00:00Madame Lagarde is concerned about the global economy. Is she right about the economic fallout from the war in Iran,
00:06more likely to be felt longer than shorter, as U.S. Treasury Secretary Scott Besant has indicated? What's your view
00:14on this?
00:14So, Carol, thanks again for having me. I think she's absolutely right. And I'm particularly concerned for those countries that
00:23have K-shaped economies that are even more distorted than the United States.
00:28What we know is that this is a crisis that is hitting those at the bottom disproportionately. Today, it can
00:36be felt in terms of energy. But we know that as energy prices rise, fertilizer prices go along with it,
00:43which means that food prices will be next.
00:46And one of the things that I pay very close attention to is the ability of those at the bottom
00:51to feed themselves. And we know that that's a growing issue. And I would hate to see a repeat of
00:58the Arab Spring.
01:02We're going to talk food prices with Stu Leonard, right?
01:04Yeah, Stu Leonard is going to be joining us in a few minutes. And what he's going to talk to
01:08us about is what he's seeing at his grocery stores in the Northeast of the United States.
01:12And I wonder, Peter, how what we saw with the Arab Spring and a K-shaped economy in other countries,
01:19how you think about that in the context of the U.S. and the U.S.'s K-shaped economy and
01:24the fact that there are so many people in the United States who are struggling to get by.
01:29And what happens if we see prolonged higher energy prices for longer?
01:33Yeah, last November, Tim, the headlines were all about an affordability crisis. That crisis hasn't gone away. In fact, it's
01:41only gotten worse.
01:42And we've seen that in terms of individuals choosing because they can't afford health care to go without it.
01:48And now they're paying more at the pump. And there comes a point at which those at the bottom can't
01:56resolve the financial crisis that they face.
01:59You know, I think if the word of the year for 2025 was uncertainty, the word of the year for
02:062026 increasingly is powerlessness.
02:08And that's what those at the bottom are experiencing.
02:12And I don't think that those above have any clear sense of the challenge that those at the bottom now
02:20face in the United States.
02:22And I think that it's not about putting off a vacation, which some of the media suggests is the choice
02:30that's being made.
02:31No, it's a question of what can I afford? Can I afford to put food on the table tonight?
02:36And can I just say that that was a post of yours on X that caught my attention?
02:40It was a headline as gas prices approach $4 a gallon. We're there right now.
02:44Americans rethink vacations. And you said specifically, and this is something, Tim, that really just caught my attention from Peter,
02:49is that, you know,
02:51those on the arm of the case, you've really spent some time with those at the bottom.
02:54There's this real disconnect in people understanding everything.
02:57Why is bridging that disconnect so important? And not just important because of, in your view, of the society that
03:04we live in,
03:05but what's the economic argument, the economic case for understanding what happens in another person's shoes?
03:12Well, I think particularly in this economy, I don't think those above truly appreciate the dependence that they now have
03:20on those at the bottom.
03:22In an economy where everything is delivered, where everything is prepared by others,
03:28I think that we live in a Downton Abbey economy where those above don't see what's happening below.
03:37And they don't appreciate every element of their condition is dependent on a growing population that is invisible.
03:51You know, it's interesting. And we've got a live chat and one of our producers, Cece,
03:56sending us, sharing with us some information and had to do with comments, Peter, that Jamie Dimon said earlier.
04:01And forgive us because I don't have the exact quote in front of me, but kind of this idea that,
04:06yep, gas prices are higher,
04:07but people still have jobs and they have money to spend.
04:10Is that, again, kind of, and forgive me, I don't have the exact quote,
04:13so I don't want to get anybody in trouble or get me in trouble because of Jamie Dimon.
04:16But I mean, that idea that, okay, you might be working, but you're just, it's just not enough.
04:23It's not enough. And appreciate, again, those at the bottom have no choice but to go to their job.
04:29There is no work from home alternative. And so the impact is immediate and it's also visible.
04:37I can't emphasize enough the kryptonite-like impact that rising gas prices have on those at the bottom,
04:48that these big billboards that they pass every day has a really pernicious effect.
04:55Does it matter? What if President Trump comes out at 5 o'clock, Peter, and says, okay, the war's over?
05:03Does things change dramatically for people in America,
05:08especially those where those higher gas prices really do have an impact?
05:12So it may change in the short run to the extent that the markets now respond.
05:17One of the things we've seen is almost a minute-by-minute correlation between market prices and prices at the
05:26pump.
05:26And so we could see some short-term improvement, and that would certainly be wonderful to see.
05:34But the rat is now in the snake, and we haven't seen how that flows through,
05:41how higher oil prices and shortages of certain crude commodities now flows through the system.
05:48And as that happens, I think people will be surprised that the cost of living increases in temporary,
05:56but plays out over a much longer period of time.
05:59Yeah, barrel of Brent, still $104 a barrel.
06:01Crude, WTI crude, the U.S. benchmark, still over $100 a barrel.
06:05Yet the S&P 500 up 2.5%, the NASDAQ composite up 3.4% today.
06:10We're seeing really the risk on rally.
06:12Would you be buying U.S. stocks right now?
06:15No, and the reason I wouldn't be buying is I don't think yet that investors have fully appreciated
06:23what I think is today the biggest consequence of the war.
06:27And that is the degree to which America will be blamed by others around the globe
06:32for a much higher cost of living.
06:35And I worry about the implications to American businesses that operate globally.
06:41I worry about what this means for American tourists.
06:45I think that we have unknowingly created a moment where there's a lot that America can
06:54and will be blamed for that is in no way reflected in current market prices.
07:00If that is a world recorders a lot, it's a lot of bad numbers.
07:01I feel great.
Comments