vignette, folks. I had a privilege of Ruth
Rebecca Stroic in mathematics one hundred million years ago. It
was a curved grade, right like in England where it's
much tougher. Could you give Professor Walch a Tito's and
tang that's good morning? Drink here, Susie, Susie, I look
(43:50):
at the great inflation and it's a joke. I mean,
I killed myself for quality C in organic chemistry.
Speaker 5 (43:58):
Yes, I did too. I have I want you to
know something. I have given a C.
Speaker 8 (44:04):
It's not a very common thing, but what the student
maybe should have gotten was different than a C. But
I gave a CE. It felt like a very brave
and daring thing to do. I spoke to the academic
dean beforehand, setting I'm giving a CI.
Speaker 2 (44:17):
No kidding me?
Speaker 8 (44:17):
Yeah, because look there's a there's great devlation everywhere. You know,
I'd be lying to say there wasn't. Should we be
giving c's the students to say, no, no, no, we
got to get jobs.
Speaker 5 (44:27):
Please don't do that to us. But lawyers are not
allowed to ask your.
Speaker 2 (44:31):
Gpsh no one in the control room has ever gotten
a C. That's what. No, Let's go around the room.
Speaker 4 (44:37):
Business School back in the early nineties, you had twenty
classes and if you passed all twenty, they stamped your
passport and I could go back to a Wall Street
at twice the pay. So though, saying was twenty p's
equals sixty G.
Speaker 5 (44:47):
My grades mattered.
Speaker 8 (44:48):
My grades at Harvard Busines School, my grades at Harvard,
they both mattered a lot. And I worked so hard,
and I did ask do they work the.
Speaker 2 (44:56):
Same hard today that you lived at HBS.
Speaker 5 (44:59):
I don't know. I don't know because I'm not.
Speaker 2 (45:02):
I've asked these kids get through Michael.
Speaker 8 (45:03):
Porter at HBS right now. I got to believe it
they can. I mean, I don't know because I'm not
in that classroom. I ask my friends there.
Speaker 4 (45:12):
Here's what my friend, this Bloomberg LP is managed by
twenty and thirty somethings, So we're the outliers.
Speaker 7 (45:18):
Yeah, and the.
Speaker 4 (45:19):
Smartest people running these businesses are to me kids. But
they're so smart, they're so driven, they're so creative. I
hired a bunch of them from boom Bloombir Intelligence.
Speaker 2 (45:29):
Yes, yeah, I'm not.
Speaker 4 (45:31):
I'm fine. I'm comfortable with this.
Speaker 5 (45:33):
The kids are all right.
Speaker 2 (45:34):
The kids are all right. One final question of twenty seconds,
how much hate mail have you gotten?
Speaker 5 (45:40):
It's a good portion of it. I have to say.
You know, people always like to kill the messenger.
Speaker 8 (45:45):
And you know, it's as if I stood up and
said gen Z is unemployable at me and they did.
Speaker 2 (45:52):
What you've done is phenomenal. Susie Welch, thank you so much.
My essay of the year is gen Z Unemployed.
Speaker 1 (46:01):
This is the Bloomberg Surveillance podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live each
weekday seven to ten am Eastern on Bloomberg dot com,
the iHeartRadio app, tune In, and the Bloomberg Business app.
You can also watch us live every weekday on YouTube
(46:21):
and always on the Bloomberg terminal.
Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg
Surveillance Podcast. Catch us live weekdays at seven am Eastern
on Apple car Play or Android Auto with the Bloomberg
Business app. Listen on demand wherever you get your podcasts,
(00:25):
or watch us live on YouTube.
Speaker 2 (00:27):
Joining us now, wasting too much time, I'm sorry, folks.
Richard Clarida of Columbia University, of PIMCO and of course
the former vice chairman of the FED, Professor CLARDA. Were
thrilled to have you in today. Can I go nerd
for a moment? Sure? Okay. I never talk about the
Nobel Prize in economics. It's like bad luck, and I'm
not doing that with somebody qualified to get the call
(00:49):
from Scandinavia. But I want to go back. This is
really important, Richard Clarida. There can be like in nineteen eighty,
I've had the honor of talking to Joe Stiglitz about
Gross and Stiglitz, which in nineteen eighty I'm not kidding, folks,
it was like a four page paper. It was small,
it was focused. And then with you and you know,
(01:12):
I don't want to get into you know this or
that there's Clarita Girtler and A Gali okay, up at
Brown University. When you make a paper like that that
is treasured by this is on DSGE folks, it's treasured
by all of economics, how do you get that paper done?
(01:32):
That ends up being like, hey, should they win a
Nobel Prize? What was the process of doing? You know,
name the paper, but I'll go to Girtler The Science
of Monetary Policies just one example.
Speaker 3 (01:46):
Well, it was an interesting time because the authors Mark Gertler,
Jerdi Galli and I were sort of either early or late.
But we felt there was a vacuum in academic economics
in that it treated monetary policy as a black box,
and we thought these guys are trying to do something sensible.
So we actually worked out essentially a forward looking tailor
(02:07):
rule to describe actual monetary policy. And it turned out
that it actually did a good job and it made
a lot more sense than the black box. But when
we wrote that paper, I don't think we had any
idea that it would have the impact.
Speaker 2 (02:17):
That it did. We thought it could get ignored, okay,
away from you. In modern economics, there's a nineteenth century
what's called plug and chug which you have an equation, folks,
and you fill in the little blanks of the algebraic
equation the tailor rule. You can't do that because you
don't know where the output gap is right right out? Yeah,
is Jerome Powell flying blind?
Speaker 3 (02:40):
Well, he's certainly flying with an obscured vision out the cockpit,
for sure. And I think there's always some uncertainty about
things like what is our star? What's the full natural
rate of unemployment? But it's probably elevated now. And the stakes,
let's be honest, I guess, let me cut to the punchline.
The stakes are higher now because of the fact that
(03:00):
for the last four years inflation has been above target,
and of course in twenty twenty one and twenty twenty
two it served and was not transitory. And so I
would argue that the stakes are higher now for the
FED than they have been.
Speaker 2 (03:11):
Really, going back to Paul Volker forty years.
Speaker 4 (03:14):
Ago, does the government shutdown impact the Fed's ability to
manage its mandate here in terms of managing interest rates?
Speaker 3 (03:23):
The longer it goes on, the more that becomes a factor.
In particular, because a lot of the data comes from
the government, including you know, inflation data and the labor
market data. Now, the FED, like many other organizations and
in the private sector, looks at a wide range of
high frequency data. You get ADP, you get a lot
(03:44):
of different indicators of the labor market. But yes, the
longer this goes on, the more challenging it is to
determine exactly where the economy is.
Speaker 4 (03:53):
What do you think is the bigger risk for this economy?
Is it from the Fed's perspective, is it the labor market?
Is this inflation? Are they evenly balanced here? What do
you think the bigger risk?
Speaker 3 (04:02):
Well that was what was important about the September meeting
because up until September, Jay Powell and many on the
committee had said, look, we have dual mandate employment and inflation,
and they seem to be roughly in balance. And at
the September meeting they said, we're now more concerned about
the balance of risk in the labor market. And I
respect that, But the reality is inflation now using the
(04:25):
FEDS preferred measures two point nine percent, that's where it
was eighteen months ago. It's well above two and so
there is a risk to both sides. There's a risk
if you don't cut rates the unemployment rate goes up
a lot. There is a risk that if you do
cut rates a year from now, inflation stuck in the threes.
Speaker 2 (04:42):
Richard Claiter, with this talk, is a former vice chairman
of the FED. For an extensive conversation. When we invented this, Paul,
I mean to go from Man Deep Singh with his
brilliance on AI to Professor Claiter, I mean, this is
the way you roll, That's how you do it. This
is how you do it. We said good morning to
all of you across America worldwide as well. Okay, I'm
in the basement of the of our building in London
(05:03):
with a guy named Jean Claude Trichet, the engineer from Leon.
He's brilliant. He goes Tom, I think you call me Tom.
I can't remember, and he says it is about diffusion,
and we're talking about productivity. I hate the phrase K
shaped economy because it implies a symmetric distribution baloney. The
(05:24):
productivity that we're all witnessing right now. Maybe Jeff Sachs
would be good at this. Yeah, the productivity that we're witnessing.
You can't tell me it's evenly diffused. Across some mirror.
How asymmetric are we in this productivity? Boom?
Speaker 3 (05:41):
Well, I think you're one hundred percent right. You know
the term in economics, you know, is is it labor
augmenting technical change?
Speaker 2 (05:49):
And I think the answer is yes.
Speaker 3 (05:50):
But more labor is augmented, another lager over time may
be substituted for. And I think that is really the
potential disruption from AI is not only does it lift
out at per hour, but it also could result in
at some point in some displacement as well. So I
think it's too soon to tell, but the minimum we
know it's not evenly distributed.
Speaker 2 (06:09):
Dominic Constume over at Missou and now Brilliant out of Oxford,
Doctor Constum would say, there's a capital deepening issue here.
Explain to our audience this wall of AI money and
what that does to the capital dynamics of America.
Speaker 3 (06:24):
Well, the interesting point is, you remember a couple decades ago,
the talk in the US was about the witless economy,
that we could get all this GDP without bricks and mortar.
And it turns out that at least for this part
of the new economy, you need a lot of bricks,
a lot of mortar, a lot of servers, and a
lot of power generation. So in some ways to get
to the very new economy, you need old economy capital spending.
(06:46):
And that's a pretty interesting period to be in. We
think it's going to go on for five to ten years,
but it's a different economy than we were used to
thinking about in the last twenty years.
Speaker 4 (06:56):
You strip out the AI spend, a lot of folks
will tell you this economy not that strong. Capital spending
is not that good.
Speaker 2 (07:03):
How do you think about that arithmetically? That's correct.
Speaker 3 (07:06):
You know, in the first half of the year GDP
growth was about one point six one point seven. If
you strip out tech investment then it was somewhere between
zero and half of that, and you have to adjust
for imports. But clearly in the first half of the
year it's really been an AI driven capex economy.
Speaker 4 (07:25):
So one of the issues out there that I guess
it's got to push the background a little bit, maybe
just because fatigue is tariffs and the impact on the economy.
We have not necessarily seen meaningful inflation resulting from the tariffs.
Growth seems to be kind of hanging in everything. Strong
gd for in a few weeks ago. How do you
(07:47):
think tariffs will impact the economy if at all.
Speaker 3 (07:51):
The economy has been refreshingly and surprisingly resilient. I don't
think there's any doubt about that. So at PIMCO, we've
revised up our outlook. You know, Atlanta Fed is now
saying Q three could come in north of three percent.
Speaker 2 (08:09):
So I actually think it actually in part.
Speaker 3 (08:11):
Is because of at the same time we've had the
tariff hit to the economy, we've also had a justifiable
optimism about tech and capital spending, so that that's been
an important feature. I think the other important feature is that,
you know, some of the tariffs have been absorbed either
by the profits of US companies that had a lot
(08:32):
of profits to absorb or foreign exporters. And then the
third piece is we're probably not yet at the at
the endpoint of teriffs. They will continue to show up
in the inflation data at least for a while, but
I think increasingly I and the Federal of the view,
and that the FEDS what's important that this is really
not going to be an inflationary story. It's a price
(08:52):
level adjustment that we're sort of in the middle innings
of getting through.
Speaker 2 (08:56):
Against some nerd knowledge here, folks, Good morning Global Wall Street.
Richard Clara with this with PIMCO, and of course forever
with his Columbia University. Okay, my path in foreign exchange
is Mundel, Mundel, Fleming, Jacob Frankel. Out of Chicago, a
guy named Rogoff shows up, No excuse me than Rudy
Dornbush up at Amputeen this upstart Rogoff and so getting
(09:19):
ops felt out at Berkeley. They show up and it
goes on and on and on. Let's take it back
to Colombia, where you have this incredible that you helped build,
this incredible synthesis of international economics. Explain to America with
Xavier Salah, m Lartin or Robert Mundel the Giant would
say about how screwed up, messed up Japan is. With
(09:44):
weekend log convex interest rates moving higher, the real rage
chart published out of Tokyo today by Bloomberg is grim.
Explain why our listeners and viewers should care about the
fragility of Japan.
Speaker 3 (10:01):
Well, because Japan is obviously a major economy, but it's
also an even bigger part of you know, international financial system.
With the yen an important currency, especially in risk off episodes.
Speaker 2 (10:12):
Somebody has to hold all the jgbs.
Speaker 3 (10:15):
That the government has been issuing, and so what happens
in Japan also spills over into US capital markets and
the global economy. And I think what's important for the
listeners to understand now is that markets and investors have
had sort of a rule of thumb about Japan, which
is it sort of goes off in its own it's
got deflation. Eventually they'll figure out their fiscal situation. And
(10:38):
now Japan has broken out of deflation. They now have inflation,
they have positive interest rates, and they're now very much
a player in the global financial system.
Speaker 5 (10:47):
Is there is there.
Speaker 2 (10:48):
Any precedent for a successful reflation. I don't see it
in the literature. It's original to Japan, isn't it.
Speaker 3 (10:58):
Well, Japan was went through about a two decade period
where they had deflation. It wasn't a spiral, but prices
were negative. I think to me, Tom, one of the
interesting things about Japan is although the boj was trying
to reflate the economy, the politicians in the public actually
didn't get a vote. They actually liked deflation. You know,
if you've got you've got your savings in yen under
(11:19):
the mattress. You know, deflation is good for you. So
I think a challenge right now in Japan is they finally,
after twenty five years, achieved the positive two or three
percent inflation. But it's creating substantial political tension as well.
Speaker 2 (11:31):
Well, I can't emphasize that that was brilliant. We'll try
to do that single best idea. We'll see if the
interns get the cut today. Well, the societal change. I
was at the White House correspondence dinner and you got
this whole security idiocy because the President's there and Martin
Feldstein's standing in front of me. I think rogue off
was my guest. Martin Feldstein's standing in front of me.
(11:53):
We'd all had six martinis. And he turns around and
he says, Tom, Japan has been lost for two decades. Yep,
that was a societal struggle.
Speaker 5 (12:03):
Is Japan now found?
Speaker 4 (12:05):
Is it out of the wilderness at this point?
Speaker 6 (12:07):
Do you think?
Speaker 3 (12:08):
Well, as I mentioned, you know, narrowly, it certainly is
no longer in deflation.
Speaker 2 (12:12):
It has positive interests.
Speaker 3 (12:15):
I will say, just an anecdote, if I'm allowed an anecdote,
I visit Japan almost every year for the last thirty years.
Speaker 2 (12:21):
And most recently this summer.
Speaker 3 (12:22):
I was struck by not only the boom in the economy,
but it is a real tourist magnet now. In fact,
if anything, in Japan, the politics is such that there
are too many tour right, which is a problem they
did not have for twenty five years.
Speaker 2 (12:35):
Professor, I got to ask you, or I should say
Vice Chairman, I've got to ask you. Lisa Cook gets
an extended stay at the Fed. What is the significance
of Lisa Cook remaining at the Federal Reserved table.
Speaker 3 (12:47):
Well, obviously the case is at the Supreme Court, and
so we'll know next year where they end up. But
what's important is, you know, she continues to serve as
a governor and continues to vote on monetary policy.
Speaker 2 (13:00):
And I think that that is right. I think that's appropriate.
Did Columbia pay for Sala E. Martin's bright colored jackets?
Is that part of his deal?
Speaker 3 (13:09):
During my time as chair, we did not subsidize the
jackets or the m and ms that he distributes to class.
Speaker 2 (13:17):
But I'm not sure about the current practice. This is
your dovo. Sally Martin's like three quarters of a mile away,
and he's there in bright orange, just like there's the
growth guy from Columbia, Richie Claire brilliant. Thank you so much, really,
treasure of the comments there. Maybe we'll get him back
once we figure out who Scandinavia annoints this week as well.
(13:37):
Clarida is with Pimco. Stay with us. More from Bloomberg
Surveillance coming up after this.
Speaker 1 (13:50):
You're listening to the Bloomberg Surveillance podcast. Catch us Live
weekday afternoons from seven to ten am Eastern Listen on Apple,
Karplay and Android Otto with the Work Business up or
what Us Live on YouTube.
Speaker 2 (14:03):
Joining us now. Finally, Jane Foley out of FX strategy
at Robbo Bank in London. I can't say enough, folks
about the difference here in the Rabobank of the Netherlands.
They go back to commercial hedging utilizing foreign exchange back centuries.
It's a whole different twist here on the dynamics. Jane Fowley,
(14:24):
I want you to explain the sowhat to our American
listeners and viewers and those in London frankly as well
of a week Japanese yen our two point nine standard deviations,
What why do I care that dollar yen could go
to one fifty five shockingly week Japan?
Speaker 7 (14:45):
Well, I mean, gently excuse me. That's the talk this
morning that we could see a move back to one
fifty five. And it is all because the market thinks, well,
you know, the end characterve is back on. You know,
we're going to not get the Bank of the Bank
of Japan interest rate hiking October after But I would
warn but I think this is a really dangerous strategy
in it. Why is it dangerous because if you think
(15:08):
about the position of the LDP leader now, and she
is of course quite likely to be voted in as
the Prime minister maybe next week, although there's some issues
there with her coalition, But assuming she is the prime minister,
you've got to wonder does she actually want a weaker yen?
Now the market is assuming that she is going to
follow the policies of her mental Aarby. But of course
(15:31):
when Abe was the prime minister, things were very different
in Japan. They were still trying to fight deflation. Now
Japan has got inflation, and she is very concerned that
a lot of this inflation is because of important inflation.
And of course, if you are worried about important inflation.
Why would you want a weaker currency, particularly when you
(15:54):
want to build a strong relationship with President Trump, who,
according to the Japanese prayers, may start Japan in his
visits to Asia and perhaps at the end of this time.
So I think this could be quite a dangerous strategy.
I'm not quite so certain that beat the carriage trade
will be on so long.
Speaker 2 (16:10):
In Paul Toro Fujioko off for Tokyo Desk has a
brilliant story today showing the in the new inflation, the
inflation justed wages. The japan people are flat on If
that happened in America, they'll literally be revolt. They're flat
on their back with a negative real wage growth.
Speaker 4 (16:30):
Absolutely, Jane, we've got I think the story maybe this
week over it. Certainly this year has been gold. We've
got gold north of four thousand dollars per ounce. A
lot of folks are saying, hey, this is a safe haven,
maybe more so than the US dollar. What are folks
in your world thinking about the relationship between the US
dollar and gold.
Speaker 7 (16:49):
Well, certainly that seems to be you know, the fashion
trade right now. But I do think that there is
room for both and I do think that if we
did have, say a sudden step up of geopolitician, I
think we'd see the dollar and we'd see gold gold rallying,
although over time the dollar, you know, if the dollar
were to recover significantly, of course, I think there would
be forfit taking first of.
Speaker 2 (17:08):
All in gold.
Speaker 7 (17:10):
Now, gold I think is a real true diversification trade
this year, and I think this is where a lot
of the buying has come from. You know, if we
go back to the first five months of this year,
that there was this rotation trade away from the US
assets and maybe that's stop now bores turned around because
we do see you know, the AI trade, the S
and P making you such strong gains really since since June.
(17:32):
But I think there is diversification still amongst that. We've
seen various different stock markets, including the perform quite well
this year, and we've seen silver do well, We've seen
bitcoin do well, and I think there is a want
by many investors really to diversify their portfolios, and I
think that's where the strength in gold is coming from.
Speaker 4 (17:51):
Jane, We've we've seen the Bloomberg dollar index, you know,
kind of stabilize here over the last month, or two
here the dollars stabilized. Is this kind of a a
new level you think for the dollar?
Speaker 7 (18:03):
Yeah, you know, the dollar is the best performing G
ten currency on the one month view, despite the fact
that it's still the worst performing on the year to date.
And we have seen a lot of stability really over
the summer months. Really sort of July is and you know,
a lot has been said over the spring about the
hedging strategies or the change in hedging strategies by non
(18:24):
US dollar based fund managers, and that probably accelerated the
downside of the donor certainly through the spring. But if
we assume that for now, you know, that's done, maybe
it could start again. But if we assume it's done,
you know, I think what we've got now is short
covering in the dollar because there's an awful lot of
fed easine in the price. The market's still whether or
(18:47):
not inflation will come through.
Speaker 2 (18:48):
Tours jargon here, let's let's translate this. Jane. You're saying,
everybody bet the bank, bet the farm that there would
be strong dollar, and now they're turning that trade around
and going the other way.
Speaker 7 (18:59):
It seems that's what happened in the spring. So if
we go back to the global financial crisis, we've seen
you since then, a massive rally out performance of the
S and P five foundred and really a massive rally
in the value of the US dollars. So everyone was
buying American assets and during that period non dollar based assets,
so really Asian European fund managers, they were investing in
(19:21):
a lot more money. There was a lot more money
to be invested, and a lot of that was finding
its way into the US. And I think come the
beginning of this year, the market, okay, the dollar's done
so well in recent years, we weren't that hedged, and
at the start of this year they started to hedge
the dollars.
Speaker 2 (19:37):
Jane, we're running out of time. First of all, we
got to get you in the studio in New York
to do like a double barrel, like a whole hair
four with Jane Folly, a raval bank. Jane. People think
I got hired at Bloomberg because I'm like bow tie.
It's not true, folks. I mean meetings with like Matt Winkler,
Peter Grauer retiring chairman, and they're going dance all our
rods and cones. Where do you do that, You do
that in Jane Foley space. Foreign exchange, Jane, I'm seeing
(20:00):
huge tension. If I look at something obscure like sterling swissy,
I'm out strong, Swiss franc to new territory, new points
of tension. If I look at euro yen back up
to a one seventy seven week en, points of tension
(20:20):
in your world, What do those tensions mean in foreign exchange,
for the stock market, for the bond market.
Speaker 7 (20:29):
Well, I mean the Nikai T two five has perform
really quite well this year. But if you're an overseas
investor investing in Japanese assets, well, you're not going to
really like the en going lower. Now.
Speaker 2 (20:40):
The yen again.
Speaker 7 (20:40):
Seems out of place here because what we've seen is
some Safeyvin Ausset's doing quite well, the dollar stabilizing, the
Swiss frank doing well, goal doing well, but the yen
again on the back foot, and that to me is
another reason why this yen selloff is probably overdone.
Speaker 2 (20:56):
Okay, Jane Foley, thank you, thank you so much. Stay
with us. More from Bloomberg Surveillance coming up after this.
Speaker 1 (21:10):
This is the Bloomberg Surveillance podcast. Listen live each weekday
starting at seven am Eastern on Applecarplay and Android Auto
with the Bloomberg Business app. You can also listen live
on Amazon Alexa from our flagship New York station, Just
say Alexa play Bloomberg eleven thirty.
Speaker 2 (21:27):
Here's the way it rolls, folks, Economics, finance, investment, international relations.
It's no different than sports entertainment. Taylor Swift, did you
know she has a new album out?
Speaker 6 (21:39):
I heard that.
Speaker 2 (21:40):
I think we're efforting her right now, Miss Swift. If
you're listening, bring Jack with you as well. Taylor. Anyways,
people keep score and as a young kid that came
out of York University of York in England and all
of a sudden things are working. He's with Capital Economics,
which is a really wonderful firm writing clear stuff. He's
(22:00):
global group, such a group Chief Economistic Capital Economics, but
really made us a splash, like with the ft and
the thinking within England of what in God's name is
going on? The summary of it is a wonderful two
hundred and fifty pages. The Fractured Age Martin Wolf warbles
(22:21):
gaily on the cover. A guy named Robert Nibleta Chathamhouse
shows up so does bread sets her Neil shearing with
us in celebration of the fractured age? Did you time
the book release for the world falling apart?
Speaker 6 (22:36):
Some things with the book that you need an idea,
you need the support of your friends and family, and
you need a bit of luck. I'm luck in space.
Speaker 2 (22:45):
What is the distinction of this fractured age that's not
in the zeitgeist? Now, all the blood, the eighteen newspapers,
the media, people like us, what are we missing of
this fracture?
Speaker 6 (22:58):
So I think that the genesis the book was that
the rhetoric of deglobalization was everywhere right. Tariff's going up,
trade barriers going up, this idea that we're returning to
the nineteen thirties, countries are turning inwards. And when we
at capst Economics looked at the data, we saw global
trade volumes going up year on year on year. So
this idea, the thing that everyone's missing is the idea
(23:19):
that the world isn't deglobalizing. But clearly something is changing.
And as I argue in the Burke, and as we've
written about a cap of Economics, the thing that has
shifted is the relationship between the world's two major economies,
the US and China, they've become superpower rivals, and that's
causing those economies to both put apart or fracture, and
then other economies to have to pick aside.
Speaker 4 (23:40):
Essentially, So again, we all grew up in a world
of globalization. That's just that's several generations have grown up
in that world. Is that still the world we're in
in terms of globalization, because it again it doesn't feel
that way.
Speaker 6 (23:54):
Well, globalization has certainly shifted, and if you look at
trade flows you can see them see the evidence that
shifting globalization. So up to about four years ago, about
three quarters of US cell phones came from China. Less
than one in four cell phones are going to be
produced in China that are consumed in the US this year,
with more coming from Vietnam and India. So we're still
(24:16):
consuming vast amounts of cell phones and imported vast amounts
of cell phones, but the location of the production is shifting,
and it's shifting for these security reasons.
Speaker 4 (24:25):
Can the global economy truly be global if there is
this seemingly broadening divide between China and the West.
Speaker 6 (24:35):
Well, there's going to be greater frictions within global trade
and capital flows and technology flows, maybe people flows too.
As I argue in the book, the key economic, key
driver of the economic consequences of this fracturing it's going
to be twofold. One is how do other countries align?
Can the US block, which is enormous, kind of hold
together or does Trump push everyone apart?
Speaker 5 (24:56):
And then the second, as you allude.
Speaker 6 (24:58):
To Poored, is the contours of the fracturing. If it's
contained to things like cell phones and batteries and chips
and semiconductors and pharmaceutical products, then I think the economic
costs are going to be quite limited to be manageable.
If we get a much wider fracturing that encompasses many
more areas than the economic costs will be much larger.
And if the two sides ever come to conflict, then
(25:20):
all bets are off. We shouldn't worry about the economic costs.
Speaker 2 (25:22):
We're sharing with us. The fractured age is the book
two hundred and fifty pages. Mister wolf Over at Financial
Time says an exceptionally sensible, clear headed, and original thinker.
I'll vote for that is well. One of your Catholic
economics essays Europe flat and is back. We see that
with the politics of France and I looked at it's
(25:43):
sterling swissy today and my word, it looks like Britain
after World War Two. How fragile is the continental and
United Kingdom economy right now?
Speaker 6 (25:54):
I think about the UK to one side. The UK
we have our own fiscal challenges, but actually I don't
think they're quite as a cut as say France. Yeah,
there's plans on the way to reduce the deficit in
the UK. The question is, really you're optimistic the UK
can get it det I think we can get to
kind of muddle our way through. There's enough fiscal fudge
going around that we can kind of muddle our way.
Speaker 2 (26:12):
Through this one.
Speaker 6 (26:13):
France, it seems to me, is a bit more intractable.
They've had four governments now of four on the back
of efforts to try to reduce the budget deficit. The
parliament is fractured, there's a presidential election due in twenty
twenty seven. All of this political dysfunction is fodder for
nationalists populist and let's see what happens in the twenty
twenty seven election. I don't think that we're going to
(26:33):
have a repeat of the Eurozone crisis. I don't think
we're going to get big debt to faults in banking crises.
The banks in France look pretty well capitalized. They don't
hold much government debt, but it's a fiscal crisis that
is brewing.
Speaker 2 (26:44):
Albums. If the right takes over in France, I mean
within the five party parliamentary system, the right in Hungry,
the right in Poland, the right, I mean there's a
huge fear almost of it. I'll call it a Trumpian
right in.
Speaker 6 (26:59):
Europe, absolutely, and we're seeing it happen. That's what we're
seeing this play out in real life. That I think
the question is what type of rights that might might
govern Italy is an interesting example here. We've had a
kind of populist right wing government for the last couple
of years under Georgia Maloney. Actually they've governed in economic
matters in their relatively orthodox way. So I think it
(27:21):
depends as much upon how they govern in if they
win power as to what the rhetoric do.
Speaker 4 (27:28):
You think This is a seminal point for France right
now to either stay the course and hope for the best,
or make it some significant changes. Is this a pivot moment.
Speaker 6 (27:40):
I think we are kind of we're approaching one of
those pivot moments, certainly when it comes to the political
structure of France. If you look at the rise of
the right, and you look at the rise of the
right across Europe, I mean, the center is kind of
holding so far. The center health in the German elections
last year. The center's held so far in France. The
question is would it continue to hold through to twenty
twenty seven in those elections you're sharing.
Speaker 2 (28:02):
And the government shutdown of the United States.
Speaker 5 (28:05):
Of America, well, I've just spent two hours.
Speaker 6 (28:08):
I came. I flew into Dallas on Monday evening. I
spent two and a half hours at immigration.
Speaker 2 (28:14):
Yeah, did you say hello to Lisamated?
Speaker 6 (28:17):
Exactly. So it's so it's having a real world consequence
now in terms of the impact on the economy. When
we look through the history of government shutdowns, we can't
really see them in the economic data. It tends to
be a bit of dislocation that gets made up in
subsequent months. But again, a bit like France, this speaks
to political dysfunction, and it is as acute here in
the US as it is in Europe.
Speaker 2 (28:37):
Congratulations, you're sharing the fractured age. Can't say enough about it.
Really an abrupt read in well timed to say the least.
Stay with us. More from Bloomberg Surveillance coming up after this.
Speaker 1 (28:59):
This is the Bloomberg Surveillance Podcast. Listen live each weekday
starting at seven am Eastern on Applecarplay and Android Auto
with the Bloomberg Business app. You can also watch us
live every weekday on YouTube and always on the Bloomberg Terminal.
Speaker 2 (29:13):
That special moment here for Bloomberg Surveillance this morning, our
essay of the year I'm thrilled to announces, will do
that here in a moment. Stay with us across America
around the work. Can I just suggest this hour of
Bloomberg Surveillance sponsored by generous.
Speaker 5 (29:29):
Electric Shorts Finances Chins.
Speaker 2 (29:30):
We'll do that maybe as well. Futures up, ten down,
Futures up, one hundred and thirty eight. Bloomberg Surveillance this
Morning brought you by IBKR. Well the US Consumer Sentiment
Index it seeds sixty in October twenty twenty five at
IBKR Forecast Trader. The yes was recently at thirty three percent.
Start predicting today at ibkr dot com slash forecast. Last
(29:56):
training day for this contract is October twenty five, So
over a decade ago. David Brooks did an essay in
the New York Times. It was my essay of the
year on the nerds in the smooth Guys on Wall Street.
It was brilliant on the cultural divide on Wall Street.
I still quote it in speeches all the time. Brilliant essay.
(30:19):
This year, My essay of the year is on the
generational divide that we live every single day. Paul's limited,
I'm limited, Tucker. Do you have offspring?
Speaker 6 (30:31):
Ah?
Speaker 2 (30:31):
Yeah, okay, altering as well, joining us now with my
essay of the year. This was out of the Wall
Street Journal a number of days ago, and she's made
a huge splash with it. Is Professor Susie Welch of
NYU is gen z unemployable. It has created a firestorm
of comment. And I have to go to this because
(30:52):
the last time Susie, I think I saw you was
with a guy named Jack Welch. When did you decide
to go into the dark caver and of academics at NYU?
What was the pat You didn't have to do this?
Speaker 8 (31:04):
I did not I had been in broadcast journalism for
a bunch of years, and then I was running a
small tech music tech company, and the pandemic brought it
to its knees. And then Jack passed away, and I
went up to the woods of upstate New York with
all my kids and all their spouses and all of
our dogs. And then the pandemic ended and everybody went
back to life. I had been cooking up in my
(31:27):
mind a class called Becoming You, which was going to
help people figure out what to do with their lives,
which was what I was trying to figure out what
to do with my life.
Speaker 5 (31:34):
And I brought it to n Yu Stern and to.
Speaker 8 (31:36):
The dean there, who I knew from my previous life,
and I said, I've got this class I wish I
had taken in business school that has a methodology that
helps you figure out what to do with your life.
And he said, well, let's try it as an experiment.
Speaker 2 (31:46):
Before we get to the essay. Yes, what reeks in
this essay is academic rigidity. This is not some fancy
person like Susie Welch who decided to get some cushy thing.
There are some real work of often here. This is
like legit, accountable academic research, isn't it.
Speaker 5 (32:06):
Yes, I'm proud to say that it is.
Speaker 8 (32:08):
I mean it was conducted by myself and my team,
which includes all of the usual suspects of psychometricians and
data analysts and so forth. So we the research, I
think is I'm really proud of it.
Speaker 5 (32:18):
It's rock solid.
Speaker 2 (32:19):
Forty thousand people, seven thousand plus gen Z types. Yeah,
when did the shock set in over your outcome? And
describe there?
Speaker 8 (32:28):
Well, there's a bunch of you know, Look, I teach
gen Z every single day, I mean every semester. Are
hundreds of students, So my shock was perhaps less than
the rest of the team because I'm in the room
with them. Now, NYU students are not quite as representative
of gen Z as outside of NYU. These are MBAs,
so they tend to have a little bit more ger
(32:49):
going on. I think that when we saw the two
percent number which we can get to, we were all like,
we checked it about thirty five timesoose.
Speaker 5 (32:58):
We thought that is too much in that number.
Speaker 8 (33:00):
So what we did is we have a tool called
the Values Bridge, which we developed in our labs, and
what it does is it ranks your values from one
to sixteen, your personal values from one to sixteen. And
so we now seventy five thousand people have taken this test,
but at the time we did the research, it was
forty five thousand people. And we were able to cut
it by generation and we were able to see gen
Z's values ranked from one to sixteen. And their number
(33:21):
one value is something we call you ammonia, which encompasses
self care, recreation, leisure, fun employment. You know, just so
John Tucker, But I think we all know somebody who
was in eutamonia is their number one value. Number two
was authentic self expression voice as we call it, and
number three was the desire to organize their life around
helping other people, which is very admirable, I would say.
(33:42):
But after I saw those top three values, I thought,
I wonder what hiring managers are looking for, because my
students are going out into the world to get hired.
I have four adult children who are fighting out there
in the world every day. So we did a separate
study and we replicated it twice after that to say, okay,
here the definitions of all the values hiring managers in
knowledge industries mainly business, It was tech, it was accounting, finance,
(34:07):
and so forth. The consulting what values are you looking for?
Speaker 5 (34:10):
And lo and behold.
Speaker 8 (34:11):
They were looking for the number one value of achievement,
the desire to have success that other people can see.
Number two was a desire for learning, stimulation and growth.
And the third value was work centrism, the desire to
work hard. And when you cross reference those two data sets,
it ends up that it's just two percent of gen
Z that have the values that hiring managers are looking for.
Speaker 5 (34:32):
It's interesting.
Speaker 4 (34:33):
I've for gen Z adjacent kind of offspring. They're all employed,
but they tell me their first memories of my oldest
were nine to eleven. That's their first memory. Yeah, and
then they had, you know, the great financial crisis, right,
their parents are impact that everybody's parents are impact. And
then they had the pandemic. So they've had some stuff,
(34:54):
you know, and I wonder have that influence is kind
of how they look the view of the world.
Speaker 8 (34:58):
Yeah, I think they don't want to buy into a
deal that their parents bought into that didn't work out
for a lot of their parents.
Speaker 5 (35:04):
I mean, you can you can come up with.
Speaker 8 (35:06):
A hundred reasons why they have these values and they're
entitled to them. I think that the problem is values
have consequences, and so some of them also have affluence
as a top value, and then they are very frustrated
and frustrated to the point of kind of anger that
they don't get the they don't get to have affluence
also as an output. If you have the value of
self care number one, so they can have their value.
I don't you know how they can buy their values.
(35:27):
I get it, there's a million reasons. I mean, their
parents might be to blame. I mean, with the torrent
of letters that came to the letters to the editor
after the article ran, a lot of people had a
lot of people they wanted to blame for this phenomenon.
Speaker 4 (35:39):
What does corporate America do here? Is corporate America adjust?
Speaker 7 (35:43):
You think that?
Speaker 2 (35:43):
Or do the students adjust or do they.
Speaker 4 (35:46):
Just find to find some common ground?
Speaker 5 (35:48):
Maybe this is a million dollar questions.
Speaker 8 (35:49):
So I've talked to a lot of business leaders since
the piece came out, and so the companies with brand
equity who can go higher the two percent are out
looking for them earlier, and they one executive said to me,
this is a cage match. We're willing to fight all right,
they're going to go find that two percent. They're going
to they know where they are, they're going to go
get them earlier, and they're going to lock them down.
(36:09):
And then other companies are going to have to figure
out what to do about the fact that they're not
going to be hiring young people who share their company values.
And do they accommodate them or do they try to
slowly move them over to a different.
Speaker 5 (36:24):
Way of thinking. It's very hard to talk people out
of their values.
Speaker 4 (36:26):
However, Yeah, what do you find in the NBA program,
Because you said those people kind of self select, they
want to achieve, presumably, but again I would suspect you
see some of that in your class.
Speaker 8 (36:37):
I mean, I see a preponderance of pneumonia, self care
being a top value. I do have MBAs, okay and so,
and in particular the nbas we're majoring in finance. Those
they have a lot of the values that companies are
looking for, and they're picked off pretty early.
Speaker 5 (36:52):
But I don't think this.
Speaker 8 (36:52):
Is true in colleges in general, and I think there's
a few And this is what I mean is that
companies are going to figure out where the two percent
are and they're going to come get them and they're
going to at them early.
Speaker 4 (37:01):
So how about for these these kids, though, I mean,
do they recognize that maybe they are in fact different
from certainly maybe their parents and maybe their grandparents and others,
and they they're defiant and they're okay with them.
Speaker 8 (37:14):
No, they're defiant. I mean they're not just okay. They're
they're they're defiant. They're like you, I mean what the
letters from gen Z that I got, the emails were like, hey,
shut up over there, lady, because you ruined the world.
You boomer people ruined the world. And our response is this,
and why would we want your values? Look what you
did to us with climate change and terrorism and school shootings.
Speaker 5 (37:38):
You created this world? Why would we buy your version
of events?
Speaker 2 (37:42):
Welcome all of you across America. It is my essay
of the year. Susie Welch, professor at New York University.
Where that's it's in the Wall Street journals. Created a
firestorm of comment, including from the kids in my family
as well. Susie, I had the honor of talking to
a guy named Jack Welch and frankly on it fmled
as well. Is the magic of the corridor from Pittsfield, Massachusetts,
(38:05):
through Albany out the Mohawk River Valley every single nineteenth
early twentieth century industrial X exercise out to the Great
Eastman Kodec Company GE nineteen twelve invented a fine benefit
pension plan. Those companies Carrier in Syracuse, Coodek, and Rochester.
They took care of their employees. What you're going to
(38:27):
hear in your classroom, what I hear every day is
the loyalty has been broken because of the employers. What
do employers need to do to increase that two percent
to a much larger number.
Speaker 8 (38:41):
I think that they can't do what they would need
to do, which is promise a long term employment. I mean,
people feel loyal when they feel like, Okay, I'm investing
my time in a company, and I'm going to be
here in two or three years and my boss is
going to be here.
Speaker 2 (38:53):
Disclosure Bloomberg LP every day. It's a privilege. I mean,
that's where we come from, right, the three of us
in this were right.
Speaker 8 (38:59):
Well, you probably a sense that, look, this company is
healthy and it's thriving, and we're all going to be here,
and I'm willing to give myself to this organization and
to work the extra hours because we're all going to
be here together. And but for most people going into organizations,
there's this constant sense of fragility and we may not
be here.
Speaker 5 (39:15):
I could be gone tomorrow.
Speaker 8 (39:16):
Why would you invest in yourself in that? And so
that contract is pretty much over now. There are places
I think JP Morgan, Goldman Zachs you can go and
think I could try to build my whole career here.
Speaker 5 (39:28):
But there's not a lot of companies like that anymore.
Speaker 4 (39:30):
A lot of it is technology. There's so much technology
out there, there's so much. Is that a net positive?
Like do the kids in your class like that's a
net positive? AI is probably all over your daily issues
with your dealings with your students. Is that is technology
with the hindsight a net positive or net negative?
Speaker 8 (39:48):
This is I don't know the answer. Sometimes I think
it's a real net negative and what it's done to
how much we talk to each other. But I will
say that my students are terrified because of AI. Like right,
AI is taking the job they would do AI. You know,
a first year consultant or a first year analyst, they're
like deer in headlights, like what jobs are left for us?
(40:09):
How where are our entry points? That's why technology is scary.
Now when it comes to using AI for.
Speaker 5 (40:15):
Homework, that's a totally what is your experience? What do
you say?
Speaker 8 (40:19):
When it first came out, they were using it a lot,
and then as teachers we got very savvy about how
to phrase the homework, you know, from your personal experience.
And then I look at my students, I say, you know,
it's against the rules to use this on exams, and
I'm asking you personally, for reasons of integrity, do not
use AI.
Speaker 5 (40:33):
And generally they.
Speaker 2 (40:34):
Comb aerospace engineering At Boulder, I got through the Great
Books English course off the cliff notes. Did you mean
is there any difference between the cliff notes and AI?
Speaker 8 (40:47):
That's a good point. I think that AI does the
thinking for them. With the cliff notes, usually you would
then go into a classroom and you'd be forced to
discuss issues. But AI, right, you know, does the thinking
and the talking.
Speaker 2 (40:58):
Explain to me what I I also see, particularly what
I'm giving speeches between the American gen z yeah and
the hungry four is a stereotype the hungry for in
a kid's recent immigrants. Second they're not buying the gen
Z thing. They're focused and they're killing it in differential equations.
(41:19):
It's stern, all right.
Speaker 8 (41:20):
So this is what I want to say to that,
and I want to wait to the data comes in.
But we are currently running the exact same study in
three different places, one with first generation immigrants as part
of the gen Z and then we are attempting in
a collaboration with a different school to do it for
this exact study in India, and I don't know if
we'll be able to do it, but in China. And
(41:41):
I think that has implications for American competitiveness because if
it comes back, then in India eighty two percent of
gen Z has hiring managers values.
Speaker 5 (41:53):
Right, that's worriesome that.
Speaker 2 (41:55):
Susie Welcher is my essay of the year. It's in
the Wall Street Journal on gen Z. Thrilled could come
in to celebrate the research of it at New York University,
Paul finished it up. Please.
Speaker 4 (42:06):
I wonder if gen Z, because I live with them
every day, will be if their values will change as
they age and they say, ooh, I got a mortgage now, Okay, So.
Speaker 8 (42:18):
Values generally don't change, Okay, right, values are generally set
by time we're twenty five years old, because a lot
of things go into that too. What changes is how
much we express them or repress them. So I think
what will happen is gen Z will keep these values
because unless you have a seismic event, your values generally
stay the same your whole life. The seismic event may
be not getting a job, and then therefore they'll repress
(42:39):
certain values or they'll suppress them not happily.
Speaker 4 (42:43):
Do you see that as again, you're the one of
the top NBA programs in the world.
Speaker 2 (42:48):
Here my first sponsor, first people to step up.
Speaker 4 (42:54):
My point is half of Global Wall Street came out
of the Stern program.
Speaker 2 (42:57):
Everywhere.
Speaker 5 (42:57):
Absolutely, that's ever really true. I mean, as a student
body changed there? Do you think my students who I.
Speaker 8 (43:05):
Don't want to make generalizations, but my students who are
first generation generally are in that two percent, so they're
not changing anything. They're like, they've got their parents' values
and they're there to win, and they are clearly already there.
I don't see the change yet right now, I just
see a shock, you know, Okay, nobody doubts the research, right,
(43:25):
they don't know what they're going to do.
Speaker 2 (43:27):
Do you give out c's? Okay, I just you know,
just a vignette, folks. I had a privilege of Ruth
Rebecca Stroic in mathematics one hundred million years ago. It
was a curved grade, right like in England where it's
much tougher. Could you give Professor Walch a Tito's and
tang that's good morning? Drink here, Susie, Susie, I look
(43:50):
at the great inflation and it's a joke. I mean,
I killed myself for quality C in organic chemistry.
Speaker 5 (43:58):
Yes, I did too. I have I want you to
know something. I have given a C.
Speaker 8 (44:04):
It's not a very common thing, but what the student
maybe should have gotten was different than a C. But
I gave a CE. It felt like a very brave
and daring thing to do. I spoke to the academic
dean beforehand, setting I'm giving a CI.
Speaker 2 (44:17):
No kidding me?
Speaker 8 (44:17):
Yeah, because look there's a there's great devlation everywhere. You know,
I'd be lying to say there wasn't. Should we be
giving c's the students to say, no, no, no, we
got to get jobs.
Speaker 5 (44:27):
Please don't do that to us. But lawyers are not
allowed to ask your.
Speaker 2 (44:31):
Gpsh no one in the control room has ever gotten
a C. That's what. No, Let's go around the room.
Speaker 4 (44:37):
Business School back in the early nineties, you had twenty
classes and if you passed all twenty, they stamped your
passport and I could go back to a Wall Street
at twice the pay. So though, saying was twenty p's
equals sixty G.
Speaker 5 (44:47):
My grades mattered.
Speaker 8 (44:48):
My grades at Harvard Busines School, my grades at Harvard,
they both mattered a lot. And I worked so hard,
and I did ask do they work the.
Speaker 2 (44:56):
Same hard today that you lived at HBS.
Speaker 5 (44:59):
I don't know. I don't know because I'm not.
Speaker 2 (45:02):
I've asked these kids get through Michael.
Speaker 8 (45:03):
Porter at HBS right now. I got to believe it
they can. I mean, I don't know because I'm not
in that classroom. I ask my friends there.
Speaker 4 (45:12):
Here's what my friend, this Bloomberg LP is managed by
twenty and thirty somethings, So we're the outliers.
Speaker 7 (45:18):
Yeah, and the.
Speaker 4 (45:19):
Smartest people running these businesses are to me kids. But
they're so smart, they're so driven, they're so creative. I
hired a bunch of them from boom Bloombir Intelligence.
Speaker 2 (45:29):
Yes, yeah, I'm not.
Speaker 4 (45:31):
I'm fine. I'm comfortable with this.
Speaker 5 (45:33):
The kids are all right.
Speaker 2 (45:34):
The kids are all right. One final question of twenty seconds,
how much hate mail have you gotten?
Speaker 5 (45:40):
It's a good portion of it. I have to say.
You know, people always like to kill the messenger.
Speaker 8 (45:45):
And you know, it's as if I stood up and
said gen Z is unemployable at me and they did.
Speaker 2 (45:52):
What you've done is phenomenal. Susie Welch, thank you so much.
My essay of the year is gen Z Unemployed.
Speaker 1 (46:01):
This is the Bloomberg Surveillance podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live each
weekday seven to ten am Eastern on Bloomberg dot com,
the iHeartRadio app, tune In, and the Bloomberg Business app.
You can also watch us live every weekday on YouTube
(46:21):
and always on the Bloomberg terminal.
Popular Podcasts
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
My Favorite Murder with Karen Kilgariff and Georgia Hardstark
My Favorite Murder is a true crime comedy podcast hosted by Karen Kilgariff and Georgia Hardstark. Each week, Karen and Georgia share compelling true crimes and hometown stories from friends and listeners. Since MFM launched in January of 2016, Karen and Georgia have shared their lifelong interest in true crime and have covered stories of infamous serial killers like the Night Stalker, mysterious cold cases, captivating cults, incredible survivor stories and important events from history like the Tulsa race massacre of 1921. My Favorite Murder is part of the Exactly Right podcast network that provides a platform for bold, creative voices to bring to life provocative, entertaining and relatable stories for audiences everywhere. The Exactly Right roster of podcasts covers a variety of topics including historic true crime, comedic interviews and news, science, pop culture and more. Podcasts on the network include Buried Bones with Kate Winkler Dawson and Paul Holes, That's Messed Up: An SVU Podcast, This Podcast Will Kill You, Bananas and more.