Bloomberg Talks
00:05:09 · S4, Tom Keene, Gary Gensler, Tom Keene
[00:05:09] S4: I'm kidding, folks. [00:05:10] S3: But if I was speaking to Vice Chairman Clarity, it'd be the same question. Out of COVID, stimulus one, stimulus two. Many have a stimulus that was called the Biden stimulus. Maybe there's a fourth, fifth stimulus as well. Has this nominal GDP been goosed so much that we risk not disaster, but some real pain and angst and workout as we pull nominal GDP down? [00:05:37] S1: Well, look, this is a challenge for any central bank. [00:05:42] S0: But if you feel that you're kind of. [00:05:43] S1: At the late stages of a capital expenditure boom, that's what I contend we are. if you're at that late stages, how do you affect monetary policy? And by the way, you might have been the right first person right here to say that there's going to be a fiscal stimulus package in 2028 on the horizon. [00:06:03] S0: If we have that deceleration. I'll give you that credit. [00:06:07] S3: Well, let's turn it over to Jack Lew because I think I stole, I. [00:06:11] S4: Steal from everybody. I mean, I know nothing about Duke. I steal it all from Paul. [00:06:15] S3: But the answer is, I believe Secretary Lew was the one that suggested that The morning after the 28th election, we get fiscal challenges and also Social Security study. [00:06:27] S4: That's where it begins.
00:06:27 · S4, Gary Gensler, Paul Sweeney
[00:06:27] S4: That's where it begins. [00:06:28] S1: I think Jack's right about that. But that's the long-term structural thing. So we're already running very high debt to our economy. But see what's happening in France, who has even higher debt to economy. They don't have what's called fiscal room to step in. We have limited fiscal room as well, but we're a bigger, I would say more significant economy. [00:06:54] S2: We're going to have these elections a week from today. Presumably the Democrats are going to gain a little bit more leverage in the House, maybe even the Senate. What does that mean for our executive branch for the next two years here? A lot of folks are saying, you think you've seen some stuff here in the first two years? Just wait for the next two. [00:07:13] S1: Well, look, it History tells us that presidents tend in the last two years, and remember this president will have had six years already, will turn more to foreign affairs. They have less leverage with Congress. But I do think that there'll be Democrats on the Hill that will look to still get some things done. And if this president wants to work with them, and that's a question, I think they'll want to get some things done on behalf of the American voters. and address affordability, address housing, address the AI worry that's on everybody's mind, AI safety, and my kids being addicted to this stuff. [00:07:54] S2: How about the kids up at MIT? How do they interact with AI broadly defined?
00:07:54 · Paul Sweeney, Gary Gensler, Tom Keene, Tom Keene
[00:07:54] S2: How about the kids up at MIT? How do they interact with AI broadly defined? [00:08:00] S1: Well, they're terrific students at MIT. I'm bragging on them all the time, the graduate students and the undergrads. [00:08:07] S0: But they use it. [00:08:08] S1: 98% of them will use it. And most of them use it on some regular basis. The faculty use it as well. And I say to them, you have to keep training your brain. You have to stay in front of it. [00:08:22] S0: Other people might have cognitive. [00:08:24] S1: Decline because they offload everything to it or most. [00:08:29] S0: You've got to stay ahead of it. [00:08:31] S1: But some of the students are just terrific in using the AI in getting ahead. [00:08:37] S3: We're going to rip up the scripture. This is too important. But this is absolutely brilliant. And then two years out, five years out, 20 years out, we're going to have a cadre of intellect that uses AI as a constructive bolt-on to their critical thinking skills. And we're going to have this huge body of people slipping by, Gary. That's the worry. They're going to be slipping by using it as a crutch. [00:09:00] S0: Yeah. [00:09:01] S1: And so, the challenge for all of us personally is that we keep pushing our brain. One of my colleagues, Eric So, wrote a terrific book on this. And he said, you know, we humans are actually biologically wired to conserve energy. So we're biologically wired not to use our brain as much. And we have to sort of fight against that biology and go further. But I think that MIT students got what they need to do that.
00:09:01 · Gary Gensler, Tom Keene, S4, Tom Keene
[00:09:01] S1: And so, the challenge for all of us personally is that we keep pushing our brain. One of my colleagues, Eric So, wrote a terrific book on this. And he said, you know, we humans are actually biologically wired to conserve energy. So we're biologically wired not to use our brain as much. And we have to sort of fight against that biology and go further. But I think that MIT students got what they need to do that. [00:09:31] S3: 1987, you were too young. The answer is I learned how to spell portfolio insurance. [00:09:36] S4: About 2 p.m. in 1987. [00:09:39] S3: Where's the shadow for you in the system right now, Professor Gensler? [00:09:44] S1: Well, if you're asking me where is the debt in the system, that's a different question. But I do concern myself that the risk in the system, in artificial intelligence, we've raised over $ 500 billion. [00:09:56] S0: Of new debt this year. [00:09:58] S1: And then you add this Broadcom $ 63 billion. So we're pushing $ 600 billion. And who holds it? I think it's insurance sector I worry about that's picked up a lot of holding of debt through private credit or just directly I worry about all these guarantees that Broadcom, NVIDIA, AMD have written back into these data centers. And it's off balance sheet. They're setting up more special purpose vehicles than even Citicorp did in the day. [00:10:33] S4: Let me get one more in here because Paul's got any questions.
00:10:33 · S4, Tom Keene, Gary Gensler, Tom Keene, Paul Sweeney
[00:10:33] S4: Let me get one more in here because Paul's got any questions. [00:10:35] S3: We're going to wait for Ethan Bronner, folks, a critical conversation from Tel Aviv. Gary Gensler, this is the critical moment then. If we have those worries... Do we understand the simple depreciation or obsolescence of all this technology? [00:10:51] S4: I do not have a clear picture. [00:10:53] S1: And a lot of the funding is funding the chips, the memory chips. And those chips might have four- to seven-year useful lives. [00:11:04] S0: Now, I get it. I get it. [00:11:05] S1: It's somebody, and maybe another country will be using these in the future. But there's such a— fabulous scaling, such technological advances that the chips of 2026 won't be that valuable in 2032. [00:11:23] S2: Are you have any confidence that our friends in Washington have any idea what AI is and what AI can be and what AI risks are? Boy, I think global Wall Street's trying to just figure it out as we go through this anthropic S1. I can't imagine our friends in Washington. [00:11:41] S0: Look, it ranges. Some part do. [00:11:45] S1: And just like in the media business, just like financial analysts, they're grappling with it. [00:11:53] S0: There's real issues. [00:11:56] S1: That we can chat about, about AI safety and AI working on its own and not being controlled by us humans. [00:12:06] S0: That's a deep thing.
00:12:06 · Tom Keene, Gary Gensler, S4, Tom Keene
[00:12:06] S0: That's a deep thing. [00:12:07] S1: I worry, of course, about this overall financial stability as we decelerate from a capital expenditure boom. And then you've got a White House that's just got their foot on the accelerator pedal and wants to go as fast as possible in competition with China. And China's not going to slow down. So these are hard choices. And then the Federal Reserve has to decide, well, Do we raise rates again in December? Do we raise rates again in March? I think they might pause after December. [00:12:38] S4: What's the pixie dust? Come on. [00:12:40] S3: Simon Johnson finally won a Nobel Prize. His book, 13 Bankers, was brilliant on the crass, a short monograph. [00:12:48] S4: Holland Woodford, MIT. [00:12:51] S3: I mean, is it the legacy of Solo in 1956? Stanley Fisher? What's the pixie dust? on the Cambridge River at MIT? [00:13:00] S1: Look, I mean, my colleagues and I don't agree, and that's a good thing about being at MIT. [00:13:08] S0: There's such a diversity of views. [00:13:11] S1: Some think there's only going to be modest productivity gains and there'll be significant Labor disruptions. [00:13:19] S0: I'm more optimistic [00:13:20] S1: About the productivity gains over the next five to 10 years, but that still could be that we've overbuilt some of these data centers at the same time.