Oh boy. here we go. JP talking again. Uh, we are.

We just had the press conference notes posted from Jpow. If it becomes appropriate to Titan policy. Further, we will not hesitate is what the statement says: Jerome pow will be presenting that in just a moment on a panel. Uh, we will continue to move carefully.

We're going to decide meeting by meeting, what we're going to do. We've already heard a lot of this. This is not a surprise. Uh, let's see, uh, attemped to risk that stronger growth could undermine inflation progress.

This is all at this conference that's getting that's getting started here decades. Um, hear that? All right. number of additional Okay, there we go. Yeah, So so good.

We've got that. so we'll be covering this in just a moment. Uh, but again. I'm going through some of JP's uh uh, testimony that's already been published.

Uh, let's see here. inflation progress. but still a long way to go. Labor market remains tight, but moving into better balance, greater greater shareff progress on inflation ahead may come from typ monetary policy, not just supply side.

Improvement This is the stuff we've heard them talk about before. Again, none of that really surprising. So so very consistent messaging here from Japal. Now, just sort of trying to understand.

hey, when when are we going to get uh, uh or what are we going to get out of the Q&A here. So let's see Fed will begin next. Framework review latter half of 20124 Maybe that's when we'll get flexible average inflation targeting? Who knows. But anyway, let's listen in over here and see what we got.

The event. this panel will, uh, aim to shed some light on the tradeoffs and the challenges that policy makers face today. Oh oops, Oh, stop that. Don't Auto move that, what are you doing? Go.

Oh gosh, Sorry. hold on one second, sound sometimes monary policy. So I'm going to introduce them briefly in the order in which they will speak. We'll start with with first with Jay Powell We're very fortunate to have Jay with us.

Jay is chair of the chairman of the Federal Reserve System since 2018. Arguably many would say the most powerful policy maker in the world. Uh, he served as a member of the Board of Governors since 2012. Uh, prior to the Federal Reserve board, Jay worked in Investment Banking.

He also served as under Secretary of Treasury for domestic Finance in George W Bush, uh, governor of the Bank of Israel since 2018. That is for almost as long as Jayce tenure as a chairman of the FED Before that, Amir was professor of Banking and Finance at the Wharton School of Business at the University of Pennsylvania and he's a world renowned expert in macroeconomics, monetary economics, finance and and financial economics and we're particularly delighted to have Amir with us today. Um Gita Gpat uh requires no introductions I think, especially in these walls. but she is the first Deputy Managing Director of the International Monetary Fund previously Gita had my job as Chief Economist and head of the research department and prior to joining the IMF she was the John Swanstra Professor of International Studies and of Economics at Harvard Universities Uh with uh, a world-class record of research on exchange rates, trade and Investment International Financial Crisis, Monetary Policy Debt Emerging Market Crisis Uh, a very, very long and distinguished list.

And then last but obviously not least, Uh Ken Rogov Ken is Uh, the motivation for this year's annual Research Conference in his honor and we're very happy to have him today tomorrow and currently the Morit Boas books and of course many, many research articles on dead and Financial Crisis. He has written what remains to this day that reference Uh Textbook uh Graduate Textbook in International Macroeconomics with with Ken Rogov in 1996 Um is known for with Mor Upsel in 1996 is known for his pioneering work on exchange rates Central Bank Independence Sovereign Debt Financial Crisis among uh, many Uh other topics and Ken as long ranked among the most cited economists I I checked quickly and I think his Repc ranking which is something uh us for academics or former academics, we we check carefully very often I think his Repc ranking is number 11 which is totally astonishing and his uh Google Scholar count is you know, off the charts astronomical. Um. and for those of you who don't know, Um I have to mention this Ken is also an international chess Grandmaster Now we will start uh with short interventions uh from each of the panels ists for about 10 12 minutes followed by uh, a quick discussion between them and then we will open uh uh for discussion with the audience.

There are mics in the aisles if you at the point which we reached that stage in the panel. If you want to ask a question, please line up behind uh the mics and then you will have a chance to do that I will only ask that uh since our time is counted that you keep your questions brief and you also keep them focused on the topic of the panel which is monetary policy challenges for the global Uh economy. Now with this, let's start with Jay Um believe Jay will talk about the nature of the inflation process in the US and the appropriateness of the monetary policy response. It's up to you Jay thank you very much Pierre Olivier It's uh, it's great to be here, particularly in honor of Ken whom we're we're proud to count as a member of the FED family.

Um, so my assigned topic is uh, Us Monetary Policy in the current Global inflation episode. So I'll begin by briefly addressing the US Outlook and then I'll turn to three broader questions raised by the historic events of the Pandemic era. All right. So to begin.

US Inflation has come down over the past year, but remains well above our 2% Target my colleagues and I are of course, gratified by this progress, but we expect that the process of getting inflation sustainably down to 2% has a long way to go. The labor market remains tight, although improvements in labor Supply and a gradual easing in demand continue to move it into better balance. GDP Growth in the third quarter was quite strong, but like most forecasters, we expect grow growth to moderate in coming quarters. Of course, by refusing to treat climate change us, Thank you very much, Thank you very much Thank you.

Just close The door. Close The door. Who just said that? Did you hear that? Somebody's like just closed the effing door. Was that Jpow? Did Jpow say that did? J What Did what? No, we didn't wait.

Play that back. Just close the door. Close the door was J Listen, Listen. thank you.

Just close the door. Close the door. No way. dude.

J's a G. Let's go. Oh My God. Dude.

No way. Okay, well we're gonna wait for this. Um oh my. God We gota we need to like Clip that.

That's hilarious. Hold on. let's let's clip that really quick. because that's that's so funny.

Hold on. Where is it? We're waiting for us obviously to come back here. Uh, let's Replay that while we wait for this event to happen. So okay, as Jpow is speaking about inflation, climate change, protesters start screaming, listen to this And then listen to Jpow say Close the freaking door like a G casters.

We expect grow growth to moderate in coming quarters, of course, refusing to treat climate change like thank you very much. Thank you very much Thank you. Just close the door. Close The door.

Oh wow. So in. So now we're sitting here waiting for Donon Powell to come back and continue his speech. but I have to say that was crazy just hearing Jow total top G mode just Clos the door Mike Hot Mic moment.

Yikes. Okay, well let's wait for this event to continue here. This is crazy though. Uh I mean this happened the last time as well.

uh where you know people were screaming and and the last time Jerome Powell was going to speak uh, there was a delay like this. We're waiting for the event to come back, but obviously it's disrupted now so let's stand by here. Okay H All right waiting. Looks like I'm trying to get an update on when he's going to come back back on should be within the next few minutes.

This raises the questions about Fed Security. Yep, uh, yep. So they're saying the reporters who are in the room right now are saying that someone on the feed was clearly extremely upset calling for the door to be closed. Yeah, it was a little more than that.

Oh rip uh I'm gonna tweet that clip if if y'all want to see that uh or or to uh retweet that. it's going to be up in about I Don't know 30 seconds here. drum Powell Just responded to climate protesters with just close the King Door on hot mic. Wow.

Okay, it is. It's posted. there you go. We're still waiting for the event to continue here.

Uh, okay. as noted last time, this raises the questions about fed security microphones. Picked up the exchange and it's uh, clear there was frustration. Someone on the feed was extremely upset.

Issues are important and they're appropriately addressed. But as I mentioned, we'll try to keep the questions on the topic for today. So monetary policy challenges for the global economy. Thank you.

Jesus Where's Jal And yeah, yeah, oh I don't hold on, let me check. let me check. We might have to go too. might have to I The hot mic here.

dude. Jpw bailed I think he's like screw you guys. the security sucks. Okay, there up.

Not at all not. don't worry about it. Okay, where was I Inflation was coming down. The labor market remains tight, although improvements uh in labor Supply and a gradual easing in demand continue to move it into better balance.

GDP Growth in the third quarter was quite strong, but like most forecasters, we do expect growth to moderate in coming quarters. Of course, that remains to be seen, and we are attentive to the risk that stronger growth could undermine further progress in restoring balance to the labor market and in bringing inflation down, which could warrant a response from monetary policy. The Fomc is committed to achieving a stance of monetary policy that is sufficiently restrictive to bring inflation down to 2% over time. We are not confident that we've achieved such a stance.

We know that ongoing progress toward our 2% goal is not assured. Inflation has given us a few head fakes along the way. If it becomes appropriate to tighten policy further, we will not hesitate to do so. We will continue to move carefully, however, allowing us to address both the risk of being misled by a few good months of data and the risk of overtightening.

We're making decisions, meeting by meeting based on the totality of the incoming data and their implications for the outlook for economic activity, inflation, and inflation as well as the balance of risks as we determine the extent of additional policy firming that may be appropriate to return inflation to 2% over time and keep added until the job is done. So with that, let me turn to the three questions uh, that I posed that have Arisen from the recting but still elevated inflation we're experiencing today. The first question is with the benefit of two and a half years to look back what we can say about the initial causes and ongoing policy: Implement Implement Implications of the current inflation after running below our 2% Target over the first year of the pandemic core Pce inflation Rose Sharply in March 21 Economic forecasters generally did not see this coming, as shown by the February 21 Survey of professional Forecasters, which showed core Pce running at or below Target over the subsequent three years. So the real-time policy questions for policy makers were what caused the high inflation and how policy should react.

And at the outset, many forecasters and analysts, including Fomc participants viewed the sudden upturn in inflation as mostly a function of pandemic related shifts in the composition of demand A disruption of Supply chains and a sharp decline in labor. Supply The resulting supply and demand imbalances led to large increases in the prices of a range of items most directly affected by the pandemic. especially. Goods In this view, as the pandemic abated, our Dynamic and flexible economy was likely to adapt fairly quickly.

Supply disruptions and shortages would diminish labor Supply Would Reb Found aided by the arrival of vaccines and the reopening of schools, elevated demand for goods would shift back to Services Inflation would ease reasonably quickly without the need for significant policy response. Indeed, although monthly Core Pce inflation spiked in March and April of 21 beginning in May, it declined for five consecutive months, providing some support for this view. But of course, in the fourth quarter of 21, the data clearly changed amid waves of new Co 19 variants, with only gradual process in restoring Global Supply chains and relatively few workers rejoining the labor force. That lack of progress combined with very strong demand from households contributed to a tight economy and a historically tight labor market and more persistent High inflation.

The committee signaled a change in our policy approach and financial conditions began to tighten. Of course, a new shock arrived in February of 22 when Russia invaded Ukraine driving up prices of energy and other commodity prices. By the time we lifted off in March, it was clear that bringing down inflation would depend both on the unwinding of the unprecedented pandemic related demand and supply distortions and on our tightening of monetary policy which would slow the growth of aggregate demand. Allow Supply time to catch up.

To today, these two processes are working together to bring inflation down. The Fomc has raised the Federal Funds rate target by five and a quarter percentage points, and we've reduced our security Holdings by more than a trillion dollarss monetary policy is in restrictive territory and putting downward pressure on demand and inflation. The unwinding of pandemic related supply and demand distortions is playing an important role in the decline in inflation. For example, wage growth has steadily Fallen since mid 2022 by most measures, despite continued robust job gains reflecting a Resurgence in labor Supply thanks both to higher labor force participation and a return of immigration to pre-pandemic levels.

While the broader Supply recovery continues, it's not clear how much more will be achieved by additional supply side improvements going forward. It may be that a greater share of the progress in reducing inflation will have to come from tight monetary policy restraining the growth growth of aggregate demand. Turning then to my second question, for many years, it has generally been thought that monetary policy should limit its response to or look through Supply shocks to the extent that they are expected to be temporary and idiosyncratic. Many argue as well that in the future Supply disruptions are likely to be more frequent or more persistent than in the decades just before the pandemic.

A second question then is what we've learned about this standard looking through approach. the idea that the response to the inflationary effects of Supply shocks should be attenuated arises in part from the trade-off presented by those shocks. Shocks: Supply shocks tend to move prices and employment in opposite directions, whereas monetary policy pushes each in the same direction. Therefore, the response of monetary policy to higher prices stemming from an adverse Supply shock should be attenuated because it would otherwise amplify The Unwanted decline in employment.

In addition, Supply shocks have most frequently, most frequently come from the volatile food and energy categories, and they've passed through quickly. While food and energy prices critically affect the budgets of households and businesses, the policy tools of central banks work more slowly than commodity markets move, so responding aggressively to quickly passing price increases could exacerbate macroeconomic volatility without supporting price stability. Our experience since 2020 highlights some limits of this thinking. To begin with, it can be challenging to disentangle supply shocks from demand shocks in real time, and also to determine how long either will persist, particularly in the extraordinary circumstances of the past three years.

Supply Shocks that have a persistent effect on potential output could call for restrictive policy to better align aggregate demand with the suppressed level of aggregate supply. The sequence of shocks to Global Supply chains experienced from 2020 to 22 suppressed output for a considerable time and actually may have persistently altered Global Supply Dynamics Such a sequence calls on policy makers to use policy restraint to limit inflationary effects. Policy restraint in this case is also good. Risk management.

Supply Shocks that drive inflation high enough for long enough can affect the longer term inflation expectations of households and businesses. Monetary policy must forthrightly address any risks of a potential deaner of inflation expectations. as well anchored expectations help bring inflation back to our Target The sharp policy tightening during 2022 likely contributed to keeping inflation expect ations well anchored. My third question then is the level where interest rates will settle once the effects of the Pandemic are truly behind us.

By 2019, the general level of nominal interest rates had declined steadily over several decades. As the pandemic arrived, many advanced economies had below Target inflation and low or mildly negative rates. Raising difficult questions about the efficacy of interest rate policy when constrained by the effect of Lower Bound or the Elb as we call it. Over two decades, an extensive literature had identified a number of possible changes to the widely used inflation targeting regime, including negative policy rates, nominal income targeting, and various forms of makeup strategies under which persistent shortfalls in inflation would be followed by a period of inflation running mod moderately above 2% Today, inflation and policy rates are elevated, and the effec of Lower Bound is not currently relevant for our policy decisions.

but it's far too soon to say whether the monetary policy challenges of the Elb will ultimately turn out to be a thing of the past. The prolonged proximity of interest rates to the Elb was at the heart of the Monetary Policy review and the changes we made to our framework in 2020. We will begin our next five-year review in the latter half of 2024 and announce the results about a year later. Among the questions we will consider is the degree to which the structural features of the economy that led to low interest rates in the pre-pandemic period will persist.

With time, we will continue to learn from the experience of the past few years and what implications it may hold for monetary policy. These are just just three of the many questions raised by these challenging times. And of course, we're very far from a complete understanding of the answers. Again, it's great to be here today and I look forward to our conversation.

Thank you! He seems a little shaken honestly. I think he's like pissed, shell shocked at this second time now and I think we're really off to a excellent start with with your remarks. Let me now turn to Amir Um Amir Um Israel is a small open economy faces very specific challenges like the US and many other countries. It's seen an increase in inflation in recent years and Bank of Israel has been uh acting on it.

In addition, like other small open economies, it faces Potential spillovers from monetary policy decisions taken elsewhere by Major central banks with a potential impact on on currency and and capital flows. and we'd love to hear views. so Amir Floor is yours all right. First, it's a pleasure to be here in a conference in honor of Ken Rof.

We all cherish and follow his distinguished contribution in Academia and and practice. Um, sort of in a sharp turn as we're all aware uh Israel is currently at a war following the October 7th in human brutal attack by the terrorist organization of Hamas. This is crucial time for Israel's security and we thank all those who support us. Our hearts are with the innocent victims of the war and our hope is for it to end with the safe return of hostages and with peace and security.

And now I'm going to turn out I want to turn now to address the issues and questions presented. Uh For this session, an important question is to what extent can a small open economy like Israel or for that matter any Soe conduct its monetary policy independently or should it rather follow the steps of the major economies? Another question is what are the spillovers from the policy taken by the major Econ economies to small open economies and how do those impact local conditions? The answer to these questions depends on the development of the economy, its specific areas of exposure to the global economy, and the particular. Okay, just to give you a heads up, this is a Uh three threers panel. Basically, you have uh, the IMF first, Deputy managing director, you've got Jerome Powell and then you've got Ken Rogoff and then now you've got the governor of the Bank of Israel.

Okay, so four panelists technically in total? Uh, this is a panel that is expected to be a 2 to 3:30 PM event schedule. We're at 2:30 right now, so the panel goes on for another hour here and there is expected to be a Q&A segment with Jpow, so stay tuned for that. Uh, for now we we Can you know, listen to some of the Bank of Israel here and and maybe see see how quickly these go so we can get to Q&A Monetary policy was generally similar in many countries because the initial Health shocks as well as many supply side difficulties were similar. Also, we benefited to some extent or from the common monetary framework such as inflation targeting, and that meant that monetary policy in different economies was predicted to act in a similar manner.

Having said that, the differential Health shock and related steps, fiscal policy differences, and exposure to supply side effects and commodity prices led to somewhat different policies, consequent inflation, and activity outcomes. Consequently, there was more heterogeneity in monetary policy exit in Co than upon its entry Israel Was fortunate. While while Israel talks should we listen to Uh, the Elon pod that came outch sector which actually benefited from The increased dependency on remote work, these circumstances led to a wedge between Global monetary policy and the required domestic monetary policy. you know I Kind of feel bad because I do think that most people aren't going to really listen to uh, anybody but Jpow here.

So I think we'll we'll wait for the Q&A although I wonder when the Q&A is going to begin. we'll we'll come back to the Q&A uh the let's go jump on over and let's uh, let's start reacting to uh podcast here and uh, here we go. So, but it's two hours long. How are we G to segment this? Well, just do it.

and oh okay, I'll change the title really quick Jerome Powell speaks live with Q&A and uh Elon Musk pod viewing there. How about that? We'll do that. Okay, all right, give me one second, we'll get started and then we will keep an eye on when they're going to be done. Okay, so let's listen to this and I'll keep an eye on when they are done.

Okay, so let's listen to this. Q Oh yeah, it would help if I didn't have both audio feeds going at once. I would fix. All right.

So Elon's new pod here dropped comes right after Joe Rogan's so let's listen to this a little bit while we wait. All right. I thought you were going to finish it. It's one of the greatest themes in all film history.

Yeah, that's great. So I was just thinking about the Roman Empire as one does. There's that whole meme. uh, where guys about the Roman Empire At least on today and half the population is confused whether it's true or not.

But more seriously, thinking about the wars going on in the world today. and as you know, uh, war and military conquest has been a big part of uh Roman society and culture and it I think has been a big part of most Empires and dynasties throughout human history. So yeah, they usually uh, came as a result of Conquest I Mean there's some like the Austra Hungarian Empire where there was just a lot of sort of clever marriages. Um, but fundamentally, there's an engine of conquest and they celebrate excellence in Warfare Many of the leaders were excellent generals.

yeah, that kind of thing. so big picture. Question: Grock approved I Asked: This is a good question to ask K Tested Grock approved. Uh, at least on fun mode.

Uh, uh, to what degree do you think war is part of human nature versus a consequence of, uh, how human societies are structured I asked this as you have somehow controversially been a proponent of peace I I'm generally proponent of peace I mean ignorance is perhaps in my view, the Real Enemy to be countered. That's the real hard part. Not, you know, fighting other humans. Um, but all.

All Creatures fight I mean the the jungle is a you look at the people think of of this nature as perhaps some sort of peaceful thing, but in fact it is not. There's some quite funny W woodog thing where he's like in the jungle. Like saying that it's like basically just murder and death in every direction. I Mean the plants and animals in the jungle are constantly trying to killing each other every single day, every minute.

So it's not like, uh, you know we're unusual in that respect. Well, this there's a relevant we're going to hop around a little bit. They do the time stamps on it. So war in human Nature I Do want to hear because Elon didn't talk about the Israel Hamas War which is where we're going to jump to.

So we're gonna hop around a little bit and we'll add some commentary. Let's listen to what they say about Israel and Hamas So like I said somehow controversially, you've been an A proponent of Peace on on Twitter on X Yeah so let me ask you about the war is going on today and to see what the path to peace could be. How do you hope the current war in Israel and Gaza comes to an end? Uh what path do you see that can minimize human suffering in the long term part of the world? Well I think that that part of the world is is definitely like if you look up the there is no easy answer in the dictionary it'll be that like the picture of uh the Middle East um in Israel Especially so there is no easy answer um what my This strictly my opinion of you know is that uh, the the goal of Hamas was to provoke an overreaction from Israel Um, they obviously did not expect to uh you know, have a military Victory um but they they expect they really wanted to commit the worst atrocities that they could in order to provoke the the most aggressive response possible from Israel Um and then leverage that aggressive response to um rally Muslims worldwide uh for the cause of Gaza and Palestine which they have succeeded in doing. Um, so the the the counterintuitive thing here I think the the thing that I think should be done even though it it's very difficult I I Do want to say quick I think Elon spot on about this I mean Hamas has succeeded in in accelerating that sort of hate bucket so to speak uh of of uh, whether it's anti-jew or anti-muslim on both sides, the tensions have flared substantially because of this.

uh, is that um I I would recommend that Israel engag In the most cons: conspicuous acts of kindness possible. every everything that is the actual thing that would th the go ofas. So in some sense, the degree that makes sense in geopolitics. turn the other cheek implemented.

It's not exactly turn the other cheek. Um, because I do think that there's um, you know I think it is appropriate for Israel to find the Hamas members and you know, um, either either kill them or incarcerate them. um like something Something has to be done because they're just going to keep keep keep coming Otherwise, um, but true. Uh, in addition to that, they need to do whatever they can.

Um, there's some talk of establishing for example, a Mobile hospital I'd recommend doing that. Um, just making sure that uh, you know there's food, water, uh, medical Necessities um and and just be over the top about it and be very transparent so it's so that it can't You can't claim it's a trick like just put wave cam on the thing you know all 247 deploy acts of kindness. Yeah, yeah, conspicuous acts of kindness. That that with that are unequivocal.

Meaning they can't be somehow becauseas will then their response will be oh it's a trick. Therefore you have to counter how how is it not a trick? This ultimately fights the broader force of hatred in the in the region. Yes and I'm not sure who said ital saying but an eye for the for an eye makes everyone blind. Yeah now that neck of the woods they really Gandhi quote that's a big famous One believe in the whole ey for ey thing.

um but I you really have. If if you're not going to just outright commit genocide like against an entire people which obviously would not be acceptable to to to really shouldn't be acceptable to anyone um then you're you're going to leave basically a lot of people alive who subsequently you know hate Israel So really the question is like how for for every Hamas member that that you kill, how many did you create Mhm and if you create more than you killed you've not succeeded. That's the you know the real situation there. um and it's safe to say that if you know, um if you know if if you kill somebody's child in Gaza you you you've made at least a few uh Hamas members who will die just just to kill an Israeli that's the situation.

Such a good point that I think is understated. is that like when somebody loses a child and I mean knock on wood? No, nobody wants to be in that situation, right? But when somebody loses a child, you potentially be you. You no matter who you are, you become radicalized because there's so much anger. And so what? Elon's saying here is totally right.

You create substantially more hate and anger 50% of the Palestinian population's children. well at least in Gaza Strip Uh, every bomb that goes off is 15 Dead Terrible. Let's keep going here. at least 15.

That's just the average right? So, But but I mean this is one of the most contentious subjects one could possibly discuss. But but I I Think if if the if the go is some sort of long-term pieace one has to be, look at this from standpoint of over time. Are there more or fewer um, terrorists being created? Let me just uh. Linger on war.

Yeah, well. War It was safe to say war is always existed and always will exist. Always will exist, always has always has existed and always will exist. I Hope not.

You think it. always, always there will always be. War Wow, this question of just how much war and and um, you know what? you know, there's this. There's sort of the scope and scale of War But to imagine that there would not be any war in the future I think would be very unlikely outcome.

I Think This is such an interesting argument that this idea that there will always be War Uh, well hold on one sec. it looks like we might be going to Q&A I'm not sure if we're going to another presentation or if we're going to Q&A Let's listen quickly. Yeah, the question in front of us at the font is you know to think about the challenges for Central Central Banks and whether central banks have the appropriate toolkit at the current juncture. and I think everyone will be very grateful to hear your views.

Ga, uh, we have another presentation. Okay, so we'll come back when we get into again the Q&A portion and in the meantime we will enjoy listening to some more E and we'll bounce back and forth. So that way we're ready when the Q&A starts series. There's war even there.

Yes, it's giant. War The post book starts off with a gigantic Galactic War where trillions die trillions. But it still nevertheless protects these pockets of of flourishing. Some somehow you can have Galactic war and still have pockets of flourishing.

Yeah, I mean it's I. Guess if we are able to one day expand to, you know, full, the Galaxy or whatever, there will be a galactic War at some point. Ah, the scale I mean the scale of War has been increasing, increasing increasing. It's like a race between the scale of suffering and the scale of flourishing.

Yes, a lot of people seem to be using this tragedy to beat the drums of war and feed the military Industrial complex. Do you worry about this? The the people who are rooting for escalation and how can it be stopped? This one of things that does concern me. So so politically appropriate right now to ask the question hey, like is it possible that people like Nikki Haley or DeSantis calling for essentially expanding support for Uh Israel um Ukraine Taiwan More weapons, More weapons More weapons. Some people argue.

Okay, have they been bought out by the military-industrial complex? Let's listen to the reply here is that there are very few people alive today who actually V really understand the horrors of War at least in the US I mean obviously the people in on the front lines in Ukraine and Russia who understand just how terrible war is. Um, but how many people in the west understand it? Um, you my grandfather was in World War II uh, he was severely traumatized. um I mean he was there I think in for almost six years in the yeah in East North Africa and Italy uh, all his friends were killed uh in front of him and uh, he would have died too. um except they randomly gave some I guess IQ test or something and uh, he scored very high.

Um now he was not an officer, he was a I think a Corporal or Sergeant or something like that. um because he didn't finish High School Um, he had to drop out of high school because his his his dad died and he had to work to support his um siblings. um so because he didn't grate high school he was not eligible for the officer Corp um so you know he kind of got put into the cannon fighter category basically. um but then randomly they gave him this test.

he was transferred to British intelligence in London that's where he met my grandmother. um but uh he he had PTSD next level like next level I mean just didn't talk, just didn't talk and if you tried talking to him he'd just tell you to shut up and he woron a bunch of medals. never never ragged about it once. not even they hinted nothing I like found out about it because I his military records are online.

that's a how I know So he would say like no, no way in hell do you want to do you want to do that again but how many people? um now he he obviously now he died you know, 20 years ago or longer? actually 30 years ago. um how many people are alive that remember World War II not many and the same perhaps applies to the threat of nuclear war. Yeah. I mean there are enough nuclear bombs pointed at United States to make the rubel the radioactive rubel bounce many times.

There's two major Wars going on right now, so you talked about the threat of AGI quite a bit. But now. as we sit here with the intensity of conflict going on, do you worry about nuclear war? The possibility of nuclear artificial general intelligence? War Um, it is a civilizational threat. Um, right now I could be wrong, but I think the the current probability of nuclear war is quite low.

Um, but there are a lot of nukes pointed at us. So, and we have a lot of nukes pointed at other people. Still, there was the principle of mutually assured destruction. and I think Elon has a good point here that the odds are probably relatively low.

You get a lot of saber rattling from like Iran or North Korea Uh, but you know they can't get their Rockets up. and then of course you have Russia that realizes they' just be deleted if there was any kind of, uh, actual nuclear provocation. So it's it's not worth it when America is so ridiculously powerful. But uh yeah, he's not wrong there.

Nobody's put their uh, their guns away, the missiles are still in the silos, and uh, the leaders don't seem to be the ones with the nukes talking to each other. No, there are Wars which are tragic and difficult on a on a local basis. And then there are Wars which are civilization ending or has that potential? Obviously Global th nuclear warfare has high potential to end civilization. perhaps permanently, but certainly you know to severely, uh, wound and and perhaps uh, set back uh, human progress by, you know, to the Stone Age or something? I don't know.

Pretty bad. Um, probably scientists and Engineers won't be super popular after that as well. They're like, you got to S to this mess. So generally I Think we.

We obviously want to prioritize civilizational risk over things that are, um, painful and tragic on on a local level, but not civilizational. How do you hope the war in Ukraine comes to an end? And what's the path once again to minimizing human suffering there? Uh, well. I Think that what? what is likely to happen? Uh, which is really pretty much the the way it is. Is that, um, something very close to the lines will be how a ceasefire or truce happens.

But you know you just have a situation right now where whoever goes on the offensive, um, will suffer casualties at several times the rate of whoever's on the defense. Um, because you've got uh, defense and death. You got minefields, uh, trenches, anti-tank defenses. Um, nobody has air superiority.

um cu the the the anti-aircraft missiles are really far better than the the aircraft. like they far more of them. Um, and so nether side has air superiority. um.

tanks? basically death dfts? Um, just slow moving and they're not immune to anti-tank weapons. So you you really just have longrange artillery? Um, and uh, infantry trenches? It's World War One all over again. Wow with drones. Yeah thr old Dron Some some drones there? Um, what a crazy reference that this is a return to.

World War I with drones dropping grenades? Basically, that's crazy. What a wild reference. Trench warfare which makes the longrange artillery just that much more accurate and better and so more efficient. murdering people on both sides.

Yeah, so it's who. who. Whoever is, you don't? You don't? You don't want want to be trying to advance from either side because the probability of dying is incredibly. High Um So in order to overcome Uh defense and depth trenches and minefields, you really need a significant local superiority numbers.

Um, ideally combined arms where where you you do a fast attack with aircraft, a concentrated number of Tanks Um, and a lot of people. That's the only way you're going to punch through a line and then you're going to punch through and and then not have reinforcements just kick you right out again. I mean I I Really recommend people read: uh World War I Warfare in detail That's rough. Um I mean the sheer number of people that died there was mindboggling and it's almost impossible to.

um, imagine the end of it that doesn't look like almost exactly like the beginning in terms of what land belongs to who and so on, but on the other side of a lot of human suffering, death, and destruction of infrastructure. Yes, the thing that the reason I I you know proposed a a some sort of Tru or or pece a year ago was because I predicted pretty much exactly what would would happen. Uh, which is a lot of people dying for basically almost no changes in land. Um, and this the the loss of the The flower of Ukrainian and Russian Youth And we should have some sympathy for the the Russian boys as well as the Ukrainian boys because they Russian boys didn't didn't ask to be on their front line.

They have to be so. um, there's a lot of sons not not come back to their parents, you know. And and I think most of them don't don't really have. They don't hate the other side, you know.

Sort of like is this saying about like this say comes from World War I It's like young boys who don't know each other, killing each other on behalf of old men that do know each other. The hell's the point of that? This is something that Elon has argued many times in podcasts before that that you're you're really destroying the younger generation here and I think this is eloquently put when he says hey, you're you're fighting an old person's mostly an Old Man's Battle and uh, most people don't hate each other I agree with him. I Think you know 80 plus percent of humans, maybe hopefully optimistically, 90 plus percent of people don't hate each other. Everybody just you know, wants to build their own success and and enjoy life right? Sad.

So Vladimir Zilinski said that he's not or has said in the past he's not interested in talking to Putin directly. Do you think he should? Yes, sit down manto man leader to leader and negotiate peace? look I think I would just recommend. Do not send the flower of Ukrainian youth to be to die uh, in trenches. Uh, whether he talks to Putin or not, just don't do that.

Um, whoever it goes on the offensive will lose massive numbers of people. um, and history will not look kindly upon them. You' Spoken honestly about the possibility of war between us and China in the long term, if no diplomatic solution is found, for example, on the question of Taiwan and one China policy right, how do we avoid the trajectory where these two superpowers? Clash Well, it's it's worth reading that book on the the difficult to pronounce thus trap I believe it's called I love war history I like inside out and backwards. Um, there's hardly a battle I haven't read read about and and trying to figure out like what what really was the cause of victory in any particular case as opposed to what one side or another claimed for the reason both the Victory and what sparked the war.

And yeah, yeah, the whole thing. Yeah, so that Athens and Sparta is classic case. The thing about the Greeks they really wrote down a lot of stuff they loved writing. Um you know there are lots of interesting things that happened in many parts of the world, but they people didn't write down so we don't know what happened or they didn't really write with in detail they just would say like we went we had a battle and we won and like what can you add a bit more? um the the Greeks.

They really wrote a lot. They're very articulate on they just love writing so and we have a bunch of that writing that's preserved So we know what led up to the pelian war between um the Spartan and Athenian Alliance um and uh we we know that they they were quite. they saw it coming, Ian, the Spartans and right. They also weren't very for opposed by their n uh I think we're potentially getting to Q&A I'm not sure we're going to check in just a moment with JP Uh, do keep in mind just to add some context here.

Thusi trap is basically this idea that when a RI in power challenges a new uh or or an existing power, the most likely outcome is war. That's essentially what Elon said, just going a little bit deeper. that rather than War being the exception, War becomes the norm in uh, any kind of challenging environment where a rising power wants to take down an established one. Uh, and this is this is you know you could think even more recently to think about the American Revolution versus uh.

the uh. The you know the English uh, the British are coming. It's It's very interesting because eventually you have War as we did I think War of 1812. It wasn't just the Revolutionary Wars the War of 1812.

so War becomes a norm. Uh, until until there's some kind of new equilibrium. and then America became the dominant superpower. And so Elon Here is making the argument that we could be trending to war with China the more this challenge between China and America continues.

but it's also unclear is China truly challenging the United States And of course, in many regards, they are artificial intelligence, chip manufacturing, uh, raw materials sanctions. So we'll see. All right, let's listen in for a moment here just to see what we're going to get from Rogol and then we'll go back to Elon Co shifts in US policy from one president to the next. Uh.

and the various implications of that uh, the uh pandemic? Uh. war in Ukraine Now war in the Middle East Uh and uh. this really uh, fragmentation of globalization uh is really something. uh, extraordinary and is a very difficult period I Think that has implications for a lot of things for policy for macroeconomics.

However, before I get into that I I want say I can think of there is sort of one silver lining and I almost hesitate to say it because if I'm identifying something the IMF seems to have done right, then it may immediately go wrong. Okay, I'm gonna pull off of this and what I'm going to do is I'm gonna give you a heads up if uh, you know what he says I've got a live feed going of what what Rog off says here. Let's keep listening to Elon while we wait for Q&A Q&A is supposed to end in 35 minutes and it hasn't even started yet. So hopefully Rogov keeps it short here.

but let's keep going with uh Elon for the time being and I'll give you updates on what Rogoff says uh as he goes through it and I'll keep an eye on it as well. So jumping into Elon they did right, but they weren't very, they were t uh but the the Athenians and the other Greeks wrot wrote a line and they were like um and spot was really kind of like the leader of of Greece Um, but but Athens grew stronger than stronger with each passing year and um, and everyone's like, well, that's inevitable that there's going to be a clash between Athens and Barta Uh, well how do we avoid that? And they couldn't? They couldn't They actually they saw it coming and they still could not avoid it. So you know at some point if there's if if one, uh, group, one civilization or or country or whatever um exceeds another. sort of like, if you know the United States has been the biggest kid on the Block for since I think around 1890 from an economic standpoint.

So the United States has been the economic most powerful economic engine in the world longer than anyone's been alive. Um, and the foundation of war is economics. So now we have situation in the case of China where the Um the economy is likely to be two, perhaps three times larger than that of the US. So imagine you're the biggest kid on the Block for as long as anyone can remember and suddenly a kid comes along.

He's twice your size. So we see it coming. Yeah, how's it possible to stop? Is there some? Let me throw something out there. Just intermixing of cultures understanding.

There does seem to be a giant cultural Gap in understanding of each other. And you're an interesting case study because you are an American. Obviously, you've done a lot of, uh, incredible manufactur here in the United States. but you also work with China I've spent a lot of time in China and met with the leadership many times.

Maybe a good question to ask is what are some things about China that people don't understand? positive, just in the culture. What's some interesting things that you've learned about the Chinese work? Well, uh, the the sheer number of really smart, hardworking people in China is, um, let's go incredible. Uh, there are really You say? like how many smart hardworking people are there in China There's far more of them there than there are here I think in my in my opinion, Wow. Um, the uh.

and they've got a lot of energy. So I mean the architecture in China that's in recent years is far more impressive than the US I mean the the train stations, the buildings, the highspeed rail, everything. It's um, really far more impressive than what we have in the US I mean I recommend somebody just go to Shanghai and Beijing look at the buildings and go to you. take the train from Beijing to Shion where you have the Terracotta Warriors Um China's got incredible history, very long history, and um, you know I think arguably the in terms of the use of language from from a written standpoint.

Um, sort of one of one of the oldest Perhaps Perhaps the oldest written language and in then China people did write things down. So um now China Um, historically has always been with rare exception been internally focused. Um, they've not been acquisitive. Uh, they've they' fought each other there.

been many, many. Civil Wars um in the Three Kingdoms War I believe they lost about 70% of the population. So so the they've had brutal internal Wars like civil wars that make the US Civil War look small by comparison. Um, so I think it's important to appreciate that China is not monolithic.

Um, sort of think of like China is a sort of one entity off one mind and this is definitely not the case. Um, from what I've seen and I think it's it's good to remember that like not everybody in China is part of the Chinese Communist party, right? That's just the leadership now. And so I think that's a really good reference. Actually, to think about China as not just the CCP Good point: Most people who understand China would agree.

People in China think about China 10 times more when they think about anything outside of China. Quick stat: The CCP has 98 million members. That sounds like a lot of people, right? But they have 1,400 million people living in China So that means 6.7% of people are part of the CCP Interesting, So it's like 90% of their consideration is you know, are is is innal? Well, isn't that a really positive thing when you're talking about the collaboration and a future peace between superpowers when you're inward facing. which is like focusing on improving yourself versus focusing on yeah, uh.

Quote: unquote, improving others through military might. The good news: The history of China suggests that China is not inquisitive. meaning they're not going to go out and invade a whole bunch of countries. Um, now they do feel very strongly, you know.

So that's that's good. I Mean because a lot of lot of very countries have been inquisitive? Um, the US is one of the also one of the rare cases that has not been inquisitive like after World War II. The Us could have basically taken over the world and any country like we got nukes, nobody else got nukes. We don't even have to lose soldiers.

Uh, which country do you want? and the United States could have taken over everything. Oh, at will. and it didn't. Um, the United States actually helped rebuild countries.

so it helped rebuild Europe You it helped rebuild Japan Um, this is very unusual behavior, almost unprecedented. Um, you know the US did conspicuous acts of kindness like the Berlin airlift. you know, Um. and and I Think you know it's always like, well, America's done bad things well.

of course America's done bad things. but one needs to look at the the whole track record. Um, and and just generally you know one one sort of test would be how do you treat your prisoners of war? Or let's say um, you know, no offense to the Russians but let's say you're in Germany. It's 1945.

You got the Russian army coming on one side, you got the French British and American armies coming on the other side. Who would you like to be to surrender to? Like no country is like morally perfect. but I recommend. Uh, being a P with the Americans that would be my choice very strongly.

in the full menu of P Much so. and in fact, B Bon Brown Um, yeah. took you know, smart guy. uh was like we've got to be captured by the Americans yeah and uh, in fact the SS was I'm gonna move forward a little bit.

Uh, we're waiting for JP Pal's comments. Jpow comments start soon. I'm going to jump to the AI segment I so far I really do like uh Elon's talk about China uh Just In Fairness I You know you go watch it over at The Lex pod in full I'm going to add my commentary in the sections I think are useful, but stay tuned because we have 25 minutes left in the IMF uh event which is going on right now I'm just watching it live right now on this other screen waiting for Jpow to come out. so we should see Q&A within the next five minutes here.

So let's listen to AI Groo for a bit to escape. Briefly the darkness was some incredible engineering work. Uh, Xai just released Grock AI assistant that I've gotten a chance to play with. It's uh, it's amazing on many levels.

First of all, it's amazing that a relatively small team in a relatively short amount of time was able to develop this close to state-of-the-art system. Uh, another uh, incredible thing is there's a regular moat and there's a fun mode. Yeah, I guess I'm to blame for that one I Wish First of all I wish everything in life had a fun mode. Yeah! I there's something compelling Beyond Just fun about the fun mode interacting with a large language model.

I'm not sure exactly what it is because I only had a little bit of time to play with it, but it just makes it more interesting, more vibrant to interact with the system. Yeah, uh, absolutely. I Um, our our AI Gro is modeled after the Hedgehog is gu to the Galaxy uh which is one of my favorite books. Uh, which is It's a book on philosophy disguised as a book on humor.

Um, and um I would say that is that forms the basis of My Philosophy uh which is that we don't know the meaning of life. but the more we can expand the scope and scale of Consciousness digital and biological, the more we are able to understand what questions to ask about the answer that that is the universe. So I have a philosophy of curiosity. There is generally a feeling like this: AI system has an outward looking like the way you are like sitting with a good friend, looking up at the stars like the asking pad like questions about the universe wondering what it's all about.

The Curiosity you talk about there. there's a sense no matter how I'm On Da in the question I ask it there. there's a sense of cosmic grander to the whole thing. Well, we are actually working hard to have uh, engineering, math, and physics answers that you can count on.

Yeah, um so for the other sort of AIS out there that these so-called large language models um I've not found the Uh engineering to be reliable. Um, and okay, so I actually also agree with Elon here there are a lot of times I I'll know 80% of a certain topic and I'm like, okay, I'm looking for a little bit extra perspective and so I'm talking to GPT about it and I'm looking at my knowledge based of the 80% that I'm aware of. whether that's licensing or laws or or just historical facts or whatever. and then some of the stuff I'm getting back I'm like, where the hell did you get that from so you know.

while I don't use it for for math I can imagine, there's definitely some fact checking going into that site as well. Well, so not. Uh. I'm not in disagreement here with Elon on that.

the hallucination It It unfortunately hallucinates most when you least wanted to hallucinate. Yeah, right. So when you ask important, diffic, difficult questions, it, that's when it tends to be confidently wrong. Um, so we're really trying hard to say okay, how do we be as grounded as possible so you can count on the results? Um.

Trace Things back to Physics: First Principles: Uh, Mathematical logic. Um, so underlying the humor is an aspiration to adhere to the truth of the universe as closely as possible. That's really tricky. It is tricky, so that's why you know you.

There's always going to be some amount of error. But do we want to um aspire to be as truthful as possible about the answers with acknowledged error and so that there was always? You don't want to be confidently wrong so you're not not going to be right every time, but you don't? You want to minimize how often you're confidently, uh, wrong And then like I said, once, you can count on the logic as being um, not violating physics. Okay, hold on. we're going into the Uh Q&A uh, jpad Jpad Q&A as we've seen today.

Uh, there are some ways in which central banks are asked to do much more than just monetary policy. Uh, let me maybe open it up to the panelists and see if anyone wants to react to uh, the points that have been raised by others before. We then take questions from from the floor so anyone wants to GA please um, am if I may uh you briefly mentioned about the use of effects intervention and as know I said in my speaking points that it's it's a pretty tricky thing to tell apart when when to intervene and when not to be great to hear from you how you think about that I Think One lesson that we learned um through economic history is that when financial crisis intermingle with real crisis or other events, can think of Coid as a Health crisis went into an economic crisis and through a lot of the work of the FED we sort of averted a financial crisis. but we know those are the deepest.

Those have a magnifying effect when the two interact and that's why when this event had started um, it was and we could already see there was a lot of uh things going on in the In Asia and in other places regarding the shekele, uh, that was the logic You want to ensure stability. You want to make sure the markets function you don't You don't Target a particular exchange rate, but you want to moderate uh things such that uh, the markets function, there is liquidity and that's uh, that. That was our our goal and I think you know as of now as I showed you the exchange R sort of three events. Obviously it's related to the events that are actually happening uh in in Israel as well.

but it it gave it time. it didn't drift into panic mode and that was the role of uh and still is the role of FX Intervention When you have risk Premier go up. That's the number one concern there there was. there are people when it happened immediately say you should, you should lower interest rates.

Uh, help the economy. No, the two go hand inand together. the idea was to stabilize The Exchange The exchange rate uh, stability had periphery effects on the bond market and the stock market in Israel. They continue all to function.

We came with the other prong approach with the targeted things for the households and that was the way uh, we sort of aimed at it. So if I can, and in the meantime, if you are planning to ask a question, I will ask you to go and put yourself behind one of the mics so we can directly move to the questions afterwards. But before we turn to that, let me actually follow up with one question for I mean Amir and and Jay um I mean Jay There's this incredible resilience in the US economy. Is that uh, uh, you know G mentioned we've had this decline in inflation and the economy seems to be powering ahead.

Growth is is really at a very high level. Consumption is very, very strong. Um, there is this question about whether transmission of monetary policy is different this time around. Now you've in your remarks, You've alluded to the fact that the SE of shocks we've had is quite different from the typical business cycle or um and so I was curious and I would like to ask the same question to Amir because in the context of the tightening of policy that you have done in the Bank of Israel Uh, and maybe some of these uh, resilience that Ken was talking about.

building a stronger monetary policy framework, building reserves Etc Whether there is a sense in which the tightening operates in slightly different ways, there longer delays, shorter delays. how how do you view this from from your own? Vantage Point Go ahead. So I would say a couple things. Um, clearly the the US economy has been stronger than expected.

It's been more resilient, and uh, this year is just remarkable. Really, You know, so many forecasters had an had a recession this year, and it's nothing like that. It's going to be close to two and a half percent growth this year, but that's that's really that's Pro in my thinking, probably significantly, a function of strong demand. I I Think monetary policy is generally working in the ways that we think it's it should work, which is intensitive spending asset prices, exchange rate.

Um, I Think there are some aspects of the US economy where you can argue that it's a little different and that would be for example: Uh, households who who are in low rate mortgages are are not selling their homes, but they're also not. They're not feeling the effects of higher rates because they they really don't want to get out of those mortgages. Same thing with companies. Uh, any company that had access to fixed rate borrowing and didn't use that uh in the last three or four years would be facing, but there very few companies that are in that.

So it may be that the US economy is is structurally a little bit more resilient to to interest rates. But I Don't think that there's I I Don't see at this point any um, anything that seems to be structurally or materially in in the the nature of a difference I'm here I I Sort of agree with Jay I think the famous long Le you know, lags. Uh, it may be a bit longer. partly people came out of coid with a lot of savings.

Yeah, so the potency and the effect of monetary policy uh took longer the adjustments of both supply and demand. but I think at least Israel also had as I shown a very strong recovery and we are still above uh Trend But we're slowing down. So the effecto monetary policy was was kicking in before. uh, this whole event inflation was on, probably on its way to its to our Target in Q1, uh 24.

it just took in my opinion a little bit longer for these adjustments uh to happen uh I Also agree with Jay in his in his speech that the issue of Supply to look through Supply was, um, there's a time to do that but once inflation gets too high and too long, the expectation channel is so important and as long as that was anchored in monetary policy, uh, ultimately would kick in it. Yeah, it did take uh a little bit longer. Okay, okay, can I I just want to for a second? um go back to something that Ken talked about which is Central Bank Independence Unsurprisingly, I'm I'm a Believer in Central Bank Independence Um but it it really is just an Institutional Arrangement that exists because the elected government allows it to exist and as long as it serves the public well, it's It's a fine institutional. Arrangement and I I think it's um, it's easy to forget that you know we we have this precious Independence It should be very, very rare in a functioning democracy that you have an institution that has the degree of Independence that we have.

Of course we we strive all the time to be democratically accountable and transparent. But I think that the temptation to wander into exciting new issues that really are the business of the elected government is is a strong one and is to be resisted. And because I think that's when I think of ways that that that uh, uh, Independence could could be undermined. To me, that's that's right at the top of the list.

Very good. Any other reactions or comments, well I I mean I I would just add to what J just said. I mean I Think many economists, particularly over the last 15 or 20 years, just take it for granted and they have these very sterile, techn