Music
[upbeat music] [growls]
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Ladies and gentlemen, uh,
Music
could I please have your attention? Can you dig it? [cheering]
Jonah Goldberg
Greetings, dear listeners. This is Jonah Goldberg, host of The Remnant Podcast, brought to you by The Dispatch and Dispatch Media. Very exciting first timer. We don’t do nearly enough sort of contemporary real time economics and finance stuff. We do a lot of Friedrich Hayek here, but probably we should do more Federal Reserve. And so we’re very happy to have from this, you know, this plucky niche startup Semafor, uh, Liz Hoffman. She’s Semafor’s business and finance editor. She joined from The Wall Street Journal, where she spent nine years covering, uh, uh, mergers and acquisition. I would say M&A, but I always think that that sounds like some sort of, uh, weird kinky thing. Um, uh, investment banking and the world of big money. She’s the author of Crash Landing: The Inside Story of How the World’s Biggest Companies Survived an Economy on the Brink, which was all about how the, um, giant global semi-frozen flounder to the face of the pandemic affected the business community. Oh, I’m, I’m sorry, I forgot the most important part. She’s the host of a very… of an excellent new podcast, which is one of the reasons why I wanted to have her on, called Compound Interest, which is put out by Semafor and can be found wherever just the finest podcasts are brought to you. So with that, uh, Liz Hoffman, welcome to The Remnant.
Liz Hoffman
Hey, Jonah. Thanks for having me. Yeah, it seemed like you were having so much fun in podcast land, we decided to, uh, to join your ranks.
Jonah Goldberg
Yeah, well, you know, appearances can be deceiving. Since you’re technically not here to talk about your book, normally when I have an author on, the first question I ask is, “What’s your book about?” Because I… That’s the question I like to get on my book tour and never get. But w-we can put that off for a second. Why don’t we just sort of do a sort of some level setting? Economic punditry is not the same as political punditry, but there are some related things. There are certain rules of thumb that aren’t necessarily always true, but, like, it’s sort of a safe harbor for predictions about things, and it feels like a bunch of them have just been repealed when it comes to the economy. So what’s your thirty-thousand foot, you know, elevator pitch, however you want to do it, take on where the economy is right now?
Liz Hoffman
Yeah. We’re just off. We had a, a, a big global economic event in Washington last week, like five hundred CEOs and policymakers. So, you know, my brain is, is sort of full of, of takeaways from that and digesting them. I would say that I am sort of generally more bearish than, than most people that I talk to. But for the sake of, of being fair, let’s start with the good stuff. You know, the US economy in particular has been just way more… The word you’re going to hear a lot is just way more resilient than, than I think people had expected. You know, if you go back a year ago, the tariffs were, were, you know, scaring the hell out of everyone. There was talk of, like, an imminent recession. I should note the tariffs have been walked back a bunch, but, like, clearly, like, the, the worst things that economists were predicting did not happen. Unemployment is still sort of by historic standards, very low. Got new retail spending out today and even taking, you know, out the fact that we’re all spending a lot more on gas, like pre-pretty healthy. You know, this is like a, a thirty trillion dollar oil tanker, which perhaps is a terrible metaphor right now, but these things turn slowly and, and the US economy has just been incredibly resilient, um, to a lot of stuff that has been thrown at it. It remains a consumer-driven economy, a services-driven economy, as much as, as the administration might want to turn it into a manufacturing behemoth. And so, look, it continues to chug ahead. There are real concerns hanging over about growth, about rates, about what AI is gonna do to the jobs numbers, about our ability to pivot quickly enough. You know, not to… We will talk about my book later if you want, but, but I’ve been thinking about a lot lately because I, I do think that, that this feels a lot like February, March of twenty twenty to me, where if you remember, like, we’re all kind of going out to dinner being like, “Should we be doing this? This seems fine.” And then we just didn’t for a year, right? That that demand shock happened really slowly and then all at once, and this to me is the supply side version of that, where, um, we are living a little bit in suspended animation. The effects of the war have not fully come through, but when they do, it’s gonna happen very, very quickly.
Jonah Goldberg
So I like the show Money, uh, Marketplace, you know, the NPR show, and occasionally I’ll, I’ll tune into it because sort of the top-line stuff is, is useful and it’s a quick catch-up. But their
Jonah Goldberg
Kai Ryssdal’s frustration with the fact that the stock markets aren’t freaking out more about Iran is kind of funny to me. I mean, I kind of share the perplexity of it. He’s like, “You just can’t pay attention to equities. Like, maybe bonds can tell us what people really… what the underlying economy think,” all this kind of stuff. But it does seem weird to me given how much, you know, as a conservative
Jonah Goldberg
for a long time, we talked about how uncertainty is like one of the worst things. It was a big part of the criticism of Obamacare and all these kinds of things. And there has never been in my lifetime a period of more economic uncertainty vis-à-vis what’s coming out of Washington. E-externalities, you can’t really, you know, predict, you know, ooh, an earthquake in Japan, you know, that kind of stuff. But like, like what Trump will do on any given day to screw around with the global trading order, to screw around with the Gulf of Hormuz, good or bad, right? That’s not my point. And yet the stock markets still seem to have this view that Trump can do this power of positive thinking thing about the global economy, and every time things go halfway his way,
Jonah Goldberg
you know, the S&P goes up. Eventually, that has to stop, right? I mean, like, but maybe not.
Liz Hoffman
Maybe not. I would say there’s sort of two explanations you could reach for. One is that there’s a lot of money in the world. There’s a lot of capital in the world, and, you know, th-that, that is just like a, a big, a big cushion. Um-But the other, I think, is this sort of learned dependency, and it goes way back. You know, it probably at least to the, the Greenspan put of the nineties. But that you haven’t gone wrong buying the dip in the last thirty years. And actually, I was struck by a conversation I had with the president of Citadel Securities, a big market maker down in Washington last week. He said, “We raised a generation of investors that never learned the price of being wrong.” And that is a real learned dependency, you know, that, that Greenspan put turned into the, you know, the oh-eight bailout, you know, the, the COVID bailout, which was, like both of those, obviously the correct thing to do for the economy. And then, you know, just sort of seamlessly shifted into the Trump put, which is that we have a president who really doesn’t like markets to go down. So there’s just an expectation that the government will be there to support it, and with a little bit of, uh, of evidence. You know, the, the, uh, the administration backed off on the tariffs. Actually, not… To your point, not because of the stock market, but in fact because of the bond market. Um, there was some discipline that was, that was, uh, put in place there. You know, but, but they’re talking about what a couple of years ago we would’ve called quantitative easing, growing the Fed balance sheet. They’re buying mortgage bonds, you know. As much as, you know, that the president badly wants the Fed to cut rates and, you know, Kevin Warsh is sitting in, um, in the Senate, I think, as we speak, w-we can talk about that, but, but there’s a sense that they’re just gonna get bailed out. You know, you add to that the sort of generational promise
Liz Hoffman
of AI, right? We don’t know exactly what this is gonna do, but there is a lot of evidence that it is going to create a lot of productivity gains and growth, and whether that’s good for the people in the economy or not, it’s certainly gonna be good for stock prices.
Jonah Goldberg
Yeah. So where, where do you come down on the, uh, AI thing? I mean, I’m, I’m not a Pollyanna, I’m not a catastrophist, I’m not a…
Jonah Goldberg
I think it’s gonna be
Jonah Goldberg
very mixed, um, in all sorts of ways, with high upsides and low downsides. But
Jonah Goldberg
what the distribution of downsides to the low side, uh, uh, downsides to the upsides is, I have no freaking clue. How are you feeling about it?
Liz Hoffman
I think we’ve probably never seen a technological advance that is more magical and promising with, but with bigger externalities, negative externalities than this one. And so it’s actually kind of an interesting public policy case. Right? You cannot stop this. We can, you know, you can put it in a drawer, and right now, you know, all these things are being throttled ’cause there isn’t enough compute. But like, those problems will solve themselves. This thing is a one-way street, in my opinion. And then the question is, okay, well, how do you wanna design, like a policy response to it? And we’ve actually seen some interesting ideas pop up in the last couple of weeks. This sense of like, universal basic income, right, is having a real resurgence. There’s talk of an AI dividend. You know, th-this is gonna create a lot of economic growth. It may in fact be jobless growth, you know? And then you say, “Well, what is the economy for, and how do we decide if it’s working?” That’s gonna require a lot of both redistribution of wealth, right? Which is a phrase that makes people, people nervous ’cause it tends to come with heads on pikes. Or, or pre-distribution of wealth, which is kind of what people are talking about with the Trump accounts. Like, can we, can we sort of set up a system that is designed to sort of create the wall of wealth that’s gonna be created and, and spread it around a little more? Because otherwise, you know, the thing that concerns me on the, on, you know, aside from the, the jobs, you know, I, I work in the knowledge economy. This stuff is very real. Um, I covered, you know, Wall Street, investment banking. Like, those jobs are being very quickly automated. But, you know, it’s just the huge paper wealth that’s being created. Anthropic is five years old and is as valuable as Google was when it was fifteen. Amazon was twenty-five. I mean, all that wealth is being created in private hands. Google is worth four trillion dollars today, and almost all of that wealth, you know, accrued to the public shareholders, who are not as diverse a swath of Americans as, as you’d like, but certainly more diverse than, like, the, the fifty people who’ve made a ton of money on, um, on Anthropic. So I think we’re gonna have to find a way to spread that wealth, and if we can do that, then, you know, this is, like a pretty magical technology. I, I’m not, I’m not terribly frightened by it.
Jonah Goldberg
I’m not a Luddite. You know, I wouldn’t have smashed the, the, the-
Liz Hoffman
[chuckles]
Jonah Goldberg
… mills or any of that kind of stuff.
Liz Hoffman
Was it the looms? The printing presses?
Jonah Goldberg
Yeah, the looms.
Liz Hoffman
Yeah. [laughs]
Jonah Goldberg
Yeah, yeah. And it’s worth remembering it’s like, the people who were affected by that were not the bottom of the rung workers. They were, like pretty high-end workers in the Industrial Revolution. But anyway, I, I, I used to be… M-my friend Charles Murray wrote a book about UBI years ago. I have always been open-minded. Milton Friedman had some ideas about it. I’ve always been sort of open-minded to it. I feel like the scholarly conse-consensus is, has moved away from it, not on the economic side, but on the quality of life side, that you… People need work for economic reasons, but also for non-economic reasons. And, and so, like, yeah, the economy could respond by creating even more elaborate video games where people get a sense of earned success by sitting around reaching some new level or unlocking some prize. Well, that’s one of the things that the best video games are kinda designed to do, is to trick your brain to feel like you had a productive day when you’ve played a video game all day. And, you know, and there are people in, like South Korea,
Jonah Goldberg
at least there used to be, who work in, like World of Warcraft sweatshops where [chuckles] they’re, like earning swords to then go sell on some digital marketplace. So they actually are working in there. I’m just not sure that there’s enough of that to soak up particularly
Jonah Goldberg
disaffected, alienated, young, able-bodied men to feel like they’re living productive lives. And I worry more about the sociological consequences and the sort of spiritual consequences of AI than I do about the economic ones per se. And our policymakers, as bad as they are about doing economic policy, they’re a lot worse about doing, you know, statecraft is soulcraft kind of things.
Liz Hoffman
Yeah. I mean, look, the, the reality is that there’s a lot of-Presumably meaningful, certainly lucrative work still in the blue-collar economy, that’s gonna take a lot longer to get automated. The robots will do it eventually, but like, like mucking around in sewers and fixing wires is actually… I don’t know if you’ve seen the videos of the robots trying to unload the dishwasher, they’re pretty bad at it.
Jonah Goldberg
Yeah.
Liz Hoffman
The question, I guess, really to me around the AI and jobs debate is speed. You know, that, that it is a lot easier right now to see the jobs that AI is gonna take, and it is a lot harder to see the jobs that it’s gonna create. I think that’s always been true in, in industrial revolutions, you know, of which I guess this is the fourth one that people are, are talking about with steam combustion, semiconductors, and, and now general intelligence. But it, it– that it might just be happening too fast for like this both technical skills to reorient, for people to shift, you know, into, into the places where the economy needs them, and then to your point, for there to be some
Liz Hoffman
cultural reset, right? Like for, for a while, I think like people are still gonna wanna go to a four-year college because that’s like a, you know, that’s a part of, um, American success, and it’s what their parents want them to do, and that’s gonna be a lot slower to change than the need for people with four-year liberal arts degrees. You know, so I, I, I think it’s actually just a question of how fast this happens. If it happens slower than people think, and there are some signs that actual adoption in the real economy, particularly at big enterprises, might be a little slower, we might be okay. If it happens along the timeline that, you know, Dario Amodei at Anthropic and some others are predicting, I think it’s gonna be really messy.
Jonah Goldberg
Yeah. I mean, I worry about this in part just ’cause my daughter, a recent college graduate, the, the sectors of the economy that she wants to go into are seeing this AI transformation, you know, Hollywood and New York in film and television, that’s sort of what she’s interested in. I have friends who are major like showrunner types in LA, and they just don’t hire script assistants anymore. Like all of those sort of dues-paying entry-level jobs that credentialize you and get you on the first rung, those are the ones that are being automated first, and
Jonah Goldberg
that’s a problem. You know, James Burnham used to say, you know, “A problem without a solution is just a fact of life,” or something like that.
Liz Hoffman
[chuckles]
Jonah Goldberg
And like I don’t… If you can’t, if, if you can’t– I think you’re absolutely right, you can’t put AI back in the box. It’s coming no matter what, and so therefore you just kinda have to figure out how to deal with it. But I, uh, the pace thing is usually important too because, you know, I’ve been making this point a lot about, um, you know, every communications technology since the printing press, mass communication technology has created a populist upheaval, starting with the printing press and Protestant Reformation I don’t think happens without the printing press. And then, you know, fast-forward to telegraph a bit, but really radio, you don’t get the populist uprisings of the 1930s without radio, and you don’t get the 1960s the whole world is watching protests all around the world without TV, and social media is even more primed to, uh, ’cause it’s a perpetual populism machine kinda thing. And the problem is, is that the pace of technological change with social media is… We, we learned to adapt to the printing press, we learned to adapt to radio [chuckles] and TV. I don’t know that we have the time to adapt to the r- rapidity of some of these technological changes on the, on the sort of handheld, you know, computer side.
Liz Hoffman
Yeah. And then you’re seeing, you know, another wave of, of populism around this. It– people really don’t like this technology. I mean, like it is wildly unpopular, and you’re seeing it, you know, in, in sort of local protests about data centers. Like, you know, I’m not advocating this, but I, I think you’re gonna see like data center vandalism. I was talking to someone recently who, who runs, you know, a company that leases these things out, and they’re thinking a lot about physical security.
Jonah Goldberg
Yeah. Yeah.
Liz Hoffman
I think that’s real. I think companies are just now starting to wake up to that and, and realize that it’s a real risk for them.
Liz Hoffman
But I also think to your point about the pace of change, you know, there’s some sectors of the economy where that matters. There’s some I think where it doesn’t, where… S- so like one thing I would look at is demand elasticity, right? Like-
Jonah Goldberg
Mm-hmm
Liz Hoffman
… if this thing became cheaper and easier to do, would we get more of it, basically, I think about that. And so like healthcare is a good example. AI, I think, is, is transformative for healthcare, and if it were easier-
Jonah Goldberg
I hope so. Yeah
Liz Hoffman
… and cheaper for… I hope so too. If it were easier and cheaper for me to go to the doctor, I would go to the doctor more, right? And we’d probably, you know, to some point of diminishing returns be better off. If investment banking got easier and cheaper, would we see a lot more M&A? I don’t know. Like at the high end, the demand for that is what it is, and so there’s gonna be sectors where, to your point, it is more of a fact of life. Um, you can think of these as pie-growing sectors or, or pie slice, you know, uh, food fight sectors. Um, anything that isn’t kinda structurally growing is gonna get automated away, and there’ll be like one or two winners. Things where, where genuinely we would do more of it if it were easier I think will continue to grow, and then the question is like, can we, we get people in those jobs in a period of time that, you know, prevents like serious social unrest? I don’t know.
Jonah Goldberg
I came into this podcast wanting to cut myself. We should probably move on from AI.
Liz Hoffman
[laughs]
Jonah Goldberg
We mentioned briefly the liberation date tariffs and all that, and when it comes to this administration’s sort of, um, approach to trade and economics and even to a certain extent industrial policy, um,
Jonah Goldberg
I think it’s very much, it’s sort of very much like the foreign policy thing. Like, uh, you might recall earlier this year, the Defense Department came out with their big strategic paper about what the national security doctrine of the United States is gonna be, and there’s always a debate among, you know, sort of pundits about how much attention should this thing get. You know, ’cause there’s always gonna be deviated from, but at the very least, sorta like party platforms, these documents tell you what the, what an administration wants you to think are its priorities, and that’s interesting by itself.And then we got Trump trying to s-grab Greenland. We got the th-the, the capture of Maduro, and we got the attack on Iran.
Jonah Goldberg
I don’t think Greenland’s mentioned in the national security document. Um, certainly the Venezuela stuff wasn’t, except for some reference to the Monroe Doctrine type things. And you would not have thought, “Okay, we’re gonna bomb Iran in a couple months,” based on that thing. And I feel… The reason I bring it up is I feel that the economic side is sort of similar. You hear Ascent and my old colleague, Kevin Hassett, and less and less from Peter Navarro, who I think is, you know, a crazy person. You hear people trying to fashion these ornate, consistent philosophical paradigms about what Trump’s vision of economics is, right? I think it’s all garbage. Some of it might be true, some might be internally consistent, but the truth is, is that Trumpism isn’t an ideology, it’s a psychology. And so for things like tariffs, he likes tariffs ’cause he likes the unilateral power to say, “Oh, the prime minister of Switzerland was rude to me, so I’m raising their tariffs 10%,” right? It’s not, it’s not a coherent theory. It’s not like he went back and read, I don’t know, Friedrich List or some, you know, 19th century continental economist and has an alternative theory about economics. It’s that he likes to be in charge. Same thing with foreign policy. He likes to be in charge, and then you get all of these spinners and stuff trying to talk to markets about, “Oh, no, no, there’s really a plan.” And, um, I’m not saying that they don’t have a plan, but they have to, like, make the plan kind of work with whatever Trump says at any given moment. You know, we’re, we’re recording this on Tuesday, April 21st. Uh, Tim Cook, or as Trump likes to call him, Tim Apple, announced he’s resigning, and Trump did this big, long True social tweet thing where he says, “The reason I liked him is I could get him on the phone, and I could ask him to do things I want him to do.” And I think that’s how he views basically… He likes the tariff power because he thinks it’s, it’s a royal monarchical power that is his to play with as he likes. Am I being unfair? Right? I just wanna get… I didn’t want you to get blindsided by my response to you, so I sort of put my response, my, my position up front. Am I being unfair? Do you think there’s more of a method to Trump’s vision of economics, or do you think the people who say there are, are just pushing the broom really hard behind the elephant?
Liz Hoffman
[chuckles] I think that there is a emotional
Liz Hoffman
cohesion to some of the Trump economic agenda that is basically nostalgic. And
Liz Hoffman
I think
Liz Hoffman
that when you sort of stitch it all together, right? So I, I had, um… I interviewed Jamieson Greer, the US trade representative, last week, and, you know, tried to really pin him down, said, “Okay, like, what does a win on tariffs look like? Like, what are we solving for?” And actually, I think for the, for the first time, at least that I had heard, he said three things: narrowing the trade deficit in goods, which, uh, that, that is not by itself to me, uh, a, a, an, a, a good thing. If it helps certain parts of the economy, fine, but that’s one.
Jonah Goldberg
It’s sort of an aesthetic ambition more than anything else.
Liz Hoffman
It’s an aesthetic thing. Sure. Yes.
Jonah Goldberg
Yeah.
Liz Hoffman
Blue col- And by the way, like, we should talk about this, but the US is a services exporter, [chuckles] right? Net exporter-
Jonah Goldberg
Right
Liz Hoffman
… of services. And, um, and, you know, there’s an argument that we’re, we’re fighting to save things that we lose on and, and risking things that we win on. But, but so he said bringing down the trade deficit, which in goods, you know, little progress overall, not, not touched. Blue collar wages, which are going up largely for, like, AI data center related reasons. There are not enough electricians and welders out there and so… But that, that’s a win. And then manufacturing jobs, where we just, like, have not, have not seen those numbers move and, and really actually upstream of them, manufacturing construction spending has been going down steadily since 2024. So the jobs on the back end of that, hard to see where they’re gonna come from. So it i- there’s a nostalgia for a sense, like America was a better, more prosperous, happier place in the 1950s, and so to try to recreate that economy. So just being, like, m- charitable, I think directionally, that is what they want and, you know, you hear Howard Lutnick talk about communities in Upstate New York, and he is not wrong about those things. There’s a question of whether we can… You know, we’re pushing on a string trying to get that back, but that is, like, there have been real communities that have been hollowed out by de-industrialization, by outsourcing. Promises of NAFTA were, um, you know, unevenly met, I think it’s fair to say.
Jonah Goldberg
Mm-hmm.
Liz Hoffman
To your point, there’s not, like, a tactical plan in any way, and I think a lot of the priorities of the administration on economic matters are getting overrun by, to your point, these kinetic impulses, this, like, geopolitical adventurism. By the way, the other thing that Donald Trump cares a lot about, and he has forever, he cares a lot about tariffs, and he cares a lot about interest rates being low, ’cause he’s a real estate guy, and real estate only works when you can borrow debt for, like, really cheaply. Interest rates would be lower today had the Trump administration not done three things: tariffs,
Liz Hoffman
uh, the war in Iran,
Liz Hoffman
and this, like, goofy investigation into Jerome Powell at the Fed, which has, you know, complicated and perhaps delayed the confirmation of Kevin Warsh. A- and, you know, we can talk about whether you think he can really get consensus at the Fed to cut interest rates or not. But, you know, you know, last year the, the market was pricing in two or three rate cuts this year. Now maybe one, and, and the percent of investors, if you look at sort of how interest rate instruments are traded, about as many people think there’ll be an interest rate hike as, as a cut, and the vast majority of people think very little happens. So these are, these are priorities that were really achievable and not massively outside the economic mainstream, but have just been, um, sort of kneecapped by these more impulsive decisions that the administration has taken.
Jonah Goldberg
Yeah. So why don’t you explain that, that, that last bit to the listeners who don’t understand this? ‘Cause this is one of my great frustrations is the… Well, once he, once Trump gets his guy as the chairman of the Fed-They’ll just lower interest rates, and it’s just not how the Fed actually works, right? I mean, this is one of the problems with talking to, like, active reporter types of, of these things is you have to stay in a lane a certain bit about offering your judgment about certain personalities if I… If you want Kevin Warsh to return your phone calls, uh, that kind of thing. I’m not questioning your honesty about anything. I’m just saying that, like, it’s not your lane to opine the way it is, that it’s mine about some of these things. But I just seem to recall, I remember a time when people were saying that Kevin Warsh would be… They would be really upset to find out Kevin Warsh was gonna be on the Fe- was gonna be, get the chair, and now they’re like, “Dear God, I hope it’s Warsh,” because of the alternatives, right? And it’s, it’s funny how the grading has changed on, on him. I’ve met him a couple times, seems like a nice guy.
Jonah Goldberg
He’s qualified, you know, but, like, uh, he does seem to want the job a little more than I would, would want. Anyway, would it, would… Explain why it’s not a slam dunk that all of a sudden Trump can get interest rates down if he gets a loyalist in there.
Liz Hoffman
The Fed is a consensus-driven organization. Like, literally, people get in a room every seven or eight weeks, and they vote on what to do on interest rates, and you need a majority to do things. And if people dissent, they do so publicly, and they explain why they, they dissented. I, I mean, you could probably construct some anti-democratic, you know, doomsday scenario by which the vote is taken, and then we do the other thing, but I, that, I don’t know, like, structurally how that would happen, these interest rates, you know, at the, the overnight interest rates are set by the Fed, and they all raise their hands. And, you know, Jerome Powell had a hard time kind of keeping the, the cats in line. You know, this is w- this is a, a Fed that has seen a lot more dissension on the votes in both directions, by the way. People thought we should raise when they held. People thought they should lower when they cut. Like, it, it has been messy. Um, so that’s just sort of on the, the practical side, the, the politics of it. But the economy right now is not sending clear signals to the Fed. And I, you know, I don’t wanna infantilize your listeners, but, like, when the economy is in trouble, you lower interest rates to get more credit flowing to make it, you know, easier for people to borrow money, build a house, start a business, whatever, you, you know, it’s easy money. This is where we were for most of the twenty tens. When the economy is running too hot, you raise interest rates, right? It puts it sort of a… You can think about it like a damper or bellows on the fire, is that what it is? That puts more or less oxygen in the economy. But then you say, “Okay, well, how do we decide if it needs oxygen or not?” And the two things you usually look at are inflation and jobs. And usually, those two things go together. When the economy is running hot, inflation is high, uh, the job market is healthy, so unemployment’s low, employers have to pay more, wages go up, prices go up. Those two things usually move together. Right now, they’re just not. Inflation is still sort of stubbornly high. Some of that is the oil shock, um, coming through. But, you know, it has been well above the Fed’s target of about two percent, you know, f- for a long time, and it was starting to come down, and then kinda plateaued. At the same time that we are starting to see some weakening in the jobs numbers. Em- unemployment has ticked up a little, and this is before really AI. There’s been some… Some people have blamed AI for layoffs. In my view, that’s air cover for CEOs-
Jonah Goldberg
Yeah
Liz Hoffman
… sort of doing what they wanna do. The headline numbers have been low, but again, that is hard to parse because immigration is a lot lower. We have, you know, the demographics mean we don’t need as many jobs. And so the economy gets sort of conditioned to say, “We’re gonna have a couple hundred thousand new jobs every month,” but if we don’t have the people for them, we don’t need them, but then the vibes get all screwed up. Anyway, all the way of saying that the economy is sending signals that could justify both, you know, the Fed stepping in to support the economy in a weakening jobs market or putting a, a fire blanket over inflation that is sort of threatening to kind of rip again and, and end up in a double-dip situation. So even the, the, the economics book you would take off the shelf does not tell Kevin Warsh what to do when he gets that job. A- and by the way, you know, serious Wall Street people are gonna be calling him, telling him, “You have to be independent. Like, if you don’t, the market is just not going to trust anything you do, and you’re gonna lose control of the Apple card.” And so he’s got… Th- this is not as simple as he gets in there, and they cut interest rates, and in fact, I, I, I do not think that will happen.
Jonah Goldberg
And part of the thing about the immigration stuff is that we have no idea
Jonah Goldberg
how much self-deportation is go- deportation is going on, and we have no idea how many people who are here legally are self-deporting because members of their family have to self-deport, and they all just, all kind of stick together. But, you know, one of the, one of the economic data points that I thought was the most fascinating over the last sixteen months was going into the second Trump term, Modelo beer was the number one beer in America, and, uh, it plummeted, uh, in sales. When you talk to people, like from the beverage industry about why, it, it wasn’t like they were dependent on illegal immigrants for their sales. It was that
Jonah Goldberg
you have big Latino get-togethers, tailgating, that kind of stuff, big picnics, big parties, outdoor, you know, beer is a social beverage,
Jonah Goldberg
and if one percent or five percent or ten percent of your people are afraid they’re gonna get hassled or that so- or their aunt is gonna get deported if they show up, you know, or if they congregate in big places, that ICE is just gonna go give them a hard time. And so the social networking function of beer sales, which is a huge part of beer sales, got kind of short-circuited by the, by the immigration policies. And when you think about that in terms of, like,
Jonah Goldberg
what that means for construction guys showing up at, at sites looking for work or all the rest, it makes house building actually kind of more expensive in a way that is kinda hard to measure because you just… There’s a labor shortage as a result. And, I mean, Steven Miller probably thought about this and cackled, but, like, I don’t think that this entered sort of Trump’s calculations about any of these things. He thinks he’s, has a lane for immigration and a lane for the economy, and if it’s not hotels and people who call him and say, “We need these g- these workers,” he just doesn’t care, and it’s not on his radar.
Liz Hoffman
Yeah. Can I actually, can I, um, pick a slight nit with part of that?
Jonah Goldberg
Sure.
Liz Hoffman
I think ninety-nine percent of what you said I totally agree with. The Modelo thing actually I think is a reflection of if you go back a few years, remember the Bud Light boycott when everyone got very mad at Bud Light for being too woke? That is actually when Modelo passed Bud Light.
Jonah Goldberg
For sure, yeah, yeah.
Liz Hoffman
And I think actually perhaps the retreat that you’ve seen, um, particularly in consumer brands from this, like, DEI stuff may actually have, have flipped and, and p- and maybe it’s, it’s, it’s okay for Republicans to drink Bud Light again. But, but no, I think absolutely-
Jonah Goldberg
I’m sure that’s true, but like, but Modelo is not a light beer, and Bud Light is a light… You know, you know what I mean? I’ll, I, I’m sure it’s multi-causal. I agree with you in talking.
Jonah Goldberg
That’s fair. Yeah, yeah.
Liz Hoffman
But no, I, I, I mean, you’re absolutely right, and like, you know, I probably should’ve added inflation to that list of kind of unforced errors in the Trump administration, you know, if their goal is to cut interest rates, which is that the immigration crackdown is inflationary. To your point, it makes it harder to, to, to build a home when the price of a home goes up. And then if the price of a home is already inflated, the biggest cost in that is mortgages, and so, like, people are gonna be reluctant to cut interest rates if it’s gonna… You know, it, like, it just makes it very hard to figure out what to do, and, and it’s not… I shouldn’t say it’s not just the Trump administration, and it’s not just the U.S., the entire world. We’re living in a more inflationary world sort of by design, and a lot of that is the, the global fracturing that, that Trump set in motion. But, you know, some of it goes back to the pandemic, and we’ve been building this sort of less efficient global economy, which is just more expensive. There’s more redundancy baked in all over the place, and Europe doesn’t think that the U.S. will protect it, you know, from, from Russia, so it starts to rearm, and that’s, like, a huge, a huge expense across the world. And, um, you know, you have to sort of build in these, like, supply chain buffers, and, like, that’s expensive. We’re just r- living in a world that is structurally more expensive, and inflation’s gonna be higher, and just, like, no central banker is gonna have a lot of appetite to cut interest rates, um, if that, if that happens.
Jonah Goldberg
Also, um, I feel like I once knew the answer to this question, but there’s things about interest rates that I, I learn them in the moment, and then they just evaporate from my brain. So the, the Fed basically only… I don’t wanna say only, but its primary thing when it’s, when we say they’re lowering interest rate is the overnight
Jonah Goldberg
rate, right? It’s what they lend to the banks in the overnight… That doesn’t necessarily perfectly correlate with medium and long-term interest rates, right?
Liz Hoffman
Correct.
Jonah Goldberg
Can you just explain how that works? I think it’s an important point that people forget is, like, not all, not everything is gonna drop overnight even if Kevin Warsh successfully gets eight out of 15 people to do what he wants.
Liz Hoffman
Correct. Yeah, um, this is when people talk about the short end of the curve. That’s what they’re talking about, that, you know, there, there’s a debt curve that starts with overnight loans, which is the way that the Fed sets its interest rates. You know, that, that, that’s the rate at which, uh, banks can borrow from the Fed. So it is sort of the, the base level of, of the cost of funding for a commercial bank is that, and then they sort of mark things up from there. But, you know, the further out you get, five-year, 10-year, 30-year debt, a lot more goes into where those interest rates are, expectations of future growth, expectations of future inflation. And, you know, what is supposed to be sort of a parabolic, I don’t know if you’re [laughs]… This is a bad podcast, but for the video.
Jonah Goldberg
[laughs]
Liz Hoffman
But, but, but a, a slightly smooth curve has looked really weird for a long time. You know, and talk about the curve is flattening, and it’s inverted, and these are all economic terms for the cost of debt over time is not looking exactly the way it should. And the Fed only controls the very front end of that, and there is an increasing concern that they are just pushing on a string trying to get, um, the economy to, to follow, um, in part because people don’t, don’t trust the fiscal outlook, right? We are just in a huge amount of debt and continuing to run huge deficits, and it feels unsustainable. And so the further out you get, the cloudier it is. There’s also, and this is a slightly wonky economic point, and I’m not an economist, so I won’t cosplay one here, but that more parts of the economy are less rate sensitive than they used to be, that sort of Silicon Valley is gonna Silicon Valley right now, and, you know, is perhaps not as, not as reliant to or responsive to changes in interest rates. So,
Liz Hoffman
uh, yeah, this is not a, it is not a sure thing that he even does it, and it is not a sure thing that if he, that if Warsh, you know, does cut interest rates, can get the Fed to do it, that it will actually translate into lower borrowing costs for the things that we care about.
Jonah Goldberg
So, all right. Let’s switch gears slightly. Um,
Jonah Goldberg
how do you think about
Jonah Goldberg
Polymarket and Calci and all this stuff? I mean, and, and put aside all the online sports betting things, which I think obviously related, but
Jonah Goldberg
I think people understand the criticisms of that stuff. I think people are a little more confused about how to think about this other stuff, right? I mean, like, I don’t know what Polymarket said the odds of how long this podcast was gonna go today, but-
Liz Hoffman
Question is did I bet on it? Did you? [laughs]
Jonah Goldberg
The question… We… No, I did not. I’ve never bet on any of these things. But it’s-
Liz Hoffman
To be clear, I don’t either. I’ve never, I never placed a bet on any of these things.
Jonah Goldberg
But it’s, like, like, there are all of these clear rules, particularly for people like you, right? For financial journalists, like, I’m sure there was a binder this thick at some point in your professional career at Bloomberg or Wall Street Journal or wherever that said, or Semafor, you know, said,
Jonah Goldberg
“This is how you have to deal with things in your own portfolio,” or how you talk about, you know, all that, which is all legit and, and, and right.
Jonah Goldberg
But now when you can bet on how long
Jonah Goldberg
a Trump press conference goes or whether or not the host of the Oscars scratches his nose at the, you know, the, the, the second hour or whatever, the explosion of potential conflicts of interest, particularly for journalists, is, like… I’ve never felt like I really could move markets on anything, but I could move all sorts of micro markets about, you know, just from conversations I have in green rooms and then things I say on CNN or something like that. I don’t like it. I think it’s a… Anyway, I don’t wanna, I don’t wanna lead you anywhere.
Liz Hoffman
No, I’m with you. I think it’s, I think it’s pretty pernicious. Well, I, I’d say a couple of things. You know, they, they either have a huge insider trading problem or the appearance of one, right? It kinda doesn’t matter, um, because people don’t trust these markets. They’re not gonna use them, and I actually think both Calci and Polymarket understand that and are trying to figure this out. But, you know, you look at, at, atEvents contracts around oil price, around, you know, Iran, and like it sure looks like someone at the Pentagon is trading on this stuff. Um, in fact, though, actually, there was like a big when are we gonna strike Iran bet that everyone assumed was an inside whale, and he was wrong, whoever it was. So h-hard to know, but I, I think it is incredibly pernicious and a real problem, and regulators are not equipped to figure it out, in part because, like,
Liz Hoffman
insider trading, even in the stock market, is not about what people think it’s about. It is not about fairness. It is actually about theft. It’s about misappropriation of information that either belonged to someone else or that you had a duty to keep secret. And like that, that sort of legal machination just totally falls apart when you kind of wander into Jeff Bezos’ stepson at college telling his friends whether his stepdad is gonna go to the Super Bowl or not. Like I, I don’t even know how you police that. So, so that’s one. Two is I think it’s, you know, we have… As someone who sort of lives in this casino economy that we have built, I don’t love it. Like this is capital that, you know, those kids in college could be starting a business. Instead, they’re putting their money to work here. Just like it is not a useful engine of economic activity. And you could say the same thing about financial markets, and that’s true for parts of it. But capital markets, like, are great, and they are the reason that the US is… Fifteen years ago, the US and Europe had, you know, an economy about the same size. That is no longer true anymore, and it’s because they rely on, like, more prosaic sources of bank funding and other things, and we have these really vibrant capital markets, and, and so I think that’s great. The thing that I’m interested in, to put a more sort of positive forward spin on this, because I am a finance reporter,
Liz Hoffman
I think that a lot of,
Liz Hoffman
of trading and, and you can call it speculation, but kind of price discovery that happens in financial markets
Liz Hoffman
will and should actually move to prediction markets. And I’ll give you an example, which is if I am an investor, and I think that Coca-Cola is going to do better on its earnings next week than the market thinks, and I want to express that thesis, right now I’d probably go buy a call option on Coca-Cola, and I’d probably buy a put on Pepsi, and I would hope that there wasn’t some weird weather event in Atlanta, like whatever, right? You have to sort of… That is a, that is a weird shaped piece of risk and creates a lot of distortion and friction in the markets when it doesn’t need to be. Whereas I could just go on Kalshi and, and click yes on a contract. So I think that that’s where a lot of, um, a lot of that financial activity is gonna go, and it may leave the investment markets like a slightly purer way to kind of like raise capital and f-finance ideas and, and that kind of thing and, and might not be the, the worst outcome. There are a lot of risks that, you know, companies… Like for example, like last year when the Supreme Court was debating the tariff case, if you’re a big importer, if you’re Costco, like you might get a big check here, but you don’t really know, and like that’s hard to figure out what to do with that risk. Like, that’s a great industrial use case for prediction markets, I think. The problem is that the market wasn’t deep enough. They need to figure out how to sort of bootstrap some, some big deep-pocketed liquidity on those markets that exist now in traditional investment markets and doesn’t exist online. So I, I think that is an interesting thing to watch, but yeah, I, I don’t love it. The speed with which it has kind of taken over huge parts of culture I think is like fairly corrosive.
Jonah Goldberg
Yeah, no, I, I, I agree. And, and like the, I think the,
Jonah Goldberg
the online betting stuff, uh, for actual sports, like sports are one of the last institutions that
Jonah Goldberg
sort of Americans love, that Americans generally trust, and we’re now just try- g- training a generation of kids, mostly boys, but still a generation of people to create wild incentives for cheating, wild incentives for sport, you know, and also thinking that the way you go through life is just betting on everything, which I-
Liz Hoffman
It’s just, yeah, it’s kind of nihilistic, right? You know, we had, um, we had John Arnold on our show last week, who’s a big philanthropist, kind of famously the youngest billionaire in America, but kind of retired from Wall Street early and, and has like done a lot of philanthropy and research around big kind of, uh, intractable problems, criminal justice, higher education. And he said his, his sort of next big thing is prediction markets. And, and he, he sort of laid out the problem clearly I think where,
Liz Hoffman
you know, as, as a society, we’ve all said, “You know, gambling is, it’s like a little, um, pressure release valve, right? It’s, it’s fine, but we’re gonna do it in a way that, that requires some friction, right?” You can go to-
Jonah Goldberg
Mm-hmm
Liz Hoffman
… Vegas and, and pull the slot machine for twenty-four hours, but you gotta go to Vegas. And you can go get a, a lottery ticket and then wait three days to find out if your number gets called. That, you know, it, it didn’t just start with prediction markets, but, um, really started with legalized sports betting and, you know, the rise of instant scratch-offs and whatever. But that that friction has come out of it, and that it’s just gotten too easy. Um, and it’s, it sort of created this kind of nihilistic casino culture. And anyway, he was really thoughtful, and actually your listeners might, might enjoy.
Jonah Goldberg
I’ve made the point about
Jonah Goldberg
casinos for years. I, I like the world where Atlantic City and Vegas basically were the places you went if you wanted to go gamble, you know, and you did it for a weekend, it was a bachelor party, whatever, and if you really love gambling, you go there more often, but like there’s a cost to it and-
Liz Hoffman
And it was a little corrupt, but it was like self-contained, you know? It was like-
Jonah Goldberg
Yeah
Liz Hoffman
… sort of a little wonderland. You sort of understood. I, I totally agree. Yeah.
Jonah Goldberg
But it was successful and big enough that it prevented real black markets from coming, you know, and that’s sort of how I felt about pot legalization too. It was like I was favor of Colorado’s experiment with it, you know, and I, I thought it was gonna go slower. I thought they were gonna do it better. But instead, it’s now just this omnipresent thing in people’s lives, and I, I, I don’t think the society is better off for the degree of it. I, I, like-
Liz Hoffman
People do smoke a lot of weed on the New York City subway.
Jonah Goldberg
It is amazing. You know, I grew up in New York City, and like I never thought that mixture of humanity plusDespair and claustrophobia plus rat urine.
Liz Hoffman
[laughs]
Jonah Goldberg
I thought, like, you, we could go to the time of the Jetsons, and New York City subways would still smell, give you that sort of Proust’s madeleines, like, oh my gosh, this is-
Liz Hoffman
That, that city perfume, yeah.
Jonah Goldberg
And, and like, they’ve changed… There’s so much weed smoking that it’s like, it’s changed the odor of the New York City subways, which I thought was gonna be the permanent olfactory landmark of my hometown. I, I, I got a, so, I, I, I’m gonna ask you a lot of quick stupid questions now. I like
Jonah Goldberg
the fact that America has, the, the dollar is the world’s reserve currency,
Jonah Goldberg
and I think we benefit from it. I get that China wants to do something about it, but I don’t… People think that China’s gonna repl- it, they’re not gonna have a free-floating currency, I, so I don’t worry about that, and no one else can come really even close. The euro’s not gonna do it. No one’s gonna. So the dollar is safe from the conventional threats to us having a reserve currency. Why the hell, if you like having the reserve currency, are we betting so big on all of these digital dollars, crypto, all of these things which if successful, as successful as the boosters would like them to be, are a threat to the dollar as the reserve currency? Like, I, I, I, I just, I’ve never really understood it. And like, maybe I’m wrong. Maybe that’s not the way to think about it, but that’s, it, it sort of, I always just thought it was weird that the Trump administration, other than for the grift parts of it, you know, the Trump coins and all that, I never understood why they were both strong, you know, dollar as the reserve currency people, and, um, by the way, can we interest you in all of these crypto things?
Liz Hoffman
Well, I actually think there was a little bit of a bait and switch from the Trump administration, which is that, like, came in, like, very bullish on crypto, but actually it all got co-opted by stable coins-
Jonah Goldberg
Mm-hmm
Liz Hoffman
… which people lump in with crypto, but are in fact-
Jonah Goldberg
But are really not
Liz Hoffman
… dollar assets, right? And actually, I think, you know, the Genius Act last year, and there’s another one, the Clarity Act, I think is moving through now, I actually think part of the reason that the Trump administration is so, you know, rolling out the welcome mat for stable coins is that the c- companies that issue them, companies like Tether and Circle, these are, these are digital coins, but they are backed one-for-one or have to be backed one-for-one with US dollars, treasuries, cash, that kind of thing. And actually, I think they like them because they are the marginal buyer of treasuries. Like, I think Tether last year was, like, a larger buyer of new issue treasuries than the Central Bank of Canada was. I think they were the sixth or largest buyer of treasury bonds. And at a time when you say,
Liz Hoffman
you know, the dollar is not going away, but you’ve seen central banks, particularly around the world, as, you know, um, thinking about their reserves, have, have been pulling away from the dollar, have been diversifying the reserves they hold into some other currencies, a lot of it into gold, that, you know, we haven’t seen, like, a treasury auction go totally sideways. And the way it’s set up is that there’s like two dozen banks that are forced to bid. So there will always be a market. But I, I think they actually like some of the stable coins because they are forced buyers of treasuries, that they cement the dollar’s, uh, dominance rather than erode it.
Jonah Goldberg
I hadn’t really thought about that. I mean, I, I, I’ve, I’ve read a lot about the world liberty financial-
Liz Hoffman
Yeah, you gotta-
Jonah Goldberg
… whatever. Uh, I-
Liz Hoffman
… you gotta set the Trump stuff aside. I really, I can’t explain that.
Jonah Goldberg
Yeah.
Liz Hoffman
And I haven’t done deep enough reporting on it.
Jonah Goldberg
So put the crypto question completely aside,
Jonah Goldberg
do you think that we are in danger of,
Jonah Goldberg
of losing r- reserve currency status?
Liz Hoffman
No, because as you said, you know, there’s the taco trade. Trump… There’s the, the TINA trade, which is that there’s no alternative. Uh, as you said, no one trusts the yuan. It’s not a free-floating currency. The euro is both not big enough and really not a unified enough market. It has its currency market, but it is not, this is not a single economy. The yen just, like, can’t do it. So there really just isn’t an alternative, and the vast majority of foreign exchange trade… Like, if you wanna buy something in rubles that is sold in euros, like, that has to go through something. There, like, there’s not a great FX market on those things, and, like, something like eighty-seven percent of the time it goes through the US dollar. So no, but I, you know, I, I’m always reminded that the Dutch guilder was once the reserve currency of the world, and then it was the British pound, and it tends to follow geopolitical dominance. So, you know, you can, you can play the tape forward there.
Jonah Goldberg
Trump likes to see the stock market go up, but he’s terrified of the bond market going crazy, right? It sounds like every now and then it’s nervous-making when we try to issue new bond, you know, sell bonds, but e- eventually they get cleared and all that kind of stuff.
Jonah Goldberg
But all it takes, I mean, again, correct me if I’m wrong, all it takes is it not working one time to cause a major, major freak-out. Do you think that’s likely? Do you, what, what, what would be the circumstances that would precipitate a b- actual bond crisis?
Liz Hoffman
That is, in fact, the nightmare scenario is a, essentially a failed auction of treasury bonds. Like I said, there’s sort of a mechanism set up. There’s like two dozen firms on Wall Street. They’re called primary dealers, and they have to bid. So they could bid, you know, they could say, “Well, we’ll take them, but only at an outrageous price.” There’s some sort of political pressure not to do that. Um, and so there’s sort of release valves baked in. You know, if a treasury auction was coming, you know, to market on a day when something insane happened, they might just pull it. So I, you know, it, it is harder for that to go astronomically wrong than you think. And in fact, there’s been a lot of hand-wringing about demand for US treasuries, but the, the order books have been pretty good, and there’s some technical analysis that suggests it’s probably fine. The concern that I would think about is less on the new issuing side but that you would see… So go back to twenty twenty. Treasuries sold off. People dumped treasuries, and not because they were particularly worried that the US government wouldn’t pay them back, though that is a little bit increasingly a, a fringe concern, but it was because they could sell them. The treasuries are one of the deepest, most liquid markets in the world, and in a, in a true panic, you sell what you can, not what you should. Think about, you know-
Jonah Goldberg
Right
Liz Hoffman
… you go to the pawn shop, and whatever they’ll take is what you sell. And so you might, you might worry about, you know, real kind of-Collision of just terrible news, whatever that might look like. Um, and people just dump US treasuries, and it sets off a little bit of a, a sort of a margin call vortex where, you know, it sort of… It, it tugs some thread in a sweater, um, and there’s a lot of leverage, a lot of mon- borrowed money on what they call the treasury basis trade. It’s not worth getting into here, but it’s sort of a… You kind of… It’s a paired treasury trade that only works if you borrow a lot of money on top of it, and so if that starts to unwind, it can unwind fast.
Jonah Goldberg
Right. Since you brought up twenty twenty, I… And I owe you apology ’cause I did wanna get more to your book, but let’s, let’s, let’s run over there. The book is called Crash Landing, and it’s about how the, the flop sweat panic about what happened to the economy and, and around COVID and all that. And let me ask it this way. When historians look, say, fifty years back on the first quarter century of the twenty-first century, right? Say, economic historians. What are they gonna– ’cause how are they gonna th-talk about COVID, do you think? How are they gonna see it, the pandemic?
Jonah Goldberg
W-was it something that was accelerating existing trends, or did it create new trends, right? It’s very hard to see Trump’s second term as not part of some of the things that were started, started by COVID. But how
Jonah Goldberg
large is the impact of it gonna seem on the economic side? I think on the cultural side, there’s a huge impact, but we don’t need to get into that. Um, um, or is it just gonna get washed out as the economy kind of regresses to the mean for the most part?
Liz Hoffman
I think, maybe this isn’t, you know, the right thing to say if you’re trying to sell books. I actually think it will not be sort of a defining economic event of the first quarter century. You know, to answer your question on, you know, did it really redefine consumer behavior? No. It actually, it pulled forward some things that were already… So here’s an interesting chart. Like, look at the percent of retail that is e-commerce, right? It was sort of going up and up, and then it massively spiked in twenty twenty, twenty twenty-one. And now it actually, it’s back kind of where you would’ve expected it to be on the trend line. Um, that’s somewhat true of, of things like telemedicine, which obviously had a big moment, and now we all think a little bit differently about healthcare. But, like, people are going to the doctor again. You know, uh, similarly with, with, uh, return to work and office. You know, it reset that power dynamic between management and labor for a while, but that was already reversing, and AI is only gonna reverse it more. So actually, I think when you look at a lot of those interesting trend lines, it will be a blip, um-
Jonah Goldberg
Mm-hmm
Liz Hoffman
… but not a very notable one. Though, to your point about the sort of cultural piece and the political piece, that’s obviously intertwined with the economic piece, and I think, like,
Liz Hoffman
you know, one thing that COVID did is it sort of unlocked the kind of inner great man of history that lives inside all CEOs, and there was this big sort of leadership vacuum, and a lot of them stepped into it. I think for very fair reasons, but they kind of… They got in touch with their feelings, and I think the pandemic and go back, you know, the Me Too, Black Lives Matter, that was all a very, like, very potent brew that, you know, pushed, um, the leadership class in a political direction, which to your point did in fact, you know, have a lot to do with the political moment that we’re in now. So, you know, I think, I think the, the actual economics, like, probably not that much. I, I could be missing some things, but I, I don’t fundamentally think so.
Jonah Goldberg
Well, what about supply chains ’cause that was the thing I remember the most. I knew guys in private equity who were like, “All of my companies were just, ‘This is it. We’re done with this crap,’ and we’re changing our supply chain rules to get out, to, to de-China risk their portfolios.” Is that, was that… Did it turn out to be as much of a thing?
Liz Hoffman
Uh, totally a thing, though probably it would’ve been overtaken by the global fracturing we’re in now, and if anything, it probably gave companies that were front-footed a bit of a head start. Right? That China plus one strategy, you know, is now China plus two or not China plus three, like, whatever it is. But I think, you know, it was a bit of a dry run for, like, you know that word again, for resiliency, right? For like, for redundancy. It did kind of rewire supply chains in a way that, you know, probably allowed Trump to get as much, like, literally bang for his buck impact on the global stage as, as his policies have gotten now. So yeah, I don’t know. I think perhaps the politics and, and cultural piece of this will be more lasting than the economics, though they’re, you know, they’re obviously all intertwined. And some of that was going on, you go back to, again, Brexit. I mean, that, that sort of n-n-nativist, hawkish stuff has been going on for a long time. This is not a, a Trump phenomenon.
Jonah Goldberg
Yeah. I mean, the way I often explain it, my own view is that Trump is not… didn’t create a lot of the problems that people associate him with, but he accelerated some. Some of the problems that we had are why he got elected, and then he, in trying to address some of those problems, exacerbated other ones. But, like, it’s, it’s a continuity thing. Like, I, I, I personally think that the,
Jonah Goldberg
um, that historians are gonna look back on the,
Jonah Goldberg
the financial crisis, two thousand and seven, two thousand and eight, and see
Jonah Goldberg
a lot of the following two decades as long tails of that, both in terms of the populist long tail. Like the Tea Parties and Occupy Wall Street, I think, are basically two sides of the same coin, sort of the left-wing populism that hates Wall Street and a right-wing populis-populism that hated Wall Street, and they’re coded differently, and they’re indexed differently, but it’s still kind of the same thing. And-
Liz Hoffman
And they’re always threatening to collide and never do.
Jonah Goldberg
Yeah.
Liz Hoffman
But that, like, that-
Jonah Goldberg
Yeah
Liz Hoffman
… sort of a great populist realignment is always sort of the fever dream of, like, it’s how you get, like, pictures of Lena Khan with Steve Bannon, you know?
Liz Hoffman
But it’s never quite real.
Jonah Goldberg
Yeah. The horseshoe can’t really meet because the actual shock troops of the boat parade people and the patchouli-soaked hippies, they hate each other culturally.
Liz Hoffman
[laughs] Yeah.
Jonah Goldberg
You know, they might agree on the politics or the economics, but, like, they’re just not gonna like each other at the ground level. Um-
Liz Hoffman
They’re not big tent people at the ends, no.
Jonah Goldberg
Yeah, you know. Um, and you know, if you’re someone like me who’s
Jonah Goldberg
pretty pissed off about what’s happened to the right-It’s easier from my end of the horseshoe to meet someone on the center left who’s like, are we really going to get as stupid as those guys? And, um, and it’s a lot easier, but like at the, at the far right end, far, unless it’s like specifically about an issue like Israel, right? Where like they can sound interchangeable. The cultural tribes are just so different. If you’re, if you say you’re a big believer in Jesus Christ as your Lord and Savior, you’re not going to hang out with somebody, even if you agree with them about antitrust, if they’re mocking your faith, right? And that’s probably one of the only reasons we’re safe from a Bane. I don’t mean the
Jonah Goldberg
Mitt Romney company. I mean the comic book character, a Bane-like uprising. All right. So, uh, I’m very tempted just to be really annoying and say, so what stock should I buy? No, uh, but, um.
Liz Hoffman
I do not give financial advice as a guest.
Jonah Goldberg
I know. I know. I just, I just like testing people. Let’s assume that either for actuarial or constitutional reasons, Donald Trump is not going to be president forever. And Democrats
Jonah Goldberg
have, let’s just assume that they have a good shot of winning in 2028, but that is by no means a foregone conclusion that Republicans don’t.
Jonah Goldberg
How much change versus how much continuity do you foresee in terms of like the big economic policies and indicators that we’re seeing right now? Is it going to be a major correction towards normalcy or is it going to be a continued trend towards abnormalcy, albeit with different ideological flavoring?
Liz Hoffman
I think a lot of the policies, and if you strip away some of the noise, a lot of the policies that are being pursued here will probably stay. I mean, I think,
Liz Hoffman
you know, hawkishness on China went, you know, became a pretty bipartisan issue really under Trump one. And that was one thing I would hear a lot from like Wall Street CEOs be like, ah, he was pretty right on China, right? That that became kind of a consensus opinion. I think the need for a stronger industrial policy is pretty bipartisan. And like, yes, the Trump administration like rails against the CHIPS Act and the IRA, but like a lot of that goes to red states. And like, yes, they took the Intel grant and turned it into a share grab for the American people. But like, I don’t, I wouldn’t really expect Democrats to be doing that.
Liz Hoffman
Nor do I think, whatever. I think some of the tactics will change, but I actually think a lot of the strategy is pretty bipartisan. The big question is like, how much do you want to kind of
Liz Hoffman
either rhetorically or
Liz Hoffman
practically pivot on kind of the global order, right? I assume that, you know, maybe some of the tariffs would go away, but like protecting domestic jobs is also pretty popular with liberals. Like, you know, it’s weird where like the party that you voted for used to be that how you felt about the economy dictated what party you voted for. There was a truism in American politics forever. Now the party you voted for dictates how you say you feel about the economy. And so like that sort of feedback loop is a little broken. But I think that a lot of the policies,
Liz Hoffman
you know,
Liz Hoffman
generally America first heavy hand in the
Liz Hoffman
private sector, sort of state capitalism, hawkishness on China will stay. And by the way, the other thing that is just bipartisan is like spending a lot of money, deficits, right? This is not a, you know, this is a lot of people in DC last week when I was down there were kind of waxing nostalgia for early Clinton. But that is just like a feature, not a bug of the system. And, you know, maybe they’ll spend a little less on defense and a little more on social programming. But, you know, from where I sit as a finance and economic reporter, it doesn’t really matter. Like we’re running very high deficits at what is almost certainly likely to be peak employment for like the next hundred years. So got to figure that out.
Jonah Goldberg
And that’s why I use Rosalind Capital. No.
Jonah Goldberg
Anyway.
Jonah Goldberg
Liz Hoffman, thank you very much for doing this. I hope you’ll come back sometime.
Liz Hoffman
Anytime, Jonah. This was fun. A little bit of a bummer, but a lot of fun.
Jonah Goldberg
Yeah. You know, there’s a reason why my podcast is called The Remnant. I’m used to being
Jonah Goldberg
outnumbered and depressed. But thank you again.
Jonah Goldberg
All right. Liz Hoffman has left the studio. And I thought that was a great catch up on all things pecuniary and monetary and economic. And I just want to remind listeners the name of her book was Crash Landing, The Inside Story of How the World’s Biggest Companies Survived an Economy on the Brink. And the name of her podcast put out by our friends at Semaphore is Compound Interest. Check it out. So I generally agree with Liz on a lot of things. I mean, she knows more about all this stuff than I do, obviously. But on that last question about continuity versus change, I don’t think it’s necessarily a good thing. But I think she’s probably right about a lot of macro policy. And a lot of our problems will continue. I think it will seem like a much bigger change because there’ll be less chaos. There’ll be more predictability. And people will,
Jonah Goldberg
that will help with the animal spirits of the economy to a certain extent. But, you know, Biden never gave, never unraveled most of Trump’s tariffs from Trump’s first term. I think
Jonah Goldberg
there are very few Democratic
Jonah Goldberg
presidential hopefuls that would get rid of all of them. But they would probably come up with a more rational, defensible, predictable system. Or they might ask Congress to come up with such a thing, which would be kind of wild. But I just think we live in a more protectionist moment. I don’t necessarily think that’s good policy. I do think getting out of China makes a lot of sense for a lot of reasons. But that’s more of a national security thing than a anti-free market thing or anti-free trade thing. And I think we’re in a industrial policy kind of age. I do not like it. I do not think it’s smart. There are edge cases that have to do with national security where I am more sympathetic. But this stuff about,
Jonah Goldberg
you know, the protectionism and all these things for like steel and, you know, Intel and whatever. I just don’t think the data is there to support, you know, what the administration does. And I think Liz is absolutely right that a lot of this has to do with, you know, the only coherence to it at the highest level is the coherence of nostalgia rather than a serious policy. And that’s a mistake. Anyway, I’m sure people will have lots of comments because, you know, this is one of these topic areas where we have lots of listeners who are vastly more expert than I about the subject matter. I’m not saying there’s always some on every topic I’ve ever discussed because we’ve got great listeners. But there’s just a lot of people who know financial markets and stuff. So I’m sure I asked or did or said stupid things. And Liz was too polite to correct me. But some of our listeners
Jonah Goldberg
will not be. But other than that, thanks for listening. And I will see you next time.
Liz Hoffman
No, you won’t. This is a podcast.
Jonah Goldberg
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