Odd Lots Podcast Summary

Episode: Adam Posen on a Surreal Jackson Hole in a Post-American World
Date: August 26, 2025
Hosts: Joe Weisenthal, Tracy Alloway
Guest: Adam Posen (President, Peterson Institute for International Economics)

Overview: Main Theme & Purpose

This episode of Odd Lots, recorded at the annual Jackson Hole economic symposium, examines the mood and discourse in 2025 in light of deepening pressures on the independence of the US Federal Reserve, the larger global shift away from a US-led economic order, and the policy changes—particularly under the Trump administration—that are fueling these dynamics. Through an in-depth conversation with Adam Posen, the hosts explore the consequences of attacks on central bank independence, the evolving role of the US dollar, implications for global and domestic economies, and the effectiveness of tariffs and other protectionist policies.

Key Discussion Points & Insights

1. The Surreality at Jackson Hole (01:24–05:36)

• Both hosts note the subdued, almost surreal mood in Jackson Hole due to ongoing attacks on Fed independence by the Trump administration, which are largely not being addressed publicly at the conference.
  • Joe Weisenthal: “There’s like an element, if I’m being honest, a certain surreality of Jackson Hole this year because... the big story is really the attack on the whole premise on the independent central banks.” (01:36)
• Jerome Powell, expected to make a “big statement” in his final Fed address, instead delivered a standard macroeconomic policy speech and avoided confrontation.

2. The Attack on Federal Reserve Independence (05:36–07:42)

• Adam Posen: There is intentional restraint among Fed officials despite ongoing attacks, both institutionally and personally (e.g., “weaponizing” government files against members).
  • “There’s been a lot of self-discipline of members of the FOMC… at a time when the attacks on the Fed and the weaponization of government files to attack individual Fed members and so on is going on.” (05:36)
• Posen asserts the risks are not just to credibility, but to the whole structure allowing the Fed to deliver its mandate:
  • “It’s not so much necessarily the credibility of the central bank… it’s the credibility the central bank will be allowed to deliver what it’s supposed to deliver.” (07:42)

3. Market Shifts Signal “Emerging Market” Behavior (09:28–11:30)

• Posen presents his research (from his Foreign Affairs article) showing a data-driven reversal: where the dollar once strengthened during US crises, it now weakens, and treasury rates rise—behavior typical of an “emerging market.”
  • “That looks like an emerging market… When something screwy happens in the US... interest rates go up, dollar goes down.” (10:38–10:44)
• The risk premium on US government debt is rising.

4. US as Global Insurer: The Old Model vs. Trump’s Approach (11:47–15:08)

• Explains how the US’s “insurance” offering—stable currency, open markets, security guarantees—benefitted both America and its allies.
  • “For the last 80 years… the US’s main role in the world economy has been to be the insurance provider.” (12:16)
• The administration’s approach (tariffs, demands for payment, threats) is, per Posen, ruining this business model for both sides.
  • “You have a beach house in Malibu… Now there’s global warming… you're prepared to pay a bit more for your insurance, but instead you find your insurer has decided, nope, we’re going to deny your claims… Or you have to slip us something under the table to get your claim adjusted… we’re tripling your premium. And if you don’t like it, we’re going to leave the state and you’re not going to have insurance anymore. That’s what the Trump administration is doing.” (14:06)

5. The Trump Administration’s Motivation – Economic and Political (15:52–21:17)

• Posen identifies several sources for the current economic nationalism:
  • Exaggerated fears about China’s rise and perceptions of cheating.
  • Motivations tied to past domestic pain (manufacturing decline, inequality, anger at “elites” post-financial crisis).
  • A bipartisan shift—echoed even within the Biden administration—toward skepticism of global trade.
  • The argument for pulling back as an insurer holds little economic merit for most areas, except possibly narrow national security priorities.

6. The Limits (and Damages) of Tariffs (28:52–35:42)

• Posen is unequivocal: Tariffs are the wrong tool to bring manufacturing back, causing distortionary, regressive taxes with minimal targeted benefit.
  • “Tariffs are good for two things… one specific industry in a very specific bargaining situation… or if you are an underdeveloped country with no state capacity… Those are the only two things tariffs are good for.” (29:13)
• Current US tariffs are stagflationary—raising both inflation and slowing growth—and will likely do nothing for manufacturing employment.
  • “It’s a tax hike, it’s stagflationary, meaning it’s raising inflation at the same time as slowing growth.” (31:13)

7. Sticky Inflation & Pass-Through—Second-Round Effects (37:10–40:47)

• Posen expects that tariffs will result in persistent, not transitory, inflation, for four reasons:
  1. Tariff costs usually passed through almost fully to end buyers.
  2. No clear evidence that induced demand destruction will offset inflation.
  3. Labor shortages due to migration restrictions and demographics.
  4. Damage to inflation expectations and Fed credibility due to attacks on the institution.
  • “[B]ing, bing, bing. That’s four reasons why… we’re going to get more inflation, more persistence of inflation, more second round effects than some people are saying.” (40:46)

8. Secular Shift in Global Interest Rates (41:11–44:12)

• Cites Larry Summers’ “secular stagnation is ending” thesis: Persistent government deficits, geopolitical risk, and upcoming productivity gains (via AI) are pushing up the natural “R star” interest rate.
  • “All of these things are going to lead to sustained increases in government spending… And they are unlikely… to be fully tax financed. So that is a fundamental [shift].” (42:36)
  • Productivity growth may lower cyclical inflation but structurally increases the return on capital—which means higher long-term rates.

9. Central Bank Mandate in a Stagflationary World (44:26–48:38)

• Posen argues that, faced with stagflation, central banks must choose whichever variable (unemployment or inflation) is most likely to “spiral out of control.”
  • “If you’re forced to choose… you have to go after the one that’s more likely to spiral out of control.” (44:55)
• He’s skeptical of the widespread belief in lasting “hysteresis”—where unemployment shocks cause permanent higher joblessness—citing quick recoveries post-2008 and post-COVID.

10. Lessons from the UK: Falling Productivity and Fiscal Trap (49:15–51:33)

• The UK has suffered uniquely poor productivity growth (since 2008), compounding its fiscal and monetary problems. The implication: Structural, not cyclical, malaise.

11. Global Central Bankers’ Shock and the Silence at Jackson Hole (52:16–55:19)

• Non-US central bankers are “shocked and horrified” by attacks on the Fed, as central bank independence is a bedrock principle globally.
  • “The entire economics profession has taken it for granted for more than 40 years... that central bank independence is good... It reduces inflation and reduces the volatility of inflation... This is the standard practice that dozens of countries have adopted.” (52:40)
• Posen surmises that, behind the scenes, foreign central bankers have been asked not to criticize the US publicly to avoid escalation.

Notable Quotes & Memorable Moments

• Adam Posen:

  • “When something screwy happens in the US like we decide unilaterally to bomb Iran... interest rates go up, dollar goes down. That looks like an emerging market.” (10:36–10:44)
  • “For the last 80 years… the US’s main role in the world economy has been to be the insurance provider.” (12:16)
  • “Tariffs are… distortionary tax on a narrow part of the tax base that has bad distributional effects… regressive. They primarily either hurt small business… or they hurt lower income people.” (29:04)
  • “The entire economics profession has taken it for granted for more than 40 years… that central bank independence is good.” (52:40)

• Tracy Alloway:

  • “It’s hard to make an argument that the US has lost out from an economic and financial and… political system around the world that it has helped to create.” (56:28)
  • “Are tariffs the right way to bring manufacturing back to the US? No, sorry.” (28:52)

• Joe Weisenthal:

  • “If you perceive to be there some sort of inequality in the United States... these things, like the trading relationship, all of these things, they are interlinked… I’m not surprised it all goes together.” (58:17–59:18)

Important Segment Timestamps

• Surreal Vibe at Jackson Hole: 01:36–03:10
• Powell’s Avoidance of Independence Issue: 02:24–03:03
• Posen on Current Regime Change: 05:36–07:21
• Market “Emerging Market” Reversal: 09:28–11:30
• Insurance Analogy & US as Global Guarantor: 11:47–15:08
• Roots of Economic Nationalism: 15:52–21:17
• Counterproductivity of Tariffs: 29:04–31:13
• Second-Round Tariff Inflation Effects: 37:10–40:47
• Secular Interest Rate Debate: 41:11–44:12
• Central Bank Dilemma in Stagflation: 44:26–48:38
• UK Productivity Decline: 49:15–51:33
• Foreign Central Banks’ Response: 52:16–55:19

Tone and Atmosphere

The mood is frank, at times somber—but conversational. Posen is lauded by the hosts for his candor and depth of thought, “not mincing words.” Throughout, there is a palpable sense of underlying anxiety in the economic policy establishment about the future of US leadership, the dollar, and central banking norms. The conversation remains analytical, grounded in empirical research, and pushes listeners to question both the motivations and the effectiveness of the ongoing nationalist economic shift.

Takeaway for Listeners

By the end of the episode, listeners have a nuanced understanding of how attacks on central bank independence, protectionism, and retreat from US global leadership create intertwined risks for both the American and the wider global economies. Adam Posen provides a robust critique of the Trump administration’s economic approach, warning that abandoning the old “insurance” model could undermine core US advantages—while the episode overall captures the extraordinary moment of economic and political uncertainty at Jackson Hole and beyond.