Nouriel Roubini's Vision for a New Safe Haven Asset

Joe Weisenthal (0:03)

Bloomberg Audio Studios.

Tracy Alloway (0:05)

Podcasts, radio, news. Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:25)

And I'm Joe Weisenthal.

Tracy Alloway (0:26)

Joe, do you remember, I think it was in 2022, everyone was talking about stagflation.

Joe Weisenthal (0:34)

Yes, of course, because we had, right, because we had markets were low, so people were talking about recession, the Fed was hiking interest rates aggressively, and inflation in 2022 was peaking, so it certainly seemed like we could have had the combo right then for essentially elevated inflation and some kind of recession.

Tracy Alloway (0:55)

Yes, and in fact, before we recorded this episode, I went back and I looked at a Google Trends chart for the word stagflation, and like the peak in 2022 is just amazing, and then it sort of fell off because we definitely had inflation. We didn't necessarily have lower economic growth, but I think now at the tail end of 2024, some of that stagflation talk is beginning to creep back into, I guess, the economic discourse.

Joe Weisenthal (1:25)

Yeah, a little bit. I mean, what I would say is, I would agree with you, there seems to be a couple things going on that are very confusing, to say the least, but one is the sort of, I don't know if it's acceptance or reality that like, like inflation has come down quite a bit, but maybe it's going to keep bumping up against the ceiling, or maybe it's going to keep like bouncing off the floor, so to speak.

Tracy Alloway (1:48)

Yeah, that last mile is going to be difficult, right?

Joe Weisenthal (1:51)

And then on some measures, the economy still seems good, but you look at some of the PMIs, ISMs, other industrial measures, labor market measures, some seem to be slowing down. So like, I still think this idea of like, I don't know if I would call it stagflation, but this sort of unpleasant combination of not great growth, not great real growth and inflation that's still like at the higher end of what people are comfortable with feels like something that could very plausibly be the case for a while.

Tracy Alloway (2:23)

It's definitely in the air. So we need to dig into this particular argument and who better to speak to than Nouriel Roubini? He is of course the chief economist and portfolio manager of the Atlas America Fund, which is a new ETF that has just launched. And he is also the chairman and CEO of Roubini, Macro Associates. Really the perfect guest to do this type of macro with us. So Nouriel, welcome back to the show.

Nouriel Roubini (2:49)

Great being with you, Tracy and Joe.

Tracy Alloway (2:51)

Do you get the same sense that the risk of stagflation is starting to pick up again?

Nouriel Roubini (2:58)

Certainly is one of the risks that we have to consider. And I think that the question on everybody's mind of course is what will be the economic policies of Trump and their impact on growth and inflation.

If I have to look ahead, I would say that some of his policies actually could increase growth and reduce inflation, being pro-business in general, making those tax cuts permanent, having government efficiency, deregulating the economy, maybe even increasing the production of fossil fuel and reducing the price of energy. Those go in the direction of policies that actually increase growth and reduce inflation. But on the other side, there's a long list of other policies that could be implemented. First of them, of course, tariff protectionism and economic war with China. Secondly, draconian restriction to migration, if not mass deportation. Three, unfunded tax cuts and runaway fiscal deficits for potential inattempt to weaken the dollar in a disorderly way. Five, maybe trying to interfere with the independence of the Fed. Now, if the second set of policy were to be implemented, their impact will be higher inflation over time and lower economic growth. So those sets of policy will be definitely in the stuck inflationary direction.

Joe Weisenthal (4:25)

That was an amazing summary, by the way, of the two ways of thinking about paths. And I guess what's striking listening to you sort of list off the two columns is within Trumpism or within the Trump administration, it feels like there are several competing camps, so to speak. And we don't really know how it's going to resolve, but there are a lot of internal contradictions, whether on personnel or ideology. And to some extent, what you just laid out are sort of, I don't know, maybe the fork in the road, so to speak, of how things could go.