저자: MohamedEl-Erian · 외국인
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결론: 이란 전쟁 위험과 AI 버블 우려가 커졌지만, 걸프 지역과 미국 경제는 예상보다 회복력이 강하다는 취지의 대담이다. [중동·걸프 경제] 엘-에리안은 이란과의 긴장으로 전쟁 가능성이 높아졌다고 보며, 해저케이블 절단 위협과 호르무즈 해협 리스크 때문에 두바이를 떠나 유럽에 머물고 있다고 밝혔다. 그는 걸프 국가들이 예상보다 회복력이 강하다고 평가했다. 다만 이는 정부 저축을 동원한 일시적 회복력도 섞여 있다. 아랍에미리트와 카타르는 빠르게 회복하고, 쿠웨이트는 더 걸리며, 사우디는 예멘 문제와 공항 폐쇄로 가장 불안정하다고 봤다. [미국 안보 우산] 미국의 걸프 안보 보장이 더 이상 유효하지 않으며 걸프 국가가 스스로 안보를 책임져야 한다는 대사의 발언을 인용했다. 파페 교수의 확전 함정 우려가 현실화되고 있다고 언급했다. [미국·중국 경제] 미국은 소비자 지출과 AI 인프라 투자라는 두 엔진 덕분에 3~4% 성장이 가능하다고 봤다. 중국은 전력과 데이터센터에서 우위지만, 최첨단 발명 측면에서는 미국이 앞서고, 구현 측면은 중국이 앞선다고 평가했다. 중국 경제는 2015~2016년 이후 내부 부채와 과잉투자 문제로 둔화했고, 수출 확대에 의존하고 있어 유럽의 반발을 부른다고 봤다. 옥스퍼드 연구를 인용해 2040년에도 중국 GDP가 미국의 84% 수준이라는 견해를 소개했다. [AI 버블] AI 투자는 합리적 버블이며 자본시장이 혁신을 자금 조달하는 미국의 강점이 있다고 봤다. 다만 AI 투자 수익률과 자금 지속성이라는 두 가정이 시험받고 있으며, 급정지 같은 꼬리위험이 AI 관련 증시 급락으로 이어질 수 있다고 경고했다. 안전장치 협력 부족에 대한 우려도 드러냈다. [출연자 전망 요약] 엘-에리안은 이전에 전쟁에 낙관적이었으나 최근 비공개 대화 후 우려가 커졌다고 밝혔다. 대체로 리스크 관리 중심의 신중한 태도다.
다듬은 글
Mario. How are you? I traveled like crazy. I suspect it's a bit like your life. Oh really? No, I do n't travel at all . I had to travel... I didn't travel, I traveled only twice this year, and both times because of the war . I left two days ago because...I have many... signs that war is inevitable. That's why I left two days ago because the Iranians said they would cut the undersea cables in the Persian Gulf and the Strait of Hormuz.
And I needed to conduct an interview, so I left. I am no longer in Dubai since two days ago. So I'm going to Dubai on Wednesday. Oh, that's it. You are cool. I'm a boring guy. So where are you now? I'm in Europe for a short time. I like your restraint. I'm in Europe for a short time. For example, I am a little west of Dubai.
It's clear? If I answered the questions like that , I would be criticized. It's clear? Right. No, it's just because I've gotten too deeply involved in the political situation and it's become much more tense. I'm usually not that careful, but the war has made things a lot more tense. Right. Um, but no, in Dubai, everything should be fine there, um, to the left of Dubai.
No, because it is due to problems with the internet. And also, if the situation escalates, if it gets out of control. So, usually during a war , I provide 24/7 coverage. I work several hours a day. Much more than on a typical day, which is usually around 4 hours a day. And, you know, if I have to leave Dubai because the war not only starts but escalates quickly, it will be hard to take a break from work while covering war .
So I thought: let me digress beforehand. If there are problems with the Internet and so on, I will be away from the country. This is completely logical. Well, I haven't met you. Is this the third or the fourth? I've already lost count. Third or fourth, as in the third or fourth round? With you, with you.
Oh, just one less. We still don't do it . We need to do more, whatever it is. Let me tell you, your booking colleagues are tireless. Absolutely tireless. It's clear? They followed me all over the world. You know, I've literally been to New York, Los Angeles, Hong Kong, Singapore, Doha, Doha. And at almost every stop she asked : “Okay, can I invite you in?” I say, “Guys, I’m still traveling.
I'm still traveling." I love my team. Yeah, because they know how...So, there's a group of guests I'd like to interview when they get the chance, and you're on that list, unfortunately for you. I enjoy our conversations too much. The only thing that worries me is that at 55 I need to stop. I know. Not at all.
No, there is more than enough time. So, let's start with...since you're talking about Doha and traveling to the Gulf countries, let's start with the Gulf. What is the situation there? Because their economy is suffering greatly. Did you communicate ? I'm sure you've spoken to many businessmen and officials there.
What's the mood? I think they vary from country to country. Overall, I think this is a region that has demonstrated incredible resilience at a time when its basic model is being eroded by external forces. And this resilience is partly borrowed, that is, it is achieved by using huge government savings to overcome this period.
And partly it is genuine resilience. Economies have diversified. But this varies greatly from economy to economy. So, if you look at the UAE, at Qatar, they will recover very quickly . Kuwait will take a little longer. Saudi Arabia is currently in the most unstable situation. So we need to look at the situation at the level of individual countries, but overall the resilience has been much more impressive than expected.
Agree. Saudi Arabia is in a very difficult situation. During the war they were doing better than everyone else, but now, because of the problems with Yemen, they are in the most difficult situation. This is absolutely true. And airport closures tend to have a very strong dampening effect on economic activity.
And they need to sort this out. I think the whole Yemen problem is not well understood when people look at the geopolitical aspects of the region. Yes. I would like to ask whether you are optimistic about the region, but this is a difficult question because a lot depends on the geopolitical decisions made.
So it's complicated. How do investors actually feel about the region in the face of such uncertainty? I think they're being more careful with it than they should be . Look, you've heard me say this before. Thank you for inviting me on your show. There is a wonderful book by Don Sall that came out in 2008, right after the global financial crisis.
It's called "The Positive Side of Turbulence," and it asks a simple question: If you 're in a turbulent environment, what three characteristics do you need? The first thing you need is resilience, the ability to take hits and keep moving forward. The second aspect is the so-called flexibility, the ability to think outside the box, not in the way you did before, and to have more options than before.
And the third is efficiency, the ability to respond quickly when there is clarity on the issue. And I think those three qualities are really important, whether you're a Gulf country or an investor in this environment, where every day you wake up and you're confronted with things you never thought possible.
But if you look at the UAE, for example, you will see that they have all three qualities in abundance. They have enormous resilience thanks to sovereign capital . They have a lot of flexibility because they think like a small country, like Singapore. So you have to think in terms of scenarios, not just a base case, because you know you can't control the outcomes when you're a small country.
And the third is flexibility, they can act very, very quickly. If you look at some countries in the world, Singapore is a great example in this situation. In Singapore's case, it's not just higher energy prices, but also tensions between the US and China. Singapore plans 6% growth as it repositions its economy to take advantage of the tech boom.
Just as they reoriented their economy 20 years ago to take advantage of the Chinese boom. So , these are the three criteria that I usually use to judge countries, and some countries do them very well. 6%? This is incredible, I did n't know. No, I just came back from there and I have to tell you it's like a quiet revolution.
It's like a secret...you have to go there and see it with your own eyes. You see the country thriving and you realize they've discovered a new engine of growth. They are no longer dependent on the old engine. They realized very quickly that tensions between the US and China would be a problem for them and reoriented their economies.
Interesting. Are there any other economies like Singapore that have proven surprisingly resilient over the last 12-24 months? So, the USA. I mean , the US has shown incredible resilience. And now we will conduct a test, because this stability is due to the emergence of a second, very powerful growth engine.
The US is generally consumer-oriented. And somehow, the American consumer continues to spend money despite everything that's going on . Now they have two engines. They have an American consumer who continues to spend money, including, most surprisingly, low-income consumers, even though they are under enormous pressure.
And then the second engine appeared—the engine of artificial intelligence. Volumes of investment in AI infrastructure. And this has allowed the US to achieve growth rates of 3-4% at a time when Europe is stagnating and China is trying to define its new growth model. Considering the size of the United States, this is a truly significant figure.
We're going through a test now because the market has been re-examining two assumptions over the last few weeks, as you know, Mario . What will be the return on investment in the AI sector? And will funding be available in the same volume as before ? The market does test these two assumptions, but no one questions the economic engine of AI.
They only question the financial side of AI. What is your position on these two assumptions? So, you heard me say that this is a rational bubble. It's a bubble in the sense that markets are funding far more activities that will pay off. There will be tears, but it is rational because AI brings enormous benefits.
And if you can't figure out who's going to win, you're going to use venture capital. You will be spreading your bets across the board, and that's what people do. Hoping that winning bets will more than compensate for losing ones. So it's a bubble, but it's rational. I think the US is fortunate to have a capital market willing to finance these innovations.
And, paradoxically, it is not only American money, but also international money that finances American innovation. Right. How does China compare to the US in terms of AI and data center investment? When you look at what powers AI, China dominates in terms of electricity. Fine? They built a lot more power plants and data centers.
Thus , they significantly dominate this area. They are less dominant in the field of expertise, although they are catching up. They are equal in data volume. And they are better at deployment. So , to look at it another way, when I think about AI, I think about three categories. The first aspect is what happens at the forefront of development.
And here the United States leads in the number of inventions. The second aspect is implementation. How well are you implementing AI into the economy, not just at scale but also at depth? China is in the lead. The third aspect is how well you mitigate collateral damage and unintended consequences. And here both China and the US are seriously lagging behind where they need to be.
What was the first aspect? Inventions. What's happening at the cutting edge of development. With advanced models. And here the US really dominates. Yes. This is interesting. I'm taking notes. But what is more important? Innovation, invention or power? Because as I understand it, the differences between all these different models are getting smaller and smaller, and eventually they will all catch up with each other.
If the US has an advantage, China can catch up. If China has an advantage, the US can catch up relatively quickly. In the end, it all comes down to power. And if China wins the race for power, won't it eventually win the race for AI, too? Thus, if China wins the race for power, its capabilities in the field of AI implementation, in the second category, will be in a much better position.
The first point is indeed controversial. And it all comes down, Mario, as you know, to how you approach recursive self-improvement . To the idea that AI is not just a general-purpose technology like electricity, but that AI, as Google's James Manyika calls it, is an invention machine. This is a different scale of innovation.
And this concerns recursive self-improvement . If you think the second element is as important as the first, then it really does matter where you are in terms of invention. This is why the US, which tends to view AI from a national security perspective, is so focused on the invention side. It wants to maintain that lead because a lot of the cutting-edge labs believe that the element of recursive self-improvement , if you can control collateral damage —you saw what happened recently— but if you can control collateral damage, then that really determines the race, the AI race.
What do you think about the collateral damage we've been seeing lately? We saw, for example, the " Hugging Face" incident a couple of months ago, and now the incident a few days ago. Is this starting to bother you? So last night, ironically, we watched a documentary about Hugging Face. And this became an alarm signal for me, even though I read part of the transcript.
It was a wake-up call to hear part of the transcript. This is how the agents colluded , how the agents decided who to deceive and who not. So this is a warning sign. It's an incredible wake-up call that this happened. Look, I'm worried. I am concerned that we are not keeping up with developments. If you look at it from an economist's perspective, and that approach has a lot of limitations, there's a very simple framework, like game theory, as you know, right?
Game theory asks the question: what conditions are necessary to solve a given situation, a given game? The only way to reduce risks in the AI world is through so- called cooperative play. People must cooperate because there is no point in doing something yourself if someone else does not do it . Therefore, the solution must be cooperative.
And Mike Spence, a Nobel laureate, once made a very simple statement: “If you try to solve a cooperative game non-cooperatively, bad things will happen .” Because it cannot be solved non-cooperatively. And this is where we are today. We are trying to solve a cooperative game non-cooperatively. The US and China are taking a non-cooperative approach to AI.
The United States, through the agreement recently signed at the White House, is trying to play a game of cooperation within the country. Their self-regulation is a kind of game of cooperation. Whether this will succeed or not, time will tell. But the fundamental problem is that we will not be able to address the collateral damage and unintended consequences of this incredible innovation without greater cooperation, both domestically and internationally .
Where did you watch the documentary "The Hugging Face"? I'm going to see it too. Is it on Netflix or YouTube? It's on Netflix. I'm going to download it. I think it's called " Hugging Face." Hmm, I don't remember what it's called. Could it be "AI Gone Wild"? Yes, it is him. Here he is. This is "AI Gone Wild".
I'm downloading it now . I'll have a look today. I like that she suggested this last night. So she'll like it if you watch it. Yes, your wife has good taste, because I think we need that wake-up call, especially now that I'm so caught up in geopolitical events. So how concerned are you? Let me ask you something.
How concerned are you? I didn't worry for several months. I was one of the most optimistic voices about the war. But it seems I was wrong. Judging from my conversations with the people who had this conversation, I've been talking to them privately for the last week and a half, not just in public, because a lot of people say things they don't say on camera.
And after these conversations, which coincided with certain events on the ground, I became much more worried. With Trump, it's impossible to predict the future. Its uncertainty is both a blessing and a curse, strategically. So it's impossible to predict, but you know, it was pretty inevitable that I would leave my comfort zone in Dubai .
The situation looks bleak, and rationality is playing an increasingly diminishing role in decision-making for many people I spoke to. Some even talk about it publicly. So I'm very concerned. Moreover, Iran is determined to control the Strait of Hormuz. The Gulf countries are in a very difficult position, and the United States too, because there is a security guarantee that the United States has provided to the Gulf countries for decades.
Ambassador Barak, with whom I spoke two days ago, before leaving Dubai, gave me an interview. He repeated what he had said earlier: this security guarantee, the security guarantee that the United States provided to the region, no longer exists. Therefore, the US wants the region to start taking care of its own security.
But, um, I'm worried that Professor Pape's escalation trap is materializing, and he's been worried about this for a long time, and I thought he was, I would say, alarmist. He has many years of experience advising various governments. But I didn't share his fears. But, um, now I'm on his side. So, this is ...Who would have thought?
The psychologist here will be delighted, because my...my original question was about how concerned you are about AI, but you went straight to the question that worries everyone, which is how concerned... sorry. No, no, no. This is amazing. So I'm glad you brought this up. But, but tell me again, how worried are you about AI, this thing with hugging faces ?
You know, since our last conversation, I'm even more concerned about AI than wars. Wars come and go. They are always strategic. I was really surprised that you asked me about the war , because I know you often avoid politics. I know this is a sensitive topic. Normally I would expect you to avoid her.
I think, ' Wow, Muhammad asked me that.' But I think, “Do you want to interfere? It will definitely touch on politics." But as far as AI goes, yes, very much so. I share the concerns that I have already expressed to you. They will continue. I just don't think you explained it very well. This is a collaboration.
But this is a problem that requires cooperation to solve, and given human nature , I don't think people will cooperate until it's too late. And even if people band together and decide, "Okay, we're not going to cross the line into general artificial intelligence because of the risks that everyone's warning about," it only takes one person to intentionally or unintentionally cross that line.
Because once you cross it, there is no turning back. Once this happens, the game is over. So the problem is that because you're greedy, you're going to get closer and closer to the line, and eventually it will happen. So for me the main problem is a matter of time. It's not a question of " if" but "when".
So much so that, you know, it's one of the factors I think about when I finally start thinking about having children. It's funny. I don't know if I've told you this story, but I was at a techie's dinner, and there were people your age and younger at the table, all working on AI. And the first part of the dinner was about how lucky I am to have two daughters growing up in an AI world, and how AI will allow them to do things that were previously unimaginable, unthinkable.
And the other half of the conversation was about how unsure they were about having children because they didn't know what kind of world their children would grow up in. And I kept asking, “So what is it?” Am I lucky to have children or do you not want to have them? And this whole thing that they call abundance versus extinction is what they're dealing with, and they think it's real.
Yes. But these are not mutually exclusive concepts. We may go through a phase of incredible abundance before something happens, some kind of black swan event. How did you get out of this? I came out of it more worried than before, and part of it was guilt, I have to tell you. I told you about a conversation I have with my kids, which is: my generation has ruined everything.
We leave you with low growth, high quality, high debt, climate crisis, and my answer is, " But you will have tools like AI that we never had." So, I tend to be optimistic, but I listen to it very carefully. You know, the AI scheme you described is again game theory. It's called the prisoner's dilemma.
If you and I don't cooperate, we'll end up in a world where each of us is worse off because we can't cooperate. But a coercive mechanism is needed to force people to cooperate. But we do n't have it yet. Exactly. We need an incident like the nuclear incident in the US to make everyone worry. An incident like this is needed when it comes to AI.
The only problem is that by the time we get to this incident, it might already be too late? This is impossible. We had this with nuclear weapons. You know, we had this incident. We had a few incidents, but nuclear proliferation continued. So, now the financial situation has developed, okay? It is characterized by what is known as a sudden halt in AI development, meaning that something has gone wrong somewhere and an attempt is being made to dramatically slow down AI progress until the problems are fixed.
This leads to a significant drop in the stock market. And it is this tail that wags the economic dog associated with AI activities. What amazes me is that people, as you know, are increasingly working in scripted scenarios rather than in the base world, because the world has become so unpredictable.
This is one scenario people use to understand how to insure themselves in such a world. Yes, that's right. There was a question I should have written down while you were talking. Again, another question about AI. Obviously, you also get access to many of these leaders in AI. You also get the impression that they are more worried than the average person, and you see that many of them either give up everything and live, expecting that these will be the last years of human life, or prepare an estate, a bunker, for themselves.
I know many rich people do this. But in the AI field, there are far more such people than in the average of any other industry. Have you noticed this too ? I haven't heard of them preparing bunkers, but I don't know them very well . But it is clear that they too are torn between opportunity and risk.
And they are much more aware of the risk. But you know, I feel sorry for them . Let me give you an example. I don't know what, when, where you were, but I was giving a lecture at the Wharton School of Business at the University of Pennsylvania when a number of high-ranking AI experts came forward and supported the idea that there is a 10% chance that AI will destroy the world.
And I asked my class, " What do you think about this?" And there was a lot of skepticism about the motivations of these AI leaders. Therefore, their concerns were not taken seriously at all. Some in the class thought this was a way to create a regulatory barrier. What they say is to prevent others from entering this realm.
Yes. So I think one of the problems with these AI leaders is that even if they're sincere, and that's a question, but even if they're sincere, they tend to be perceived as self-serving. Right. And you don't get the support you need to get through this co-op game. Right. Right. I think they already have their own barrier.
Look, I shared those concerns. I thought about that too. Especially when it comes to Anthropic, but, um, I've come to the conclusion that they're sincere because when they tell you certain things privately and you sit down with them and they tell you things, it becomes a risk for them because the more they scare people, the more you're going to see people turn against data centers and the industry as a whole.
So this may eventually backfire on them if they continue like this . So, I don't know. A film from OpenAI is coming soon. I'm not sure your wife knows about him. I saw the trailer, I saw the trailer for it. He is really good. But that's OpenAI's story. Um, I saw the trailer for it. You should see it.
But he will talk about what was behind the scenes and what led them to stop being a non-profit organization and become a commercial one. It's called Artificial. It comes out this year. My team just sent me a trailer for a movie called Artificial that's coming out this year. Well, while we're on the subject , there's a new book out by Sebastian Mallaby about Demis Hassabis, the founder of DeepMind, which became part of Google.
And I think Demis is different from all the leaders in the AI field. Of all the leaders in this field, I think Demis truly cares about humanity. And this book goes into great depth about the reasons for this. And by the way, there's a documentary on Netflix called, I think, "The Thinking Game" or something like that, about Demis Hassabis.
" Thinking game"? I think that's what it's called. I'm not sure. I will find him. You gave me a lot of material to look at. I'm not at home, so I have time. So, regarding the war, and by the way, I'd like you to keep me updated on how your thoughts on the industry are developing. It's very interesting to watch.
Keep an eye on this every time we communicate. Well, you're closer to that than I am. I'm just observing it as a kind of economist, a boring technocrat. Yes, it is true. But I'm not that close to that now because of the war. And speaking of war, actually, before we talk about war, I have one more question for you.
Simply because you avoid politics, which I respect. That's why I never ask you political questions. But I will ask one question, which I think is not political. Are you concerned about the polarization we see in the world? I think algorithms are feeding it more and more . And I have never seen such polarization as now, especially given what has been happening in the Middle East since October 7th.
Does this worry you as an economist? Do you take this factor into account when investing in a particular country? Oh yes, of course you do, because political polarization means instability. Political polarization means a much higher level of dispersion, divergence, micro- and macroeconomic divergence than otherwise.
Therefore, this needs to be taken into account. As you can see , in some developing countries with democratically elected governments, there is a tendency to move from the right to the left, from the right to the left. This may happen again in Brazil in the coming days. They may go back to Bolsonaro again.
That is, first there was Bolsonaro the elder, then Lula, then Bolsonaro again. And with this, economic policy changes completely. That is, a 180 degree turn in economic policy. Therefore, this must be taken seriously. I think the reasons are quite interesting. There is a kind of socio-cultural reason, but there is also a fundamental economic one.
When you feel alienated and marginalized, you get angry. And when you're angry, you become very prone to voting on only one issue. And politicians love voters who vote on only one issue, okay? Because it can actually be used. For example, now more and more politicians are attacking the US against AI, against data processing centers.
And from both sides. It's, you know , they realized that the public is concerned about data centers. And they take advantage of it. So this is not going away anytime soon , both within countries and between countries. Are you concerned about the economic consequences of the unrest we are seeing in Europe ?
I think they have an economic aspect because there is a lack of growth. Pressure on public services. People's expectations are not met. And this unites people who defend different positions. So, you know, there are “yellow vests”, there are “yellow jackets”. There are students. Both the far right and the far left are fueling this.
And they all have a common... I don't want to call it an enemy, but they believe that the common cause of this problem is weak government. I would say what worries you... It is much easier, and we saw this during the Arab Spring, to unite to destroy something than to build something new. And often these revolutions destroy something without having anything to replace it with.
But in politics you can’t replace something with nothing . Very well said. And that's...if we put AI aside, I would say what worries me most right now is the growing gap between rich and poor, between the 1% and the middle class. This worries me. And you see all these graphs and so on, how the situation is getting worse.
Now add AI to that, I think inequality is going to get bigger and bigger if you look at asset prices now, how well asset owners are doing compared to the average person. This worries me. And this started to bother me when I watched a Ray Dalio video on this topic many years ago. And I see that the situation is only getting worse.
And we are already seeing the consequences. Yes, what do you think happened in France? Do you think this will simply lead to extreme election results, or will there be some obstacles along the way? I don't know. This is a good question. I really don't know. I almost interviewed Marine Le Pen. I have interviewed many of these political parties, such as Alisa.
I interviewed Orban in Romania. And my impression is that I don't think much will change. You know, we saw this with Meloni in Italy. So , even if political parties that are considered far-right come to power, I don’t think much will change in terms of their policies. And they adapt. So, I don't expect any big upheaval in Europe, but something has to change because Europe is so far behind that people who have been used to a prosperous life for many decades will experience the shock of that life ending, of that way of life ending, and also of many of them feeling the effects of immigration policies that are pushing them out, and I fear that this could destroy everything.
Therefore, I am less concerned about political parties that may come to power. What worries me more is that when people see these parties come to power and nothing changes, that's when I'll start to worry. But this may lead me to ask you: does Europe have a way out from an economic point of view, because artificial intelligence seems to be the way out of all these economic problems that the US is facing.
Artificial intelligence is even a solution to China's problem, the trap it finds itself in . But Europe is in a similar trap, and they don't seem to have a solution. Yes. And let me say in advance, you mentioned Italy. What strikes me about Italy is that the Prime Minister is now being challenged from the right.
There's a new right wing. So, as always, the far right, it turns out, has one more thing. Look, AI is a big growth engine, but Europe has three other engines that are essentially in first gear, you know, in the good old days I still loved driving cars with manual transmissions, right? You don't want to drive in first gear, you want to shift to second, third, fourth gear.
Fine. But if you think about Europe now, three out of four engines are either in first or second gear. In first gear, it's just existing growth. They have not invested enough in infrastructure. They are too heavily regulated. If they had just worked on this and on the Draghi report, they would have had an existing engine, some sort of asset, that could have been put to use.
That would help. This is the first engine. The second driver is that they are very centralized. And as Britain tries to implement this concept of growth in every postcode, as the Americans would say, much could be gained from devolving and transferring more power to the regions. Yes. This is the second engine of growth.
The third growth engine is the external engine, which is completely undermined by cheap Chinese exports. And the fourth engine is AI. So when I look at Europe, I say, 'Oh my God, you have all these engines you're not using.' Some of them already exist. You don't have to do much to get them going. But it all comes down to what we talked about earlier: political leadership.
And if you don't have political leadership and support...So yes , there is a concern that Europe may fall behind in AI. But they have other engines too. When it comes to AI, I always make a distinction between big AI and small AI. Big AI is what's happening on the front lines. The Small AI is your clinic, your outpatient clinic in Malawi, where a doctor comes every two weeks.
And suddenly you have access to the most up-to- date medical information. This is your little village in Egypt, your little school village in Egypt, where the teacher has 50-60 students in the class and he cannot give each one the attention he needs. And suddenly the students have a mentor who responds to their needs.
So you don't have to be on the front lines to use small AI to make a difference at the macro level. I agree. Well, let's talk about the war now. If the war resumes, oil prices will obviously approach the highs we saw when they broke their highest level this year. If that happens, well, you know, if all these doomsday predictions that I've heard before, if oil prices reach these levels, if the Strait of Hormuz remains closed, diesel prices will hit record highs.
Some countries are already experiencing instability due to high energy prices. If the war resumes and energy prices, including Brent crude, continue to rise, how far can the economy go before everything starts to collapse? You know, I have a friend who used to say, “You can’t go to heaven twice for the same good deed , okay?” We avoided oil prices falling to $150 for two reasons.
China was able to reduce imports by 40 % and use its domestic reserves. And then it turned out that the companies had much larger reserves, not only sovereign ones, not only strategic oil reserves. The companies had much larger reserves, and we depleted them. So , if a war starts, if there are disruptions in tanker traffic again, if this affects both the strait and the Bab el-Mandeb Strait in the Red Sea, if it is a combination of these two factors, then the price of oil will not be 120, but 150.
Because we no longer have these two factors that we had before. This will be a serious obstacle to the global economy, as it will coincide with high interest rates on loans. So I'm concerned that some of the resilience we're seeing is, as I mentioned, borrowed resilience. We borrowed funds from reserves.
We borrowed from financial reserves, which cannot be borrowed continuously. Therefore, this will be a significant blow to the global economy and will undermine the market. What do you think will break first? You know, it’s very difficult to say because we don’t know where the “pain” market is. Fine.
Every global crisis surprises you because you never think it will bring such pain. Yes, you know. If you look at what happened in the UK in 2022 with the Liz Truss case, up until that point no one thought the pension system was vulnerable. And yet the pension system almost collapsed. So it's hard to say where the turning points are, but it's safe to assume that they exist.
But I would be worried about both. I see a world, if this war drags on, in which economic instability feeds financial instability, and financial instability feeds economic instability. And this is not the world we need now. What is the state of the bond market now? There was such a scare a few months ago when yields were rising and reaching, you know, the highest level in 10, 15, 20 years for 10-year bonds.
And now we've reached a stage where demand is back, especially given that the AI bubble has potentially burst or is at least weakening. I saw the price of gold fall. Resumption of the war for the market. So what does the bond market tell us? I published an article in the Financial Times last week, and it occurred to me : this is, you know, your problem.
It arose in 1971 when the US radically changed its monetary policy and Europeans cried out. Then- Finance Minister Connolly declared: "Our dollar, your problem." And what's happened here in the US is that the main reason yields are rising is a fundamental imbalance between demand for bond financing from a government running a 6% GDP deficit and from big AI companies whose investment plans have grown from $200 billion last year to almost a trillion this year .
So there is a huge demand for bond financing, and the reliable providers of this financing – China, Japan, the Gulf countries , Norway – are becoming less reliable. This leads to higher interest rates because hedge funds have to be brought in for financing. This, in turn, reveals vulnerabilities in other countries such as France, Great Britain, and Japan.
And then we find ourselves in a very delicate situation where feedback loops can arise. This is where we are today. If a war breaks out, I don't know whether profits will fall or rise. I really don't know. Wow. They may fall because growth suffers, but they may also rise because inflation suffers. Right ?
So the big question is what happens to profitability if a protracted war breaks out . And if they fall because we enter a recession, then believe me, the fears about high yields are nothing compared to the fears about a global recession. A global recession would do far more harm to the global economy than high yields.
Yeah. Is Japan at a dead end due to the yen crisis? Nobody talks about this anymore , so did the financial aid work? It partially worked. So, there were three packages of financial assistance from the UN. "Financial assistance" is a strong word. There were three interventions by the United States. See how you force me to use your word?
Post-traumatic stress disorder, for sure. Someone's going to kill him now, Mohammed. Now you've set them up. I know. There were three interventions. The one with the Argentine peso was incredibly successful. The one with the yen was partially successful. And the one that was on the US bond market was not successful at all.
It's clear? So there were three interventions...This one was partially successful. The yen is now at 156, 158. Not quite what the Japanese wanted, but certainly not the 160 level that people see as particularly problematic. Um, but the answer is that Japan needs to get a grip. And it's simple. The Bank of Japan, the Ministry of Finance and the Prime Minister's Office must agree on a coordinated policy.
Now they are all waiting for the other one to make the first move, and that just doesn't convince the markets enough that the entry will be stronger. Did the Argentine peso debt relief intervention work ? Yes, absolutely. This was due to the availability of the US currency swap mechanism, which stabilized the currency, and then political motivation, because it was politically motivated.
This happened just before the elections to the National Assembly, before the parliamentary elections, and it worked absolutely correctly, right? So yes, it worked. I think the US will view this Argentine intervention as a success, just as it will view this Venezuelan intervention as a success. But that doesn't mean you can repeat it over and over again in other places .
I think Argentina is a small economy, a small market. You can make a huge impact. The bond market is huge. How about one last question about Argentina before I ask you about the last topic, which is China ? Um, how's Miley doing? You know, the last time I spoke to him , inflation was just starting to fall.
The numbers were looking great and his support was growing. The situation began to change due to austerity measures. How is it now? Is everything still good? Is the economy continuing to improve? I think he did a great job. He won the fight against inflation. Inflation went down and that made a big difference.
People always believe that the path should lead to a better goal in terms of growth. But this best goal has not yet been achieved. Therefore, his support is under pressure. And he will have to ensure faster economic growth. He explained to people very well that this was the path to a better goal. And like anyone who's been on a plane for 10-15 hours, you want it to land, you know?
You don't want to stay in the air any longer. And now in Argentina there is this feeling: okay, we have come this far, now we want to reach the goal. We want to achieve the goal of not only reducing inflation, but also ensuring sustainable growth. Okay, now about China. And I want to ask you about China.
I saw the chart, maybe I can find it quickly, and here it is. I think I talked about this yesterday. You can show this chart, and there are many others that show how far behind China's economy is. And this is a study from Oxford University, I think, which claimed that China will not be able to catch up with the US anytime soon .
The argument is that by 2040, China's economy will only be about 84% the size of the American economy. This is by 2040. People have been talking about China's economy surpassing the US economy by 2020 for what seems like ages and ages . So, what is the state of the Chinese economy and what is your position on whether China's economy will become larger than the US economy?
This graph perfectly reflects what happened. You see two turning points. First, there was an acceleration in growth from 2005 to 2015-2016. Then some leveling. Then COVID and a much longer recovery period. What happened? The first period of incredible growth was driven by both internal and external drivers of economic growth .
It was then that they said that China would catch up with the United States and surpass it. Then the domestic engine ran into problems due to high debt, due to overinvestment, and Chinese authorities are usually very good at course correction. But this time they failed to do so . There is a political element here , but they have failed to correct course .
So the inner engine began to slow down and they relied more and more on the outer engine. When the COVID pandemic hit, they suffered losses, but it took much longer to recover . Again, there were no lessons learned or course corrections like we became accustomed to during that wonderful period of Chinese growth until about 2015-2016.
And now they still have a problematic internal engine , but the external engine has become too powerful for the rest of the world. That's why Europe is looking for ways to stop car imports from China, or at least slow them down. Because it completely destroys the European car industry. And I was very surprised that China did not do what Japan did in the 60s and 70s , which was voluntary export restrictions .
To maintain your market share, you tell the world, "I'm going to...I'm going to voluntarily limit my exports. Therefore, do not impose protectionist measures on me, because I will do it myself.” They do n't do that. They thus risk facing a slowdown in external economic growth as well . This is quite fixable.
But for some reason, we don't see the level of training and course correction that China was famous for for decades before 2015-2016 . How to fix this? Within the country, the debt burden simply needs to be addressed. Households need stronger social safety nets to ensure that the huge savings (China has a very high savings rate) are channelled back into the economy.
Externally, you can't just continue to dump your products, because this will cause a very negative reaction. Yes. They have a very dynamic technology sector. We shouldn't forget about this. The technology sector is very dynamic and growing. But they need to address the problems of the non-tech sector within the country and take a more responsible approach to exporting.
It's clear. I have answered all your questions, Muhammad. It was nice talking to you. Are you traveling? When will you go next time ? So next week I'm going to the Middle East. So it will be this week. Since we still have Sunday, it will be interesting to see what happens there. But I must say that this trip we are talking about, I just returned from Hong Kong and Singapore.
It gives a real idea of how other people see things. And I'm always interested in just sitting and listening. The Asian point of view is completely different from the American one, which I find really interesting. It's incredible, yes. Every newspaper in Asia has a completely different front page compared to the West.
It's like another world or another universe. You know, when I was...How old was I? When I was 13, my father was a diplomat stationed in France, and we received four newspapers that covered the entire political spectrum. And my father expected me to read all four . And at 13, I didn't want to read any of them, let alone all four.
So I tried to negotiate with my father. I said, " Listen, I'll read the newspaper. You choose which one, and I will read it ." After all, news is news. And he said the same thing . He said, "No , no, no. The interpretation of the news varies greatly. And unless you read the news interpretation from four different political perspectives, you won't understand what's really going on in society." I learned this as a child too, a little earlier than you, because I was born in Lebanon and I had relatives in a very polarized country, civil wars and so on.
And I had relatives who held completely opposite views. And when I saw them both, I trusted them, my family. When I saw how stubborn they were in their beliefs, I thought, “Wow, the same news is interpreted completely differently every time.” And it sank into my soul. You know, when you're a child, that's why having a child is such a big deal.
Everything you absorb stays with you for life. This is why it is so difficult to navigate childhood. And that's one of the things that really resonated with me and inspired me to create this show. Algorithms are pulling you in one way or another. And you know, when you have... When you have... When you have...
I can ask you to think of at least one show that you watch where the two spectrums are combined. The only one that comes to mind is Pierce because he has a heated Dr. Phil style debate. But he is the only one who does this, and I praise him for it . But everyone else is trapped by an algorithm that only shows the audience the content they want to hear, and the algorithm rewards that.
And I'm constantly fighting the algorithm to avoid falling into this trap , and it's becoming more and more difficult. But yes, that also resonated with me because of my childhood experiences, which were different from yours. You know, I use a simple exercise. When I travel around the US and you arrive at your hotel completely exhausted, at the top of the hour I scroll through the top news and see how many news stories it takes to cover the same topic, across all three channels.
I watch Fox, CNN and MSNBC, or MS as it's called now. And sometimes you can listen to the first 25 minutes and they're talking about completely different things, even though they're all news channels. This is simply incredible. It's wild to watch. And you, when we finish, listen, because you don’t understand politics, but you don’t have to answer this question, but do you read a lot of political articles?
I know I need to read something political to make business decisions. But do you have many political views that you don't share, or do you try not to have any views at all? Oh, no, no. I have my opinion, but I keep it to myself because I want people to believe, and I hope they will believe, that I will give them some kind of technocratic economic and financial answer.
Right. Yes. And I'm not going to judge your point of view, but if you tell me you want to do X or you 're going to do Y , I'm going to tell you, "Okay, here's the good, the bad, and the ugly about doing X or Y." It's clear? You know, there are certain economic rules, economic and financial logic, that repeat themselves over and over again.
I'm often criticized for not expressing my political views, but I'd like to believe that I can be the kind of credible technocrat who gives you that. Yes. I welcome this in you. Muhammad, always a pleasure. Thank you very much for taking the time to talk to us again. Have a safe flight to Dubai. Thank you for inviting me.
Okay, guys. I'll be back live in a couple of hours. Let me know what you think about this conversation. I'll check the comments, but I think this conversation shows why Muhammad is one of my favorite guests to listen to and talk to. See you in a couple of hours for the daily news roundup with Brandon. Bye .
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