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Episode 3: Inflation Nations: What to know about inflation and interest rates
Listen: "During the course of this year, the Fed will not be concerned only with inflation as the months go by; increasingly the pendulum will shift, and they'll be concerned about the employment part of their mandate as well," says Charlie Reinhard, Head of Investment Strategy for North America at Citi Global Wealth Investments.
In the latest episode of Living Beyond Borders, a podcast produced in partnership between GZERO and Citi Global Wealth Investments, Reinhard joins Eurasia Group’s Rob Kahn for a check-in on the lasting, sticky rates of inflation, how the Fed will continue to adjust interest rates, and what kind of recession - if any - investors should prepare themselves for.
Shari Friedman
Managing Director of Climate and Sustainability, Eurasia Group
Charlie Reinhard
Head of Investment Strategy, North America, Citi Global Wealth Investments
Robert Kahn
Director of Geoeconomics at Eurasia Group
Transcript: Episode 3: Inflation Nations: What to know about inflation and interest rates
Disclosure: The opinions expressed by Eurasia Group analysts in this podcast episode are their own, and may differ from those of Citigroup Inc and its affiliates.
Charlie Reinhard: Even at the end of this year, we don't think the Fed will truly be at its goal of three and half percent, but we do believe that during the course of this year, they will not be concerned only with inflation as the months go by, increasingly the pendulum will shift and they'll be concerned about the employment part of their mandate as well.
Rob Kahn: We know from history that that process of raising rates to bring the economy back in balance is very hard to predict. It can be very uneven and bumpy, and it's very rare that the Fed does that in a way that achieves a perfectly smooth soft, landing.
Shari Friedman: Welcome to Living Beyond Borders, a podcast from Citi Global Wealth Investments and GZERO Media. On this program, we examine global risks and opportunities from the angles of both politics and economics. I'm Shari Friedman, Managing Director of Climate and Sustainability at Eurasia Group.
Today we're looking at a topic we've tackled frequently over the past three years on this podcast: If the economy is so good, why do things seem so bad? Consumer spending is up, hitting a two-year-high earlier this year. The job market continues to surge and unemployment's at its lowest that it's been in 50 years. But we continue to hear the R word: recession.
So why is this, and what is the connection between jobs, interest rates and inflation creating this swirl of uncertainty as we head deeper into 2023? Today we have the perfect duo to answer this question. I'm joined by Charlie Reinhard, Head of Investment Strategy for North America at Citi Global Wealth Investments. Welcome.
Charlie Reinhard: Thank you for having me.
Shari Friedman: And Rob Kahn, Managing Director of Global Macro Geoeconomics at Eurasia Group. Hey Rob.
Rob Kahn: Hey Shari.
Shari Friedman: Let's start by asking the big picture question. Is the U.S. economy good or bad, or both? Charlie, what do you think?
Charlie Reinhard: If we think of the economy as being one part real growth and one part inflation, we actually have different answers. In the case of the real economy itself, we're starting the year out in a position where things are good, but we think that they're going to become bad during the course of time. Leading indicators have turned down negative. The Fed is still raising interest rates. Because interest rates are higher, we see a softening in interest rate sensitive areas of the economy like housing and when we're done constructing homes that were decided back when interest rates were lower, does the order book exist to continue building those homes?
And if we're not building homes, we're not ordering the appliances, the heating systems, the cooling systems. And if we're not ordering them, we're not shipping them. If we're not shipping them, we're not insuring them. There's a ripple effect when it comes to housing.
And of course, we've also seen some layoff announcements in technology also in areas of finance as well. So for a variety of reasons, we think that the economy is going to slow. It's starting the year off strong, but we think that we're going to slip into a mild recession.
In the case of inflation, we're starting off from a bad position, which we think is going to get better during the course of the year. Inflation has already come down. It peaked at 9.1% in June of last year, and we think it'll be at three and a half percent by the end of this year.
We've recently heard from S&P 500 companies in their fourth quarter reporting season. Profits are slightly negative compared to a year ago. And not only are they negative, but seven of the 11 major sectors are in profit recessions versus four sectors just three months ago. So it's spreading.
This means that CEOs and CFOs are going to be looking to contain their costs. And of course, for many labor is the big expense. We've seen rents tapering off, supply chain improvements, supplier delivery times have shortened, backlog orders have come down, commodity prices have come down. So when we put all of that together, we think that inflation is going to continue to dissipate. So an economy whereby the growth picture gets worse and the inflation picture gets better is probably the best way to describe how we see events unfolding this year.
Shari Friedman: So kind of both. And on this recession piece, Treasury Secretary Janet Yellen is bucking a bit against the idea that we are entering into a recession. And she had this to say ahead of President Biden's State of the Union speech in February.
Janet Yellen: You don't have a recession when you have 500,000 jobs and the lowest unemployment rate in more than 50 years. So what I see is a path in which inflation is declining significantly and the economy is remaining strong.
Shari Friedman: So Rob, do you agree with this assessment?
Rob Kahn: Not really. Now where you stand depends on where you sit. And as Treasury Secretary, it's her job to make the case for the administration's policies working and her optimism is part of that story. In that sense, I agree with most of what Charlie said. The economy has shown impressive resilience to date. It's growing around two and a half percent now led by the consumer. So we are certainly not in recession now, but it's coming at a high price. Most importantly, high and sticky inflation. The economy is out of balance.
And so as we look ahead - the path forward - I am less optimistic than Secretary Yellen, that inflation is declining significantly and the economy will remain strong. In fact, I would take the Fed at its word when it tells us that they're prepared to raise rates until they have slowed demand, and that likely means a cooling of the labor market. And we know from history that that process of raising rates to bring the economy and back in balance is very hard to predict. It can be very uneven and bumpy. And it's very rare that the Fed does that in a way that achieves a perfectly smooth, soft landing in which growth stays strong and inflation comes back down to where they want it to be, a 2% target.
So that means in my view, that interest rates are going to have to rise quite a bit more from here and highly likely will produce a significant downturn in demand and growth as the year goes on.
Shari Friedman: Rob, what are the principal reasons why inflation has persisted? And to what extent does some of this trace back to the actions taken to shore up the economy during the worst of the pandemic?
Rob Kahn: That's a really tough question, and I should start with a reflection on how economists have done up until now in predicting inflation and an acknowledgement that, as Jay Powell said in a slightly different context, we're trying to feel a way around a dark room without hitting too much of the furniture. It's difficult, it's challenging.
And the reason why we're operating in darkness is because of the extraordinary and unusual nature of the shocks that we have had to deal with in recent years, from pandemic, to war, to all the supply chain disruptions associated with that. This is not typical of the boom/bust cycles of the U.S. economy, and it certainly is something that our experience and our models that are based on our history don't give us much insight to.
As I look back at why inflation is so high now and why we were surprised by that, it is a mix of both supply and demand factors. On the supply side, the disruptions from the pandemic were severe and it's certainly taken us longer than we expected to work through them. They're still with us. We're still seeing many continuing challenges with working through that.
And just as we thought we were kind of at the peak of the disruption and starting to move back to a more normal economy, I think the war between Russia and Ukraine provided an additional set of challenges, particularly in the areas of energy and food which are so critical to so many consumers and households.
Add on to that, that I think these shocks have changed the way people look at their jobs and at their lives and their futures. That has affected labor supply, and the return of people to the markets disappointed, our hopes, and there are a lot of reasons for that. That's the supply side of the economy and tells us something about how much is available to be bought and at what price.
But of course, there's also a demand side too, and it's also interesting to ask ourselves why has demand pressed up so hard against this restricted supply. In that case, part of it is a resilient U.S. economy that has responded well to these challenges.
Part of it also, and this is what differentiates us from so many other countries, was an extraordinary fiscal effort; that the amount of stimulus that was provided by the U.S. government in the early days of the pandemic was really extraordinary. We had the capacity to do that. Many countries did not have what economists would call the fiscal space or the ability to provide that much support, but in the U.S. we certainly did.
There's an active debate about whether we went too far, but be it as it may, in those early days, we felt extraordinarily at risk and along with an extremely expansionary monetary policy, fiscal policy did provide that floor under activity.
But it did put a lot in spending into the system which we are still working through and has contributed to not only resilient demand, but pressure on markets and has led to price increases that in turn has proved very sticky and has remained at much higher levels than we have hoped. And that's why it puts the Fed in a very tough bind.
The rate hikes that we have gotten so far haven't had the effect we had expected it to or had hoped to. And so I think we're seeing a momentum to inflation that I think is very worrisome if your goal is to put inflation down on a firmly downward track. And I don't think we can have great confidence that the policies that have been put in place so far are going to be enough to get us to where we want to go.
Shari Friedman: So there's a lot, Rob, that you kind of packed in there with this interconnection between inflation and interest rates and this move to try to kind of keep the economy in this balance. Charlie, moving over to you - I'm wondering if you could kind of create this linear trajectory and unpack this piece that Rob was talking about given the correlation between inflation and interest rates and why the Fed is implementing these incremental rate hikes.
Charlie Reinhard: Sure. So the Fed has two mandates. The first is full employment and they feel pretty good about achieving that mandate at this particular juncture. The second is stable pricing. They want to average inflation that's not too much beyond 2% over the course of a cycle, and that's where they are concerned. So they are raising interest rates in order to bring that about.
Now the problem is that if you're looking at inflation data and if you're looking at the unemployment rate, you're actually looking at lagging information. The leading indicators are suggesting that the economy is going to weaken. In order to bring about lower levels of inflation, the public needs to believe that it's achievable. And we can look at expected inflation for the next 10 years by comparing a 10-year treasury to a 10-year inflation protected treasury and expected inflation is somewhere between two and two and a half percent. So, so far, it's well anchored.
The Fed of course, needs to keep it anchored in order to bring about their inflation goals. Of course, when you're looking at trailing information or lagging information, you run the risk of making a mistake as you would if you were only looking at your rearview mirror and not looking at what lies directly in front of you.
And so, we think that they are likely to go too far; to make a mistake. And of course, a reduction in demand is the arch enemy of inflation. So if we were to see the unemployment rate move higher during the course of the year, and we think that we will, that should also help bring about lower inflation.
But you know Rob made a really good point earlier about the stickiness of the inflation that we are seeing. And even at the end of this year, we don't think the Fed will truly be at its goal of three and a half percent, but we do believe that during the course of this year, the balance of their concerns, because of that dual mandate, will change. They will not be concerned only with inflation as the months go by. Increasingly, the pendulum will shift, and they'll be concerned about the employment part of their mandate as well.
And so, once we have some negative job growth, we think that the Fed will pause. They'll probably pause for a few meetings and then eventually they'll lower rates by the end of the year.
Shari Friedman: Just in terms of interest rates, I think it's important to note that historically the interest rates are still pretty low. I mean, I remember when I was taking out student loans, they were quite a bit higher than they are right now. So is this a case of us getting spoiled by low and maybe unrealistic rates in recent decades?
Charlie Reinhard: Back in August of 2020, I think we made a generational low in interest rates with a 10-year treasury yield of just half a percent. We think that interest rates, the 10-year treasury, is likely to be lower at the end of the year than it is today. But generally speaking, when we think about where interest rates average in the period following the financial crisis you know, up until recently, we're likely to experience higher rates on average in the future than during that time period. Inflation is likely to run a little bit higher, as a result of that interest rate should be higher as well.
Rob Kahn: As Charlie was saying earlier, people's expectations about inflation do seem anchored so far, although that's not something I feel we can count on persisting forever. And I think that's because the last 30 years or so we have lived in a period of very low inflation.
I think there's a lot of reasons for that, demographics, the influx of a lot of workers from the emerging world into the global marketplace, which put downward pressure on interest rates and on price pressures. Some people have referred to this as secular stagnation or other ways of capturing, but fundamentally these are broad long-term drivers that contributed to a period of low inflation.
But there are arguments that some of that may be in the process of reversal. And I think to some extent how much you worry about those reversals depends not only on how you see the world evolving, but what you've experienced. And I am struck that I grew up at a time of high inflation and volatile expectations prior to the Great Moderation. And when I talk to colleagues who are much younger than I am, they don't have that same experience. And I think that probably contributes to a little more concern on my part that we could be shifting in coming years to a higher rate environment with greater and higher inflationary expectations.
And so that idea of being spoiled, what that's capturing, it partly relies on your view on the fundamentals, right? Is the world changing in some material ways, that maybe we're a little less globalized, a little less reliant on cheap global labor in a way that may contribute to higher base inflation? That's part of the debate, but also simply what we're used to, which feeds into our expectations and then in turn can feed into these inflation dynamics.
Shari Friedman: So people may have gotten spoiled, but the interest rates nonetheless are likely to rise. Rob, the former Treasury Secretary and economist Larry Summers took a lot of heat for his assertion that higher unemployment is needed to beat inflation and to stave off recession. Is there any truth to this idea? And kind of going back to this interconnectivity, what's the connection now between wages and employment and inflation?
Rob Kahn: He's right, although it's shorthand and as the Fed often emphasizes, they don't desire higher unemployment, nor do they feel it's essential. They hope they could cool down the labor market, take pressure off prices without a significant increase in unemployment, but they'd be prepared to tolerate it. I think what Larry's getting at is simply that this high inflation has to be addressed through some reduction in demand. Fed's tools, primary tools, which are higher cost of money, will work eventually through reducing demand, and that will reduce, in addition demand for products, the demand for labor.
And that means, of course, in the first instance, the number of vacancies go down, firms will be a little more cautious in advertising for new employees or to hire new employees. And that should lead to some increase in unemployment, as I say, is the natural price of getting back to balance.
Obviously, that causes distress and particularly for sectors of the economy that are in lower skilled professions are more vulnerable to cyclical downturns and the like. Those people, many of them had seen a lot of gains in years prior to the pandemic. We saw real wages of a lot of low-income groups rise significantly. It would be a shame to lose that, but you can't get yourself into a policy position where you kind of say that any increase in unemployment is bad simply because policy should never allow that to happen. That's the situation if you get into that where you're chasing higher and higher levels of inflation in an effort to keep unemployment low.
The goal here is to find some sort of level of activity and resultant level of employment that is sustainable over time in a regime of price stability - because we ultimately believe that stable prices is supportive of higher activity and higher employment.
Shari Friedman: Mmhm. And Charlie, moving back over to you. We've talked a lot about kind of the U.S. policy tools, but are there other factors contributing to the inflation rate and just generally overall uncertainty? Like for example, continuing supply chain issues and the energy price hikes that really were exacerbated by the ongoing war in Ukraine?
Charlie Reinhard: Yeah, so certainly the supply chain disruption that we had during COVID, the war in Ukraine, have complicated matters, and also we had a very big policy response fiscally to also contend with. You know, in normal times, I think technology is actually an advantage. The little barcodes that we see on the back of our packages when we have robust and well-working resilient supply chains do a wonderful job of communicating up and down the supply chain when we need the next shipment and we can better match supply with demand.
When supply and demand are growing at the same pace, things can remain in balance. And I think the technology has contributed to the longer business cycles that we've experienced since the 1980s. That being said, we have been through some unusual times.
Now, in the U.S., inflation did peak back in June and it's come down and I think supply chain pressures have lessened to a large degree. When we look at freight rates, delivery times, backlog orders, I think it's come down quite a bit. In Europe, the situation was a bit different because of the closeness to the events that have had been taking place in Ukraine. Europe has done a wonderful job, I think, in diversifying away from Russian gas and benefited from a mild winter. That mild winter has allowed Europe to reach a very good place with respect to natural gas storage right now.
Of course, the war is still ongoing, so we can't say that it's going to remain that place, but for right now it does -. that aspect does look pretty good. Now that being said, in Europe overall inflation is coming down, but core inflation when we remove food and energy, that hasn't really turned down yet.
And as a result of that, they're probably a bit behind in terms of the inflation cycle than we are in the U.S. Some of that reflects the terms of trade between the U.S. and Europe. The dollar was strong in 2021 in the first three quarters of last year. Ultimately that'll turn itself around, but it's not just the Fed, but the European Central Bank President, Christine Lagarde, that has taken a very hawkish stance lately as well to try to bring about better levels of inflation in Europe.
We actually think inflation in Europe will also be around three and a half percent at the end of the year like in the United States, but it's going to take some policy tightening in order to bring that about.
Shari Friedman: So Rob, Charlie had just noted several geopolitical factors that are having an impact on the global economy, and I wanted to turn over to China. As it lifts its zero COVID policy and starts to reboot its own economy, is this going to have a global impact and specifically toward the U.S., is it going to have a mitigating factor in a pending recession?
Rob Kahn: Well, geopolitics, it's hard to imagine a time when it played a bigger role in the performance of the global economy than now. So many of these factors you can mention, most notably the war, but also factors like rising U.S.-China tensions and the like are potential negatives to global growth. Probably the one possible upside risk here comes from China's recovery. From my perspective, the decision last year to rapidly exit its zero COVID policy and accept the high health costs of doing so was really shocking. And it reflects, I suppose, the president's own desire to change the narrative politically and economically in China.
But for whatever reasons, the path by which China rebounds and returns to growth is a major factor for the global economy and for the U.S. economy as well. I think China matters more for the U.S. now than certainly a decade ago, but probably more than in any other time for the U.S. economy because of the way in which we are integrated in trade and in finance.
Now that said, while a China recovery - and does provide an upside to global growth: we expect China to grow about 5% this year. It will not be smooth, and I suspect, will not pack the punch that past Chinese booms have. Let me explain why that is.
It does seem that this recovery's going to be more focused on the Chinese household and the Chinese consumer than past recoveries, which were very much driven by infrastructure and housing. And as a result, put significant upward support for and pressure on commodity prices, key resources that are such an important part of global trade and finance. I think this may be a recovery that is more homegrown and home focused and doesn't drive Chinese imports of critical goods in the same way.
Also, we could see some surges of new variants as the year goes along. I think also Chinese monetary and fiscal policy will be a little more cautious than it has in past cycles, because of some of the legacy they're dealing with in terms of COVID and in terms of strains on their economy that are persisting from their past real estate challenges in particular.
All of this suggests to me that stimulus will be tempered, and also that the growth may be more gradual and more stop/start than maybe some of the storytelling suggests. So I do think that it's still going to be a positive factor for growth. It probably is the biggest upside risk to a story of moderating and soft global growth this year, but it's certainly a lot of uncertainty about how that plays out.
Shari Friedman: And then the idea of the variance also kind of throw a wrench into the possibility of growth - and globally as well. Bringing it back over to U.S. tools. I want to touch on this congressional battle over the U.S. debt ceiling that we'll probably see coming up this summer. Rob, can you explain how that is going to affect all these different pieces that we've been talking about today?
Rob Kahn: Well, let me start with the good news here on this one because so much of what we're talking about here is how things can go wrong and what the risks are. I am highly confident that the U.S. government will not miss a payment on its treasury bonds and bills. It will find a resolution to this debt limit battle in time. But I do worry that this could be messier and more down to the wire than we've ever witnessed before. Now I know many of you will at this point say, “well, haven't we been through this before? It seems like every other year we have a debt limit showdown. We talk about the risks and in the end, they get to a deal and they move on.”
And indeed, there's a tremendous political incentive to do it, but I would highlight a few things. First and foremost is the divisive nature of our politics today, which of course, in some ways has never been worse. And certainly, a desire on the part of the Republican caucus in the house to use the debt limit aggressively to try and change the trajectory of spending, with both sides very far apart in their visions of what U.S. fiscal policy should look like. And it just seems very hard to trace out a path by which those two sides get to a solution other than the fear of a default.
Furthermore, there is a perception and it's not without some merit that we are better prepared now to navigate a close call on the debt limit than before, both because the Fed is prepared to manage any dislocations to money markets and also because arguably the U.S. government understands better than maybe in the past how it might be able to prioritize payments if it has to and pay some suppliers late, delay some bills while at the same time paying on the treasury.
Now that idea that you can prioritize payments is a double edge sword because on the one hand, to the extent it is true, it does provide some additional time for negotiation. On the other hand, of course, the perception that these deadlines aren't real and that you can navigate around it by just simply paying some bills and not others, is not only a – you know, can become an excuse for non-action, it also could be very destructive to our credit rating. Indeed, at least one of the major credit rating agencies has already said that even if you're paying on the treasuries, if you're defaulting on other obligations, it does undermine your credit worthiness.
I think ultimately, we will get a deal, it will probably maintain spending around current levels.There may be some promises of future cuts. We've, in the past, had certain kinds of rules for constraining spending. They haven't proved very effective, but we could use that again. And there may also be agreements on other non-fiscal issues that each side care about, like immigration or some public programs like Medicare or food stamps and the like that could contribute to a deal.
So I think ultimately I could see a deal taking shape, but it may well not happen until September or October in line with the budget. It may ultimately mean that we actually need some period of market turbulence, some period of actual kind of anxiety about getting this done to actually bring both sides to yes.
Shari Friedman: Right, right. A little bit of heat. It sounds like it's going to be a very exciting summer here in the United States. So Charlie, we've been talking a lot in this broad economics speak, and people are probably wondering, how does this translate down to my own investments? How do I proceed in this environment - and what would you tell them?
Charlie Reinhard: Well, each person is different. That being said, you know, we think that we're in the late part of an economic cycle, so we're proceeding in a manner where we're a little on the cautious side, but we think that events are going to change during the course of the year; that opportunities for being less cautious will open up during the course of the year.
One thing I should mention, though, is that if we were to summarize all of the economic research and financial research that has ever been done on investing, it would really come down to having a diversified portfolio with a pro equity bias, not meaning having equities all the time, being a hundred percent of your portfolio, but rather investing with an eye towards the notion that the economy is going to grow eight or nine years out of 10, and when the economy grows, profits grow, and when profits grow, that takes securities along with them.
Shari Friedman: Yeah. So I mean, what you're saying is this idea of: it's cyclical and here's where we are in the cycle. And so you just have to understand that it's never in one direction. It's up and down, and here's where we are. So, we’ve been dancing around and kind of connecting this issue of whether we’re going to have a recession or not. And just to kind of have a final conclusion and to put this into black and white, are we heading into a recession?
Rob Kahn: In a word, yes, I expect a recession kicks in later this year or early 2024. I put around a 75% probability on that. As Fed interest rate hikes do slow the economy, as sentiment shifts, financial conditions tighten, and as that spreads through the economy, we will see a slowdown that will ultimately take us into recession. I don’t think it needs to be as deep as 2008 or 2020, but it could take a while for the recovery, given that monetary and fiscal policy will be kind of on hold for now and won’t provide support for the early stage of recovery.
Shari Friedman: And Charlie, what do you think?
Charlie Reinhard: We think that we're going to enter a recession. It'll be somewhat mild by historical standards, and it won't necessarily be very long by historical standards. And we're looking for a recovery next year. And in terms of profits, we would expect S&P 500 profits to contract by about 10% this year and then begin to rebound next year.
Shari Friedman: Charlie Reinhard, Head of Investment Strategy for North America at Citi Global Wealth Investments, and Rob Kahn, Managing Director of Global Macro Geoeconomics at Eurasia Group. Thanks to you both.
Charlie Reinhard: Thank you.
Rob Kahn: Thank you, Shari.
Shari Friedman: And that's it for this episode of Living Beyond Borders. Also this season, we'll discuss a wide range of topics like the economic benefits of more women in the workforce, the current state of the US-China relationship and energy transitions at this critical moment for climate policy.
Listen to all of this season’s episodes by heading to gzeromedia.com, and click on the Living Beyond Borders tab. Or you can find episodes in the GZERO World Podcast feed wherever you get your podcasts. For GZERO, I'm Shari Friedman. Thanks for listening.
Episode 9: US/China power struggle, the global political balance, and your finances
Listen: “China's ability to grow in unprecedented fashion came because they had really cheap labor, and wealthy countries around the world were very happy to take advantage of that labor. Those two things are no longer true,” said Ian Bremmer, president of Eurasia Group and GZERO Media. From the state of the great technological decoupling to China's zero-COVID policy, the relationship between the US and China remains both critically important and deeply fraught.
In this episode of “Living Beyond Borders,” a special podcast produced in partnership between GZERO and Citi Private Bank, we’re assessing where the two nations stand today, and what some recent developments like a Chinese banking crisis, knock on effects of Russia's war in Ukraine, and a renewed debate over tariffs mean for the world and for your money.
This episode, moderated by Shari Friedman, Eurasia Group’s Managing Director of Climate and Sustainability, features Ian Bremmer in conversation with David Bailin, Chief Investment Officer and Global Head of Investments at Citi Global Wealth.
Shari Friedman
Managing Director of Climate and Sustainability, Eurasia Group
David Bailin
Chief Investment Officer and Global Head of Investments, Citi Global Wealth
Ian Bremmer
President, Eurasia Group and GZERO Media
- S3 Episode 1: If the economy is good, why do I feel so bad ... ›
- S3 Episode 2: Saving the world's water supply - GZERO Media ›
- S3 Episode 3: Will there be a recession? - GZERO Media ›
- S3 Episode 5: Could today's crisis lead to future growth? - GZERO ... ›
- Episode 3: Inflation Nations: What to know about inflation and interest rates - GZERO Media ›
- Episode 4: Broken (supply) chains - GZERO Media ›
- Episode 5: Energy transition today - GZERO Media ›
Episode 8: How closing the gender gap drives economic growth
Listen: “Women make about 75% of all household consumption decisions, and control close to 100 trillion in wealth,” says Ida Liu, Global Head of Citi Private Bank. "Women can no longer be ignored."
On the latest episode of Living Beyond Borders, we look at the impact women have in 2022 on the U.S. and global economy.
After some progress in the number of women in leadership positions and running businesses, the COVID-19 pandemic saw a setback for millions of women, especially those responsible for childcare. We'll look at how they are faring, and the gains women around the globe stand to obtain in the coming years.
This episode is moderated by Tracy Moran, managing editor of GZERO's daily newsletter Signal; and features Ida Liu, Global Head of Citi Private Bank, and Isadora Seixas, Global Macro-Geostrategy Analyst at Eurasia Group.
Tracy Moran
Managing Editor, Signal, GZERO Media
Ida Liu
Global Head, Citi Private Bank
Isadora Seixas
Global Macro-Geostrategy Analyst, Eurasia Group
- S3 Episode 6: Economic weapons & fallout of the new Cold War ... ›
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- S3 Episode 5: Could today's crisis lead to future growth? - GZERO ... ›
- The economic power of women - GZERO Media ›
- Episode 3: Inflation Nations: What to know about inflation and interest rates - GZERO Media ›
Episode 7: Future-proofing: How we fix broken supply chains
Listen: “Envision supply chains like a strand of Christmas lights. If one light goes out, then the whole strand will stop working,” said Eurasia Group’s Christina Huguet.
On the latest episode of Living Beyond Borders, we’re talking about the moment those lights went out—as the COVID-19 pandemic took hold and disrupted shipping, manufacturing, and labor all at once—and what it will take more than two years later to turn those lights back on and create more resilient global supply chains.
This episode is moderated by Shari Friedman, Eurasia Group’s Managing Director of Climate and Sustainability, and features David Bailin, Chief Investment Officer and Global Head of Investments at Citi Global Wealth; and Christina Huguet, Industrial and Consumer Analyst at Eurasia Group.
Shari Friedman
Managing Director of Climate and Sustainability, Eurasia Group
David Bailin
Chief Investment Officer and Global Head of Investments, Citi Global Wealth
Christina Huguet
Industrial and Consumer Analyst, Eurasia Group
Transcript: Season 3, Episode 7: Future-proofing: How we fix broken supply chains
Disclosure: The opinions expressed by Eurasia Group analysts in this podcast episode are their own, and may differ from those of Citigroup Inc and its affiliates.
Christina Huguet: Envision supply chains like a strand of Christmas lights. If one light goes out, then the whole strand will stop working. Rather every single light needs to be functioning on a global scale this means that it does not necessarily matter what the US is doing or what China is doing independently to alleviate the supply chain disruptions if these changes are made in silos.
David Bailin: When we talk about a supply chain breakdown, we have to understand that it was a series of exogenous shocks that basically laid waste to a just-in-time supply chain. And given that as background, we are healing from that, but it takes probably a year in order for those normal supply chain disruptions to heal.
Shari Friedman: Welcome to Living Beyond Borders, a podcast from City Private Bank and GZERO Media. On this program, we examine global risks and opportunities from the angle of both politics and economics. I'm Shari Friedman, managing director of climate and sustainability at Eurasia Group.
Last fall during a press briefing at the White House, then Press Secretary Jen Psaki was asked about a growing supply chain crisis:
Man: People couldn’t get dishwashers and furniture and treadmills delivered on time, not to mention all sorts of other things -
Jen Psaki: The tragedy of the treadmill that’s delayed.
Shari Friedman: Of course as we know, the problem became much bigger than treadmills and furniture shipments, shipping log jams, labor shortages and skyrocketing prices have been an ongoing reality through the pandemic. And since the beginning of the war in Ukraine, the situation has become even more dire with problems going far beyond waiting for a month for a new car to severe cases of food shortages and exploding inflation. Much of the last several decades have been all about finding efficiencies and cost savings through the longer and longer supply chains.
That's led to a situation where something as simple as a table might circulate the globe a few times from the start to the end of its production process. But the pandemic exposed shortcomings in this system, that's the nature of many existing supply chains. A backup early in the process can have an outsized effect later on down the line. A one week delay in a lumber delivery can cause months in delays in a home construction.
Today, we're looking at where global supply chains are today and where they're going. We're joined by David Bailin, Chief Investment Officer and Global Head of Investments at Citi Global Wealth. Hi, David.
David Bailin: Pleasure to be here. Thank you for having me.
Shari Friedman: And Christina Huguet, Industrial and Consumer Analyst at Eurasia Group. Welcome.
Christina Huguet: Thank you. Great to be here.
Shari Friedman: It used to be that nobody even knew what a supply chain really was. And now suddenly everybody's an expert now that we've seen this slowdown affect our daily lives. Going in the other direction to the economic and political landscape, how important is understanding supply chains to the broader geopolitical picture?
Christina Huguet: You know what we've seen, it's really what you've already mentioned. There's been a lot of delays and the optics have just become worse, especially when consumers were unable to get their things like their treadmills and their couches, but really it was exacerbated when pictures with ships waiting by the ports came out. I think the first thing to highlight when it comes to geopolitics and supply chains is that unless policy makers have a deep understanding of the issues at every single node of the supply chain and are addressing these issues with the acknowledgement that they are entirely interconnected with the other nodes, it's impossible to expect that our supply chain problems will be resolved.
A great metaphor we like to use at Eurasia Group is to "envision supply chains like a strand of Christmas lights." If one light goes out, then the whole strand will stop working. Rather every single light needs to be functioning on a global scale this means that it does not necessarily matter what the US is doing or what China is doing independently to alleviate the supply chain disruptions if these changes are made in silos. At the same time, policy changes that impacts one part of the supply chain will complicate the picture further down the line because more focused whac-a-mole approaches will exacerbate or really worsen other constraints and vulnerabilities.
Shari Friedman: That Christmas light is a really good explanation of how this works because then it would take a while to replace that one out bulb, which explains why one piece of it can take so long and have these outsized effects on the timing. And David, where are we now in terms of recovering from that huge disruption? Are companies and economies recovering when it comes to supply chains?
David Bailin: Well, there's definitely a recovery underway, but I think that in order for everyone to understand what's taken place, we have to go back prior to the pandemic to what were the conditions before. And I think the conditions beforehand were excellent. They were an incredibly efficient just in time global supply chain for almost everything. Meaning that if you were going to buy a dishwasher, that dishwasher was probably in production five months ago and it was delivered to the store a month and a half ago and then delivered to your home. And what happened during the pandemic is that the supply chain elements completely blew apart. Meaning that the supply of parts to the manufacturers, the assembly, the shipment of partially assembled goods to the final assembler and ultimately the shipment of goods to the end users, to the retailers or distributors, all of those broke down at the same time due to an absence of parts, an absence of labor and an absence of capacity to ship.
That was then exacerbated by excessive demand as people were forced to stay home and they ended up purchasing more than 30% more goods during that period of time when all of those shortages existed than ever in the history of the global economy. So when we talk about a supply chain breakdown, we have to understand that it was a series of exogenous shocks that basically laid waste to a just-in-time supply chain. And given that as background, we are healing from that, but it takes probably a year in order for those normal supply chain disruptions to heal. And you've already mentioned the fact that we've had a further exogenous shock in the war in Ukraine on top of all of that.
Shari Friedman: Well, this brings us to another point and I think that David, your point about it's not just the supply chain part, it's also the increase in demand part, which is a part of the equation, I think that doesn't get discussed as much. And following up on your point on the war in Ukraine, Christina, going back to you, how have you seen the war in Ukraine exacerbating all of these supply chain issues that we're seeing and what is the likely effect moving forward?
Christina Huguet: Yeah, so I think David did a really good job of pointing out what was happening before the war, the significant constraints that continued throughout the pandemic. There were some efforts to address the constraints, like keeping the Ports of L.A. and Long Beach open 24/7 for a period of time, opening other locations to load and unload containers or even considering the merge fees to incentivize clearing the containers more quickly.
But just as things were looking up, the war in Ukraine really hurt a lot of these efforts that were being put in place. So logistically the war has been a nightmare for maritime and air routes. Not only are parts of the Black Sea and the Azoz Sea now unpassable, but there are significant closures all around for commercial shipping. Many logistics companies have suspended services in Russia, also depressing ocean capacity.
There's also been a big cut to air capacity, which has contributed to price increases that we've been seeing globally. The flying ban canceled many flights and removed about 10 million miles of airspace from international freight routes. So airlines are responsible for around 20% of cargo and pretty much what we saw was an extreme decrease in capacity provided by carriers. So in addition to the rising cost of the delays and the air fly capacity, fuel costs are extremely high, all leading to record backlogs and delays. In addition to the record costs, not only that we are probably going to see even further price pressure on the oil market as Europe and the UK move to ban insurance for Russian oil cargos, which will be implemented in around six months time. So got another aggravating factor into what is currently a lot of inflationary pressures.
Shari Friedman: And David, you had noted that it's not just about raw materials and goods and shipping, but it's also about labor shortages. Is this still the case and how closely related are supply chain issues and labor shortages right now?
David Bailin: Well, if you're in China right now and going through the lockdowns that China has, which remind me very much of what America went through in the April through June period of 2020, there are significant labor shortages that are still taking place regionally. And obviously there are disruptions to labor supply all across Europe, as well, as a result of the war. So labor disruptions are a large part of it.
I think that when we look ahead, there are the negative factors of all of the costs and lack of capacity that Christina talks about, but there is also a slowing global economy. So let me project out the following. I think a lot of the common supply shortages, whether it's toilet paper, dishwashers, bicycles are going to be resolved over the course of the next six months. What's not going to be resolved over the course of the next six months are the war-related activities and the China-related disruptions that are going to be ongoing for a good deal longer.
And those are specifically related to agricultural goods, rare metals, oil, and natural gas. These disruptions in supply chain are going to continue because we're not just talking about physical supply chain, but rather a complete realignment of who people are going to trade with due to politics.
Xi and Putin basically made a statement to the West that the nature of geopolitics was changing and that they were willing to suffer the consequences. And it turns out that the consequences were going to be related to the supply chain. If you are a producer of a good in Europe or the United States, relying on Asia for previously Russia, for any portion of your supply, you've got to be thinking to yourself, I've got to build additional capacity, an alternative supply chain. And that is both inflationary and of long duration and that's going on now as well.
Shari Friedman: Another big topic on people's minds right now is inflation. And what is the relationship between current inflation and the supply chain issues that you've just been discussing?
David Bailin: So I like to divide inflation into what I describe as flexible inflation and sticky inflation. And I like those terms because I think it lets us look at inflation appropriately as what is exogenous, I.e., a war or a pandemic, both of which are unusual events and have very major consequences that don't have to last a long time and sticky inflation. The idea that people are expecting more wages or are seeing costs of goods go up continuously simply because of their scarcity. So when you think about the kind of inflation that we're suffering now, probably two thirds or more of it is of this flexible inflation that's caused by exogenous factors.
Now over the long term, that's a good thing. But in the short term, it's a difficult thing because the only tool that the Federal Reserve and central banks have to bring inflation down is to reduce overall economic demand. They have to take a little from everywhere in order to bring down economic demand. And that does not specifically address agricultural or energy prices. So right now the greatest threat to the economy is the Fed and central banks raising rates very quickly, that brings down aggregate demand, but it doesn't cause oil shortages or shortages of wheat to go away. So we have a situation now where the tools to manage inflation and the nature of the inflation itself are mismatched. And that's what putting the global economy in jeopardy right this second.
Shari Friedman: Christina, going over to you in a previous episode, Ian Bremmer of Euraisa Group noted the shifting. He mentioned that one of the trends he's seeing is more insourcing from chicken in Malaysia to wheat in India, to baby formula here in the US. Are you also seeing this trend and how does this relate to supply chains?
Christina Huguet: I think that generally speaking, this is referring to the growing trend of protectionism that is really aimed at protecting domestic supply of different goods, especially commodities. And so this is a result of several things, really starting with the pandemic where factories around the world were shut down or forced to reduce production because workers were sick or because cities were locked down. So this came at the same time as consumers in the Western world wanted more. And as David mentioned, there's a hike in demand that clogged the system for transporting goods. So now when you have Russia's invasion of Ukraine, extreme weather events in addition to that and rising energy and fertilizer prices, you have policymakers wanting to respond to these compounding issues.
So they're reacting by wanting to make sure that their stable goods are available at home. Essentially a way for leaders to avoid being blamed, especially as rising prices hurt the poorer populations. But the result has been something of an unintended domino effect where one country starts to protect its commodities and then another thinks it needs to do the same thing. So the issues that the trend is not sustainable and when it comes down to our food system and the global food shortage because our food system is extremely global and domestic farmers also need access to extra markets, protectionist moves hurt their capacity to make a living.
So as countries want to become more self-reliant for a wide range of commodity goods, expert bands and protectionism will not actually be a consistent or sustainable policy stand for leaders. In the long term though, even if countries try to increase domestic capacity as much as we can, but we saw the baby formula crisis in the US where efforts for self-sufficiency can lead to crises. In the case of the baby formula, US produces 98% of the infant formula for domestic consumption. But when there was a shutdown of a major production site in Michigan due to contamination issues, other sites were just not able to easily import more ingredients due to tariff and non tariff barriers.
And were thus unable to ramp up capacity or quickly import substitutes. So as more countries impose these protectionist moves, move to increase self-resiliency. We will likely only see more crises and shortages as these policies prove to be quite disruptive and as ongoing shipping delays decreases overall flexibility, even for goods that are high priority.
Shari Friedman: Getting into the bigger picture, we know that economic shifts have big impacts in the geopolitical world. And David had alluded to this, does this shift in who's making what, where and who's selling to whom significantly affect the balance of power. What's your view on this and the relationships between major importing and exporting countries?
Christina Huguet: Oh, absolutely. This trend of protectionism and movement to increase self-sufficiency are changing a number of things. I think in terms of the shift of balance and power, there's definitely a move towards friend sourcing or considering setting up agreements with other countries to increase bargaining power or in to ensure a bilateral supply of some goods. And what we see are some countries are able to weaponize single source dependency. And this has really been an emergence of a new tool of economic state craft as a principle foreign policy tool. For example, the mineral supply chain for semiconductor chips are currently heavily located in China. And Beijing could choose to restrict exports in order to prevent chip production in other markets just as it did in 2010 to Japan, where there was an unofficial export ban on rare earth products.
Similarly, Russia's role as a top exporter of fertilizer has shown other vulnerabilities of single source dependency. With Russia as well, we continue to see supplying of natural gas, despite heavy sanctioning, where Russia is able to use its gas supply as a weapon, which has led to an energy crisis in much of Europe. So what we'll expect to see in the longer term is more of a push to diversify supply chains and create redundancies to minimize and diversify risk. The issue is that this will take time and we will actually see it kind of happen more amongst like-minded countries and really push regionalization of trade relationships.
David Bailin: And Christina's point here is both correct and inflationary because the minute you talk about creating redundancy in supply chains or talk about regionalization or polarization between the east and the west and the economic response to it, that is a costly endeavor. It means building secondary and tertiary supply change, excess shipping capacity, new capital expenditures, all of which require long lead times and take capacity from other parts of the economy. So I would just point out that at Citi, we expected long term inflation if we were to go back three years ago, to be 2% per year on average. And now we're talking about having an ambient inflation rate of 3% to 3.5% part of which is this new supply chain issue.
Shari Friedman: As we look forward beyond just the immediate rebalancing that we're seeing, are you envisioning that when the supply chains bounce back into a more stable form, the form that they will be in moving forward for the next near and long term, Christina outlined a much more regional system, are you also seeing that this is where we're going to be going as they settle into a more permanent pattern?
David Bailin: I think the term deglobalization is way overused. And the idea that we're going from global to regional is probably overstated. What we're talking about will really depend upon the essential nature of goods. So when we have goods like energy today that are scarce or semiconductors that are scarce, or the ability, for example, even for major equipment to be manufactured in areas that have risk of short supply. And I hate to use this term, but weaponry, the things that go into making arms are those kinds of goods. All of those will require regional supply chains to ensure that any of the global components of them could be replaced if they needed to be.
But for most of what people buy, the vast majority, 85%, we're talking about toilet paper, bicycle parts, you name it. There's not just the need to get a given good, but also to have substitutes readily available, meaning that if there are manufacturers of goods in Asia, in Europe and in the US, the capacity of those existing plants would probably be increased to create that redundancy. And so that if a region shut down or if there was an issue geopolitically, you'd have a choice to get excess capacity. The baby food situation, I think is a great example. Why should we actually have just in time manufacturing for baby food, which is in itself a strategic need for all of the kids who use it and the parents who deliver it. That's the kind of thing that I think we will see happen less and less frequently. There will be excess capacity deliberately to address those fundamental needs.
Shari Friedman: So it's like having an extra Christmas light on hand to re-screw in if that Christmas light goes out right?
David Bailin: That's exactly right because remember, a light bulb replacement happens in a normal time. Light bulbs go out. What we're talking about here with a pandemic and a war are not light bulb issues. These are major, major issues. But the announcement by Russia and China as to how they feel about the West and the West's incredibly unified and strong reaction against Russia and its actions in the Ukraine, in my mind have really created a polarization that will have these long term economic impacts requiring more supply chain redundancy, more manufacturing capacity redundancy and more essential parts bifurcation or regionality using Christina's word in the future.
Shari Friedman: And that all sounds like it's going to be more expensive.
David Bailin: There's no way that it can't be. When we think about the difference between the world before and after the pandemic and the war, the one thing that is absolutely clear is that we were running a just in time world prior to these events and the cost of not having that redundancy became incredibly clear. We might have been able to handle it when it was just the pandemic because of the fact that the demand for goods went up because people were trapped at home. But with the geopolitical change, it is very clear that having Europe depend on a single source for the majority of its gas is in fact a political threat and we're seeing that play out now.
Shari Friedman: And so I'm curious about the impact of all of this on sustainability. One upside of some of the insourcing might be the positive impact on sustainability with less shipping all over the place. What are you seeing on that front David in terms of sustainability and supply chains going forward?
David Bailin: One of the only benefits for these terrible events that we've lived through is the recognition that there need to be both substitutes and replacements. And when it comes to energy, this will cause an acceleration of the development of alternative energy or another way to say it is the more profitable it is to produce carbon based energy. The more profitable it will be to replace it. And that was what was going on before the pandemic struck. So I think there'll be an acceleration in alternative energy. When we think about the geopolitics, it's exactly the same, but at much larger scale. So for example, in order for Europe to become energy independent, there's going to have to be a supply chain built between the United States and Europe for liquified natural gas. And there are many other examples of this in the areas of semiconductors or other strategically relevant goods and services.
So that's what's going to happen next. When it comes to ESG, I think the greatest thing that we can talk about is the fact that 400 companies pulled out of Russia voluntarily. And they did that because of the standards and practices that they, their board of directors, their shareholders and their customers wanted to see happen. Russia violated some ethical or essential principles for these companies and they acted upon them without regard to the fact that there was going to be an immediate hit to profitability. This is ESG in action. A change in governance, a change in policy that actually reflects the values of the shareholders and consumers. And so those two things are the large takeaways in my mind from these terrible events.
Shari Friedman: So let's zoom back out into the big picture. Christina, what lessons, if any, has the global economy learned from the supply chain issues that we're facing now?
Christina Huguet: Yeah, I think we can maybe summarize this in into three big lessons, at least from where we sit in the geopolitical angle. The first one is things will continue to get worse unless policy makers address issues along every notice of supply chain. And also work with each other to make sure that there are redundancies and resilience, especially as there is new legislation being pushed forward related to national security. And as the EU and the US are doing their national supply chain reviews. The second big lesson is expect more disruptions as like I said, these new initiatives increase to increase resiliency, come out by moving supply chains closer or onshore. So there will be more delays at borders with this new clean supply chain requirements.
What that would look like in terms of our company is prepared and are importers ready and what the delays look like as customs manages and learns on the spot with some of the new policies. And then finally I think we can also expect that countries will continue to strategically align with other markets to increase their collective bargaining power. While other countries will continue to use leverage and things like their single source of dependency in order to push for their foreign policy or diplomatic agendas.
Shari Friedman: David, what are you seeing specifically from an investor perspective? What have investors learned about this? Either a lesson that they've learned well or a lesson maybe that they've incorrectly learned?
David Bailin: I look upon this as a time when we saw both governmental and investor complacency, an assumption that the supply chain was both efficient, that it had built in redundancies that didn't exist and that it actually could withstand some significant external stress, none of which turned out to be true. So from a policy standpoint, one would expect that governments themselves are going to have to be more involved in creating the redundancies for strategically relevant components and elements of the economy, which we've talked about just using semiconductors and energy as examples, and that they really didn't have sufficient policy in place beforehand. Companies themselves are going to have to be thinking about how they want to actually build those supply chains and where to put their factories. And so you might see much more what I would call home based sourcing take place there. And I think from a consumer perspective, the idea of substitution is going to become much more relevant.
The largest impact that I think will have a long ramification of the valuations that investors place on the subject we've talked about today. Companies that are ESG aware are going to get valued more highly than those that aren't, ultimately, those companies are also going to become more efficient and there's going to be a cost of getting from here to there, which will partially be an inefficiency as Christina's talked about. So we are in a transitional period and I think ultimately the economics of being more environmentally sensitive, more government sensitive and socially sensitive will ultimately be one of the things that makes that an incredible component in the judgment of how investors are going to put money to work in the market and a positive one.
Shari Friedman: So ESG is going to be increasing in the future, which I think is an interesting trend to note right now is there's so much consternation going on in the ESG market at the moment. So we're going to have to take off now, David Bailin, Chief Investment Officer and Global Head of Investments at Citi Global Wealth and Christina Huguet, Industrial and Consumer Analyst at Eurasia Group, thanks so much to both of you for being here.
David Bailin: Yes, thank you so much. It was an incredibly interesting conversation and really enjoyed your questions.
Christina Huguet: Thank you everybody, it was a pleasure.
Shari Friedman: And that's it for this episode of Living Beyond Borders. Stay tuned for more throughout the summer as we continue to track major trends like the shifting US-China relationship and the impact of women on the global economy. To listen to previous episodes, head to gzeromedia.com and click on the Living Beyond Borders tab or subscribe wherever you get your podcasts. For GZERO, I'm Shari Friedman. Thanks for listening.
Episode 6: Economic weapons & fallout of the new Cold War
Listen: In 1985, after four decades of standoff between the world's biggest superpowers, US President Ronald Reagan had a private conversation with the Soviet leader, Mikhail Gorbachev. Reagan asked him, "What would you do if the United States were suddenly attacked by someone from outer space? Would you help us?"
"No doubt about it," Gorbachev responded.
That moment didn't magically end one of the greatest political power struggles in history, but it did begin to melt the ice.
Today, the US/Russia relationship is at a new low as war rages in Ukraine, and a new Cold War is growing. But the old Iron Curtain existed to divide Europe. This one is uniting it, and further isolating Putin’s Russia.
On the latest episode of Living Beyond Borders we’ll discuss what that means for America, the global economy, and your bottom line. This conversation is moderated by Shari Friedman, Eurasia Group’s Managing Director of Climate and Sustainability, and features Ian Bremmer, President of Eurasia Group and GZERO Media, and Steven Wieting, Chief Investment Strategist and Chief Economist at Citi Global Wealth Investments.
Shari Friedman
Eurasia Group’s Managing Director of Climate and Sustainability
Steven Wieting
Chief Investment Strategist and Chief Economist at Citi Global Wealth Investments
Ian Bremmer
President of Eurasia Group and GZERO Media
Episode 5: Could today’s crisis lead to future growth?
Listen: “Geopolitics and their impact on the markets are greater right now than at any point in my professional life,” said Ian Bremmer, president of Eurasia Group and GZERO Media.
In this episode of “Living Beyond Borders,” a special GZERO podcast series brought to you by Citi Private Bank, we’re looking at the current state of the global economy. Gas prices are skyrocketing, supply chain issues abound, and we’re facing a bear market that has sent stock prices tumbling.
All of these issues are exacerbated by the still ongoing COVID-19 pandemic, Russia’s war in Ukraine, and a growing divide and decoupling between China and the US.
But could there be opportunity in this moment of great uncertainty? Our discussion gives investors a frank and forward-looking view of what to expect in the coming weeks, months, and years.
This episode, moderated by Shari Friedman, Eurasia Group’s Managing Director of Climate and Sustainability, features Ian Bremmer in conversation with David Bailin, Chief Investment Officer and Global Head of Investments at Citi Global Wealth.
David Bailin
Chief Investment Officer and Global Head of Investments, Citi Global Wealth
Shari Friedman
Managing Director of Climate and Sustainability at Eurasia Group
Ian Bremmer
President, Eurasia Group and GZERO Media
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Listen: As record inflation meets rising interest rates, we’re examining the role of the US FederalReserve in protecting the economy from recession in the coming months.
15 years ago the world faced the largest financial crisis since the Great Depression, brought on by a perfect storm of risky lending, mortgage defaults, and failures of financial institutions. In January 2008, the Fed made significant cuts to interest rates to stimulate the economy. Those rates have stayed historically low since then, but that’s rapidly changing.
The latest episode of Living Beyond Borders, a special podcast series from GZERO brought to you by Citi Private Bank, examines the moves the Fed is making right now and how they will impact the economy and your bottom line as an investor.
Our program features Steven Wieting, Chief Investment Strategist and Chief Economist at Citi Global Wealth Investments; and Robert Kahn, Director of Geoeconomics at Eurasia Group. Lucy Eve, Senior Strategist of Geoeconomics at Eurasia Group, moderates the discussion.
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Senior Strategist of Geoeconomics at Eurasia Group
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Chief Investment Strategist and Chief Economist at Citi Global Wealth Investments
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