TDS Time Machine | Money Talk - Conversations with Economists

Summary

The Daily Show: Ears Edition Episode: TDS Time Machine | Money Talk - Conversations with Economists
Release Date: July 14, 2025
Host: Jon Stewart
Guests: Christine Lagarde, Stephanie Kelton

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Introduction

In this episode of The Daily Show: Ears Edition, Jon Stewart delves deep into the complexities of modern economics with esteemed economists Christine Lagarde and Stephanie Kelton. The discussions span a range of topics, including the evolving perspectives within conservative economics, Modern Monetary Theory (MMT), and the current state of inflation and monetary policy under the European Central Bank (ECB).

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Section 1: The Evolution of Conservative Economics with Christine Lagarde

Timestamp: [02:07] – [21:05]

Overview

Christine Lagarde, Chief Economist at the American Compass policy think tank and author of The New Conservatives, engages in a thoughtful dialogue about the shifting paradigms within conservative economic thought. The conversation centers on the departure from traditional laissez-faire market faith towards a more interventionist approach in addressing national economic concerns.

Key Discussions

1. Departure from Market Faith

   • Lagarde: "Markets can give you great outcomes, but they don't guarantee great outcomes... conservatives are starting to say, well, wait a minute, we actually have to care about this and we have to be prepared to do something about it." [02:38]

2. Trade Policies and Tariffs

   • Lagarde: Discusses the historical context of trade protectionism, referencing Ronald Reagan's tariffs on Japanese cars to protect the American auto industry. She emphasizes the need for "balanced trade where in the past we were happy to let the manufacturing go elsewhere." [06:16]

3. Impact of Tariffs and Industrial Policy

   • Stewart: Raises concerns about the effectiveness and permanence of tariffs as tools for economic policy.
   • Lagarde: Argues that while tariffs are blunt instruments that shift business baselines, there is also a need for targeted industrial policies like the CHIPS Act to support specific sectors. [11:47]

4. Bipartisan Consensus and Future Directions

   • Lagarde: Highlights a new bipartisan agreement on changing trade policies, noting support from figures like Senator J.D. Vance and Senator Marco Rubio. She envisions a Republican Party more aligned with supporting working families and understanding market limitations. [27:09]

Notable Quotes

• Lagarde: "The new right's saying, actually there are some things we really want to see win, and that's what politics is." [03:50]
• Lagarde: "We absolutely want a strong economic and security alliance... But everyone takes primary responsibility for their own defense." [24:11]

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Section 2: Modern Monetary Theory with Stephanie Kelton

Timestamp: [32:35] – [40:56]

Overview

Stephanie Kelton, a leading advocate of Modern Monetary Theory (MMT) and author of The Deficit Myth, explains the fundamentals of MMT and its implications for government fiscal policy. She seeks to redefine the commonly held perceptions of deficits and the government's role in economic management.

Key Discussions

1. Understanding MMT

   • Kelton: Describes MMT as an economic framework that separates government budgets from household budgets, emphasizing that a government with a fiat currency can operate without the same constraints as households. [32:35]

2. Reframing the Deficit

   • Kelton: "The deficit is just the difference between two numbers... Somebody gets 10. So the government's deficit is mirrored by a financial surplus in some other part of the economy." [35:29]

3. Implications for Fiscal Policy

   • Stuart: Argues that viewing deficits as inherently bad overlooks their potential to fund essential programs like infrastructure, healthcare, and climate initiatives.
   • Kelton: Emphasizes the need for elected officials to make informed decisions about spending without the undue fear of deficits. [37:47]

4. Challenges and Misconceptions

   • Kelton: Addresses common misconceptions about MMT, clarifying that it doesn't advocate for unchecked spending but rather a more nuanced understanding of fiscal capacity. [38:42]

Notable Quotes

• Kelton: "MMT is an economic framework that tries to have an honest conversation, that talks to people like grownups." [33:07]
• Kelton: "We can have an adult conversation about how the government can actually operate its budget when it doesn't face the same kinds of constraints that a household or a business faces." [33:14]

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Section 3: Inflation and Monetary Policy with Christine Lagarde, President of the ECB

Timestamp: [41:55] – [60:35]

Overview

Christine Lagarde, now serving as the President of the European Central Bank (ECB), provides insights into the current inflationary trends, the ECB's strategies to combat rising prices, and the broader implications for the European and global economies.

Key Discussions

1. Current Inflation Status

   • Lagarde: Reports that inflation is nearing the ECB's target of 2%, currently at 2.2%, and emphasizes the importance of maintaining this stability. [43:15]

2. Causes of Recent Inflation

   • Lagarde: Identifies three main factors contributing to the recent inflation surge: the COVID-19 pandemic, the war in Ukraine, and energy price disruptions. [45:07]

3. Central Bank Tools and Responses

   • Lagarde: Discusses the primary tools used by central banks, such as interest rate adjustments, to manage demand and control inflation. She notes improvements in analytical models that aid in anticipating economic uncertainties. [49:22]

4. Global Economic Coordination

   • Lagarde: Highlights the importance of global governance in areas like AI to ensure that technological advancements enhance rather than undermine workers' positions. [56:01]

5. Future Economic Outlook

   • Lagarde: Optimistically forecasts better economic stability within the next 12 to 24 months, citing enhanced tools and models for economic analysis. [59:55]

Notable Quotes

• Lagarde: "We're not on a gold standard anymore. We have this thing called a fiat currency." [36:29]
• Lagarde: "We absolutely want a strong economic and security alliance... everyone takes primary responsibility for their own defense." [24:11]
• Lagarde: "The CHIPS Act was a step in the right direction." [12:12]
• Lagarde: "If we think this sort of liberal world order system... is not serving as well anymore." [25:11]

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Conclusion

This episode of The Daily Show: Ears Edition offers a comprehensive exploration of contemporary economic challenges and theories. Christine Lagarde provides a critical analysis of the evolving conservative economic strategies and the necessity of balanced trade policies. Stephanie Kelton introduces listeners to Modern Monetary Theory, challenging traditional views on government deficits and fiscal management. Finally, as the President of the ECB, Lagarde sheds light on the current inflationary environment and the tools being employed to achieve economic stability. Through these conversations, Jon Stewart effectively bridges complex economic concepts with accessible dialogue, making the episode invaluable for listeners seeking to understand the intricacies of today's economic landscape.

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Notable Moments:

• [03:50] Lagarde discusses the "new right" embracing interventionist policies.
• [35:29] Kelton redefines government deficits in the context of MMT.
• [43:15] Lagarde outlines the ECB's inflation targets and current status.
• [56:01] Lagarde emphasizes the need for global governance in AI to protect labor.

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For more insightful discussions and extended content, listen to the full episode of The Daily Show: Ears Edition on Paramount+ or Comedy Central.

Transcript

[Jon Stewart]

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That's cool.

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Financed, right? That's what they said.

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[Christine Lagarde]

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[Christine Lagarde]

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[Christine Lagarde]

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[Christine Lagarde]

You're listening to Comedy Central.

[Jon Stewart]

I guess tonight. He is the chief economist at American Compass. It's an economic policy think tank. He writes the newsletter Understanding America. He's the author of the forthcoming book the New Conservatives. Please welcome to the program. Oren Cass. Sir. I got markers all over the place smelling the morale. Thank you for joining us.

[Christine Lagarde]

Thank you for having me.

[Jon Stewart]

I wanted to have you on. I want to tell you I really do enjoy your writing. I follow the. I don't know what they're called now. Substack blog.

[Christine Lagarde]

Substack.

[Jon Stewart]

Substack. And I read your books. I always find them. I don't necessarily maybe agree with all of it, but I always find it really interesting in really good faith. This is this idea of the new. Right on. On the economy. Can you explain what's the deviation from previous orthodoxy and sort of what that entails?

[Christine Lagarde]

Sure. I think the best way to understand it is that, you know, we went through a period of 30 or 40 years where conservatives just had way too much faith in markets. Just trust that you get out of the way and you're going to get great outcomes. And markets can give you great outcomes, but they don't guarantee great outcomes. And so conservatives have been seeing, especially over the last decade, a lot of the things we care about, things everybody cares about. Do jobs, pay enough to support a family? Are we too dependent on China for everything? Can we make computer chips in this country? Markets were perfectly happy to give us really bad answers on those questions. And so conservatives are starting to say, well, wait a minute, we actually have to care about this and we have to be prepared to do something about it.

[Jon Stewart]

Now, when you say this at the meeting with the other conservative economists, did they go, leave us? Like, it really seems like that is fundamental heresy on, you know, I've listened for years. The reason we can't do sort of social engineering or social policy or redistribution of wealth is the government's not in the business of picking winners and losers. That is now off. The new right is saying, actually we do.

[Christine Lagarde]

Yeah, I think that's right. The new writer's saying, actually there are some things we really want to see win, and that's what politics is. What would politics be if you just pretended you sort of didn't care about anything? You'd sort of have a lot of the very uninspiring Republican politics of the last few decades.

[Jon Stewart]

I would say now you started, though, you worked with Mitt Romney, who was considered the avatar of. Of that. Was he open to this idea? Where did it start to find traction for you that a more activist government, this sort of idea of economic policy as kind of social engineering, when did it start to gain traction?

[Christine Lagarde]

I mean, for me, it actually started working with then Governor Romney. Like you said, he was conventional in a lot of ways. One of the issues I was responsible for with him was trade policy. And we brought him the very typical here's what Republicans say about trade briefing. And he said, well, that's fine, but what are we going to do about China? And to your point, about all the other conservative economists in the room, they were, what are you talking about? We don't do anything about China. If China wants to send us cheap stuff, we say thank you very much in the meeting.

[Jon Stewart]

What does it sound like when the monocles fall out of the eyes. Does it clink? It just feels like one of those, like, duh, there was the Grey Poupon.

[Christine Lagarde]

The gasps can be disturbing.

[Jon Stewart]

Yes.

[Christine Lagarde]

To your point, there's a lot of religious fervor, frankly, on what I would call the old right about some of these ideas. And when someone says something very common sense, like, well, wait a minute, maybe an authoritarian communist government that's trying to hollow out American manufacturing, maybe that's not really free market.

[Jon Stewart]

Right.

[Christine Lagarde]

But I was saying, I was like, wow, that's a really important point. And I was the one assigned to go off and try to figure it out. And what I discovered was that on the right of center, really going back to the mid-1980s, there had just been no thinking about this.

[Jon Stewart]

There had been an incremental protecting that manufacturing base or our industrial center. And then I think in Covid, you saw, everyone kind of paused and went, oh, we don't have supply lines to make paper masks. Like, we don't have anything. Was. Was that where you saw it really get a foothold?

[Christine Lagarde]

I think, you know, I think on the, on the right of center it was. The China problem was active even before COVID Right. Because I think, you know, one thing, and it's important to say this is a fairly recent conservative phenomenon. If you go back in the history of conservatism, even if you look at Ronald Reagan himself, Reagan was a trade protectionist. He basically started a trade war with Japan because he did care about these things.

[Jon Stewart]

This was in the days of Japanese carmakers were making cars that were cheaper. People were preferring them. They were dominating the market in America.

[Christine Lagarde]

And Reagan negotiated an outright quota that Japan, not even a tariff, Japan will not increase the number of cars it sends into America. And that's why we now have the American auto industry in the South. Honda and Toyota make American cars essentially because somebody like Reagan was willing to recognize trade is good if it's fair and balanced.

[Jon Stewart]

But I've read the mixed things about whether or not that five years later, it actually gave too much leverage to these Japanese countries. And they got to drive very hard bargains for American labor. In the south, for instance, they didn't build them in Michigan. They didn't build them where union labor was. They built them. They undercut union labor in some respects.

[Christine Lagarde]

They did choose to go to states with non union labor.

[Jon Stewart]

Right.

[Christine Lagarde]

The way that the unions were behaving at the time was one of the reasons that US Automakers were falling behind. That level of inflexibility was a real challenge. And that's also something that you saw Reagan really take on and confront. So, you know, I don't think there are a lot of people in the American south today who would say, boo, we wish these automatic come. It was an enormous gain, and the investments have led to much higher productivity over time. So I think that's the story of what we want to see more of.

[Jon Stewart]

And bringing that back and giving the country a resilience that losing that base actually cost us. And this brings us to Liberation day, which is April 2.

[Christine Lagarde]

April 2.

[Jon Stewart]

April 2. Mark it down. Liberation Day. The Trump tariffs, we don't know what they are, but we know they'll work and that we will live on Mars in, what, eight weeks. I don't know what's gonna happen. Do you know what's going to happen on Liberation Day?

[Christine Lagarde]

I don't know what's gonna happen. And I think that there has rightly been at this point, a lot of criticism that the way that the Trump administration has been rolling a lot of this out is just leaving too many questions, that if you want to do this right, you need certainty and predictability.

[Jon Stewart]

Clear communication, all core values of the Trump administration.

Fair.

[Christine Lagarde]

Fair point. One of the interesting things about the Trump administration is that the team he has around him this time on the economic side, so Secretary of State Rubio, Secretary of the Treasury Scott Bessant, his chief economic adviser, the US Trade representative, he's really surrounded himself, I think, with a quite strong team that thinks consistently about this. And so, you know, that's something that.

[Jon Stewart]

Does he ever, like, ask them or.

[Christine Lagarde]

That is a fair question. And that's what I think everybody's waiting to see is can we sort of get this moving in the right direction? Because it is important to say that the direction is important here, really. For 25 years, going back to when we let China into the wto, we have pursued this model that says more free trade always, regardless of what happens to American workers, regardless of what happens to American industry, We just want the cheap stuff. And that has been really damaging.

[Jon Stewart]

You know, in some respects, though, we regard, I think we're putting a certain motive on China, when in fact, like, these were corporations seeking the lowest water of wages and what they could pay people. And certainly labor can't travel the way that capital does. So, you know, I guess the idea is we levy these tariffs and then these corporations that had been seeking this will all go, oh, okay, it's not worth our while anymore, and they'll reinvest in the States. Is that kind of the broad theory? Of it.

[Christine Lagarde]

Yes. The idea is that corporations are going to respond to incentives. And you go all the way back to Adam Smith and the wealth of nations and the idea of capitalism. You want people pursuing profit to do that in a way that is. Is also good for the society. Where I think a lot of economists, and this is left and right of center, got it wrong, was to think that's just always the case. As long as they're pursuing profit, it's gonna be good. And it's only gonna be good if it's within certain constraints, if the things that are most profitable actually are things that are good for the country.

[Jon Stewart]

And the government decides sort of what those constraints are, so they put guardrails around them. I guess the question I have is tariffs feel somewhat, I don't want to say whimsical in the sense of, oh, he, you know, dances downstairs in a tutu and says, 25% on whiskey, like. But they are executive actions. And if you're a business making a. I assume their plans are 5 year, 10 year, 20 year. If they could just be repealed by the next guy, and it's not legislation, is that really an effective incentive for bringing back all that manufacturing?

[Christine Lagarde]

I think that's a very fair concern. And ideally, it would be done through legislation. I think one of the things that's very encouraging is to see that we are increasingly now seeing a new bipartisan consensus that we do want to change this.

[Jon Stewart]

I'm sorry, I don't know that phrase. What was that?

[Christine Lagarde]

It started when President Joe Biden essentially kept all of Trump's trade actions. Everything that Trump did on China, Biden kept and then even extended.

[Jon Stewart]

But wouldn't like the CHIPS Act. Right. Wouldn't that be another way of incentivizing without setting up barriers that might be more unpredictable or might be flimsier, depending on the whim of an executive. Why don't they embrace that? In the same way? Doesn't that add to getting the outcome you want? Incentivizing, bringing those. Those jobs back? Why is that unpopular on the right?

[Christine Lagarde]

Well, it's only unpopular with some on the right. And I think it goes to where we started, which is this historical concern with the idea of sort of picking winners and losers at all.

[Jon Stewart]

Right.

[Christine Lagarde]

And a lot of concern that, you know, what's gonna happen if government actually gets involved in giving particular benefits to particular companies. That being said, the Chips act was bipartisan. I think there were maybe 17 senators. You know, J.D. vance has been a supporter of the Chips Act.

[Jon Stewart]

Right.

[Christine Lagarde]

And so, you know, I think again, that's, that's a step in the right direction.

[Jon Stewart]

Would you rather see it through that kind of industrial policy or through. Or is it a real balancing of all those various levers?

[Christine Lagarde]

I think you have to do both. Because if you only do the CHIPS act kind of thing, right, CHIPS act is great if you've got one thing that's really important. Almost everyone agrees, you know, I do.

[Jon Stewart]

Steel and you know, so well.

[Christine Lagarde]

So this becomes a question now, right? Do you really want Congress now going through and saying, oh, well, now we need one for steel? Well, do we need. Do we need one for aluminum, maybe? Well, do we need one for cars? Should we do one for airplanes? That's both cumbersome and something that's very difficult to do well politically. Whereas one of what I think actually the benefits of tariffs is that they are quite blunt. The tariff is sort of, if done well, a much broader policy that sort of shifts the baseline. And so I think you need that if you want to shift the basic decision making that businesses are going to make generally. And then if there's particular things you really care about, that's when you also want to come in and give them support.

[Jon Stewart]

Would it then did it surprise you? Because we talk about China as being sort of this ascendant economic power. And by the way, it's not just the manufacturing base of America that has been hurt by that. All the countries near China can't compete. You know, all around there, Indonesia, you know, they're struggling with a very similar thing. But then why go after Canada? Like what? Do you know what I mean? Like, it just, it all seems so weirdly vindictive. And then you're like, and then we're going to take over Greenland. Like, it does feel a little less like rebalancing economic inequities. And we've decided on a new world order where big does what it wants and nation states. We go back to a little bit of that colonialist model or imperialist or whatever it was. Is that the concern?

[Christine Lagarde]

I guess it's a fair concern. I think there's some truth to it. That's not all bad when you talk about this New World order idea, which is that the United States has been sort of championing this liberal world order, right, where we have essentially taken it upon ourselves to frankly absorb a lot of costs from other people, right? So in the trade world, it's not just China, it's also Germany and Japan and Korea. We are absorbing their production. They get the job.

[Jon Stewart]

But don't you Think we're buying influence? I would say so. His. The Trump view is they're abusing us and using us. I think the view I have is America wants to tell them what to do. And so by leveraging our military might, we have sway.

[Christine Lagarde]

But do we? What do we. What have we successfully told Japan or Germany to do?

[Jon Stewart]

Uh, I mean, in general. Yeah. In the last three years, Stop wearing lederhosen. I think they've cut down on it. No, no, no, no.

[Christine Lagarde]

This is a serious point. I appreciate the joke, but.

[Jon Stewart]

I guess my point.

[Christine Lagarde]

But there's a reason you couldn't answer the question. And this is.

[Jon Stewart]

Well, I don't know what we'd want them to do because I feel like.

[Christine Lagarde]

Well, if we don't want them to do anything, then what are we maintaining the leverage for?

[Jon Stewart]

Because, well, the leverage is on when we want to go into Iraq. I guess what I'm saying is what we want them to do.

[Christine Lagarde]

That was great.

[Jon Stewart]

Listen, I'm not saying it was right, but you have a guy like J.D. vance goes to Greenland and shits on Denmark. Like, Denmark lost as many people per capita in those wars as we did. Like, they talk about, you know, Denmark's not defending Greenland enough. Like, and we'll do it, but aren't we doing it already? Like, they're in NATO. So I guess my point is, like, that stable world order hasn't mistreated the United States. I guess I don't see us as victims of a con game that Europe has been running on us. And like, the idea that we want Germany to be able to fend off Russia on their own places us in very tenuous position, does it not?

[Christine Lagarde]

Why?

[Jon Stewart]

I have a book at home about Germany and their position as a global military power where we didn't have sway. Right. And they did what they wanted and it didn't work out.

[Christine Lagarde]

Frankly, I don't put a lot of credence.

[Jon Stewart]

I don't. And by the way, it's also in.

[Christine Lagarde]

No, no, no. I want to pick up on this.

[Jon Stewart]

20% of the Oscar winning movies, the.

[Christine Lagarde]

Fun applause line that, like, oh, the Germans will just become Nazis again, like, that's a weird racist critique of Germans. I don't see any reason to believe that. Let's be honest, it is. Let's look at the actual German state. On what basis are you saying this is like something about Germany that we can't.

[Jon Stewart]

I think it's that there is an element within their society that they've deemed. This is not me saying Germans will do that. This is Germany. This is. I didn't say they'll become that. The leaders of Germany are fearful that they had this.

[Christine Lagarde]

I don't think they are. I think leaders of Germany really enjoy spending virtually nothing on their military, while the United states spends roughly 4% of GDP on ours, as we have been doing for decades with other countries in NATO.

[Jon Stewart]

Not even really. You think they're like freeloading on our military?

[Christine Lagarde]

There's no question they're freeloading on our military. You can say you like that they're freeloading on our military, but I don't think there's any dispute that that's what they're doing.

[Jon Stewart]

I guess I don't understand the idea that they're freeloading and we want each nation state to build up their military to the point because to me that makes it more likely if you build something like that, it's more likely you'll use it. Now that seems to be backed by general history. When people rearm, they tend to do it and use it. But I think the idea that Europe needs to like. I guess what I'm saying is this is a fine adjustment that's being made with a sledgehammer, if that makes sense.

[Christine Lagarde]

I think that's a very fair point. I think where we started on.

[Jon Stewart]

I was dying over there.

[Christine Lagarde]

I will concede that one to you just to.

[Jon Stewart]

Yes.

[Christine Lagarde]

My five year old gets one point of ping pong every.

[Jon Stewart]

Yes. See, I'll take that.

[Christine Lagarde]

Look, the New World Order point that we started with I think is very important here because what the Trump administration, and I think this is Certainly Trump's view. J.D. vance has spoken about this. Marco Rubio has spoken about this. Their view is that this world order we tried to establish in which the US does take on these burdens, and in your view we benefit from, from taking on those burdens.

[Jon Stewart]

I think it's a mixed bag. I would not say it's purely benefit. I think what we do spend on defense is kind of insane. And to have 850 military bases to project power across the world, I wholeheartedly agree with that. I think unleashing those forces through vindictiveness and like blaming them for victimizing us is not the methodology like everything else. Like Doge, I always hate that strawman. Like we go, I don't like the way this is going. Oh, you're not for efficiency like that.

[Christine Lagarde]

Same thing.

[Jon Stewart]

Oh, you just want, you want Germany to keep freeloading. That's not what I'm saying. And I think it's a misreading of that point and not being fair to the nuance of it. I understand that there can be adjustments in that and that free trade can be rebalanced and all those other things, but they're breaking something that did serve us. Maybe not phenomenally, but okay. And we had a really strong hand in building it, and now we're pretending like they did it to us. And that feels unfair. I was doing. When I. Let me tell you something. When I come on your studio show, I realize that's difficult to handle. Hey, look, it's not so fair. I didn't. Yeah. You know what I mean?

[Christine Lagarde]

I saw you prep them in everything.

[Jon Stewart]

Yeah. But talk about that a little bit.

[Christine Lagarde]

Yeah. So first of all, I think you're absolutely right that the US did construct this system. And I think if that doesn't mean that the US should not learn lessons, that doesn't mean that conditions don't change. But I do think it absolutely creates an obligation for us to be thoughtful in how we proceed. And I think it's a fair critique if we're not being thoughtful in how we proceed.

[Jon Stewart]

That felt like a very different answer than Germany and Japan freeload on us.

[Christine Lagarde]

And you know that's also true.

[Jon Stewart]

All right, would you, you know, do you think. What do you think's going to happen? Or do you worry about the instability of not easing this transition? But is this a. And look, I've read the whole, like, Mar A Lago Accord, and I don't know if that's a conspiracy, but is the idea that there's some master plan if we create this chaos, we cause all this thing to draw people to Mar A Lago where they renegotiate our nation's debt? Is that something that you think is plausible? Or is that what this is all about? Is that why they're not doing it in a way that seems more thoughtful?

[Christine Lagarde]

So let me say two things about it. The first is I think a lot of the critiques of how it's being done are very fair. And I think it's important to distinguish that from the discussion of the principles, because I think the principles are important and we should want to have the right set of principles and not throw them out just because they're not being pursued in the way we might like. When it comes to something like the Mar A Lago Accord, I think what you see people talking about and trying to move toward is to say, if we think this sort of liberal world order system, first of all, even if it was serving the US well at one point, is not serving as well anymore. Second of all, to some extent may just be going away anyway. China is now rising as a peer competitor. The US Cannot be a unipolar hegemon like it was when the Cold War ended. So if we accept that things are going to change, we should have a perspective on what we want. And you know, something that I've been writing about a lot is trying to interpret and decipher what that might look like because again, it's a very fair critique. They have not been as clear about it as we should want them to be. What I think we should want and what, like I said, folks in the administration like a Marco Rubio or a Scott Besant, who I think do write and speak thoughtfully about it, have pointed toward is the idea that we absolutely want a strong economic and security alliance. It's not going to be the whole world because China's going to have its own sphere as well. But what we want to have within our sphere is a few things that in the past the US didn't necessarily ask for. We're going to want balanced trade where in the past we were happy to let the manufacturing go elsewhere. We're going to want others to essentially own their own defense burdens. That doesn't mean we're not partnering and working together, but that everybody takes primary responsibility for their own defense.

[Jon Stewart]

No NATO, no. Like alliance like that?

[Christine Lagarde]

No, no, you can absolutely have an alliance like that. But the alliance is premised on if you are Germany, you are on the front lines of what the concerns in Europe are. If you are Japan, you are on the front lines of the concerns with China. It's not a matter of everyone simply turning and asking the US what the US Is going to do. And then the third element is keeping China out and recognizing that China, to your point, China's just been doing China, doing what's best for China. But that, that is not consistent with what the US And a US Led alliance would want. And so if you want to get from where we are today to that kind of system, you are asking things of allies that they haven't been asked before. And so the question is, how do you make that a credible ask? Because I think it's fair. I don't think that those are unreasonable things to ask. But you are going to have to be willing to back that up and say the old world, the old version is gone. Let's talk about what the new version could look like.

[Jon Stewart]

Right. And I think, do you think they prematurely blew up the old version or you just, you really Felt like it just wasn't. It wasn't functioning in that way anymore.

[Christine Lagarde]

I think the old version. I think the old version has been gone for a while at this point. That in the economic sphere, the idea.

[Jon Stewart]

Of that sort of era of cheap.

[Christine Lagarde]

Goods, the era of cheap goods, the era of the US Being able to simply sort of exert its military will on the world, the era of the US Economy being so much stronger than others that we could afford to absorb everybody else's production. Over the last 10 to 20 years, the U.S. the typical working family, has not been well served by that deal, I don't think.

[Jon Stewart]

No question. And this is where. So it sometimes gets. Listen, people have differing viewpoints, and it can get confusing and trying to. But here's where I think there can be great agreement. Working people making living wages. And I think that would be very surprising for someone on the center right to sort of agree with maybe the more progressive wing of the Democrats. But that is absolutely a value that we have lost. And do you think that's something that the right will follow you along with? Because it's something I think the left has been screaming about for a very long time.

[Christine Lagarde]

Well, I think we're moving in that direction. You know, I think it is a process of transition when a party reorients. The term realignment gets used a lot. We're increasingly seeing working people coming into the Republican Party. We're seeing Republican leaders, folks like Marco Rubio, J.D. vance, increasingly, I think, speak credibly and seriously to some of their concerns. We're seeing more openness to the labor movement. You have the Teamsters president partnering with someone like Senator Josh Hawley on legislation. And so I really do think that that is happening. I think the politicians will always be the lagging indicator. Right. The folks in their 70s and 80s. The folks in their 70s.

[Jon Stewart]

You're talking about the junior senators.

[Christine Lagarde]

Mitch McConnell is unlike, likely to, you know, suddenly adopt all of this. But if you look at.

[Jon Stewart]

Don't count them out. I'm gonna go at 110. He's gonna be ready.

[Christine Lagarde]

You have more faith than I do. When you look at younger Republicans, both folks coming into the Senate, so I mentioned Rubio and Vance, folks like Jim Banks from Indiana, Bernie Moreno from Ohio, all of them are more focused on these kinds of issues. And then when you look behind that, at the sorts of people I work with, the policy wonks, researchers, writers, journalists, lawyers, folks sort of 40 and under, are overwhelmingly oriented in this way. And so I have a great deal of hope that as that moves to be the center of the party, you really are going to see a different Republican party that still loves markets and wants them to work, but has a much better understanding of their limitation, has much more concerned for what is happening to the typical working family and wants to figure out how to keep their conservative principles but apply them somehow to use public policy and make things better.

[Jon Stewart]

So socialism essentially. No, I appreciate it. One final question and then I'll let you go because I know we're busy. The final question is this. Are you concerned if they realign the trade? Look, corporations are, as you said, they're profit seeking and that's how they go. Are you afraid that the globalization movement, where they sought the lowest form of regulation and workers wages will just be translated into this country? So in other words, in the way that China might have undercut the United States, are you worried South Carolina and Texas undercut Wisconsin and Michigan and that this revitalizing the manufacturing base will fall prey to the same dynamics that we saw it fall prey to globally? Is that a concern?

[Christine Lagarde]

I'm not too concerned about that because that has always been a feature of American political economy. We've always had that sort of competition between.

[Jon Stewart]

We can handle that disagreement.

[Christine Lagarde]

We can. And I think that's the best way to think about more protection of the American market. There's been this idea for so long that free trade and free markets are sort of synonymous. If you like free markets, you want more free trade. But free trade with China does not advance free markets. It takes everything authoritarian and communist in China and imports it. Now your companies have to compete with that. And then now you need more safety net programs to support those who lose their jobs. You need more chips acts and industrial policies. You have to respond in all sorts of ways.

[Jon Stewart]

So many of the people that use those subsidies are actually working people. They're not. This isn't one of those like lazy people sitting on the couch coasting on the government dump. Working people with one, sometimes two jobs that still have to subsidize it because they're just not paid enough. And it's very, very difficult. But this is, listen, the book, the Once in Future Work. This is your old book. What's the new one called?

[Christine Lagarde]

It's called the New Conservatives. It's a summary of what we've been doing for the last five years at American Compass developing this, the Conserved Economics of the New Right. And it will be out at the beginning of June.

[Jon Stewart]

And when you go back to them and you tell them how was it? You'll say Like Stewart was right about at least one.

[Christine Lagarde]

I'm gonna tell him because I called Jon Stewart a racist. I'm not sure that was smart.

[Jon Stewart]

It's all good. The New Conservative is a nominal preorder. Subscribe to Orange Newsletter Understanding American Subtitles Orange Hat Chris Then I got this. That was great. The McDonald's snack wrap is back. You brought it back. Ranch snack wrap.

[Christine Lagarde]

Spicy snack wrap.

[Jon Stewart]

You broke the Internet for a snack? Snack wrap is back. Ba da ba ba ba. Ryan Reynolds here from Mint Mobile. With the price of just about everything going up, we thought we'd bring our prices down. So to help us, we brought in a reverse auctioneer, which is apparently a.

[Christine Lagarde]

Thing Mint Mobile unlimited premium wireless. 30, 30, better get 30, better get 20, 20, 20 get 20, 20 everybody better get 15, 15, 15, 15. Just 15 bucks a month.

[Jon Stewart]

So give it a try.

[Christine Lagarde]

@Mintmobile.Com Switch upfront payment of 45 dollars for a three month plan equivalent to.

[Jon Stewart]

15 dollars per month required new customer offer for first three months only. Speed slow after 35 gigabytes of network's busy. Taxes and fees extra. See mintmobile.com Our guest tonight is a professor of economics and public policy and the author of the best selling book the Deficit Myth. She's featured in a new documentary, Finding the Money. Mmt.

It's always been a group of us that, that sacrificed a lot to make the professional decision to say things that are so different from what everyone else is saying, knowing that you're going to be not just challenged, but ridiculed along the way. You got to have some thick skin to get through it. But if you're convinced that the work that you're doing is important and that the ideas will hold up to scrutiny, then you just keep pushing forward.

Please welcome Stephanie Kelton. Stephanie, welcome.

[Oren Cass]

Thank you.

[Jon Stewart]

70. It's a fascinating documentary. I will say you are setting out, correct me if I'm wrong, to fundamentally change how people see money. Yeah, that's a big ask. And we got about seven minutes. Yeah, I think a place to start is with mmt, right? Mmt. If you can help us define what MMT is and I think what the.

[Christine Lagarde]

Narrative, the narrative you're hoping to get across with mmt. What is the new economic narrative?

[Jon Stewart]

It's no longer pull yourself up by your bootstraps.

[Christine Lagarde]

What is MMT telling us?

[Jon Stewart]

So in economics is widely known as the dismal science. Right?

Because I got to get better branding.

Well, that's what MMT is trying to do, better branding. Because you know, in the dismal Science, it's all about scarcity. And we can never have the things that we want because there's always this really intrusive problem, which is how are you going to pay for it? Where is the money going to come from? And the problem is that we treat money like just any other scarce good or service in the economy. And what MMT is doing is saying, hold on a second, we're not on a gold standard anymore. We have this thing called a fiat currency. And it does make people nervous because a fiat currency sort of opens up space and it's kind of like, wait, is money real after all? And so MMT is an economic framework that tries to have an honest conversation, that talks to people like grownups, not insulting people by telling them that you have to treat the government's budget like a household budget and speaking down to people. We want to be honest about the monetary system we have today, the capacities of the government to spend when you have a fiat currency and you're not tying your currency to gold and promising to convert into something that you could run out of, like physical gold. So we're opening up a conversation where there are still limits and you still have to make choices. But we can have an adult conversation about how the government can actually operate its budget when it doesn't face the same kinds of constraints that a household or a business faces.

I mean, I guess by that I think the big headline with this as well is the way we look at.

[Christine Lagarde]

What the deficit means.

[Jon Stewart]

Correct?

Yeah.

Like I hear deficit, you hear it in the news, you hear every politician talking about it. Deficit equals bad. And the major narrative of mmt, monetary, modern monetary theory is deficit good. Correct.

Every deficit is good for someone in purely financial terms. And I'll tell you why. Because you're right. We use this word and it sounds inherently like something's gone wrong. If somebody is in deficit, there's a problem. Right. You don't want to turn on the sporting game and find the announcer saying that your team is going to have to come back and overcome a seven run deficit if they're going to win the game. It's always a bad thing, right? But actually, if you think about what the government deficit is, it's just the difference between two numbers. That's all it is. So what?

What a relief. Well, I guess we'll find that. Is everything fine?

[Christine Lagarde]

Does that mean everything's fine?

[Jon Stewart]

It's fine in the sense that it's, it's just a benign mathematical. Like it's the difference between two numbers. It's not even higher order math, right? It's just how many dollars the government spends into the economy each year versus how many they take back out, mostly through taxation. So simple math. If they spend $100 into the economy and they only take $90 back out, we label it a government deficit and somebody records IT as a -10 on the government's ledger. What we forget to do is to recognize if they put 100 in and only take 90 out, somebody gets 10. So the government's deficit is matched or mirrored by a financial surplus in some other part of the economy.

Wait, hang on.

[Christine Lagarde]

So did you guys meet backstage or something? Because what the hell? What is mmt?

[Jon Stewart]

What is what? What's mmt?

[Christine Lagarde]

What is.

[Jon Stewart]

What does MMT stand for? You had.

So it's modern monetary theory. And so again, the currency. We're not on a gold standard. We're in the modern fiat age.

[Oren Cass]

Fiat.

[Jon Stewart]

What's fiat is a good car that.

You get, or what you're walking around with if you've got some of this stuff in your wallet is a tax credit. So those dollar bills that we're walking around with, we think of that as money, right? And we can use it to transact. We can use a buy and sell thing, we can use it to make purchases of goods and services.

[Christine Lagarde]

Okay?

[Jon Stewart]

And money is good.

It's good to have, generally. And it's really good to have when you got to pay your taxes, because this is what the government expects us to hand over at the end of the day in payment.

Okay, Money is good. I'm with you so far.

But let's do this. What about that government deficit that you just mentioned? Right, And I said every government deficit is good for someone. Why? Because it's just a financial deposit into some other part of the economy. The question is good for whom and good for what? The government can increase its deficit to do things like feed hungry kids, tackle the climate crisis, fix crumbling infrastructure. All of those things are ways to use a government deficit that might have desirable results for people and for the economy.

[Christine Lagarde]

So money is good, deficit is good.

[Jon Stewart]

I'm with you so far. So what's the, what's the bad.

[Christine Lagarde]

What's the problem here?

[Jon Stewart]

A big part of the problem is the way that we've been taught to think about these things, to try to stamp out deficits, to reduce them, to view them as inherently dangerous. They're not inherently dangerous. And as I just said, they can be used to help us accomplish important goals in the economy.

[Christine Lagarde]

So, okay, so what's the Next step.

[Jon Stewart]

Why would we actually, let's say we believe in MMT or. Yeah, mmt.

[Christine Lagarde]

What, what, what's the next thing that.

[Jon Stewart]

I mean is belief enough? Do I just have to pray to mmt? And then what?

[Christine Lagarde]

What has to happen next? Who else?

[Jon Stewart]

What has to happen next is that the people that we elect to represent us have to go in there and take decisions using the incredible power that they have called the power of the purse, that they've got to take decisions about whether to fund programs, whether to cut programs, not on the belief that they ought to be operating their budget like a household, but when these decisions come up about Social Security and Medicare or continuing with the inflation Reduction act and staying, you know, in the game on climate change and going even beyond what that legislation did, what I think gives me hope anyway is that we've demonstrated what we're capable of and that we can build on it and not revert back to old ways of thinking about austerity and the need to reduce deficits. Because that's when you hammer your economy. That's when people have a lost decade. That's when all of a sudden, you know, the prosperity that is within reach starts to slip through our fingers.

So when the IRS comes for my taxes, I just gotta tell them like.

[Christine Lagarde]

Yo, deficit is good.

[Jon Stewart]

Don't worry about it. Don't worry about it. You need to, you know what you need to do? You need to take a some THC or some DMT and let the MMT just wash over you. Let the paradigm shift come to you. Ronny Shay. Yeah, I think I'm in it right now. I think you're in it. Well, Finding the Money will be released in select theaters nationwide and on demand May 3rd. For more information, go to findingmoneyfilm.com Stephanie Keltip we're going to take a quick break right back after.

[Christine Lagarde]

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Message is sponsored by Greenlight. With school out, summer is the perfect time to teach our kids real world money skills they'll use forever. Greenlight is a debit card and the one family finance and safety app used by millions of families, helping kids learn how to save, invest and spend wisely. Parents can send their kids money and track their spending and saving while kids build money, confidence and skills in fun ways. Start your risk free Greenlight trial [e-mail] Spotify that's greenlight.com Spotify My guest tonight, the president of the European Central Bank. Please welcome back Christine Lagarde. Thank you so much for being here. We were just talking. Last time that I saw you, you were the French Minister of Finance.

[Oren Cass]

Right.

[Jon Stewart]

And then you moved on imf and I came back and you came back and then now you are the head of the ecb, which is for context, similar to like what the Fed would be, I assume for the United States.

[Oren Cass]

That's right.

[Jon Stewart]

And you lowered interest rates as well.

[Oren Cass]

Yes. We started a little earlier in June.

[Jon Stewart]

Okay. I didn't know I was going to go there right away. I didn't know we were going to do this right away.

[Oren Cass]

Okay. We only did 25. He did 50.

[Jon Stewart]

You only did 25 pages.

[Oren Cass]

But then we did it again. So that's 50. 50.

[Jon Stewart]

Do you guys talk? Do you say, I'm about to do 25? And he's like, well, I'm gonna do 52 months later and make you look silly. You don't coordinate?

[Oren Cass]

No, we talk to each other. We don't coordinate. We don't.

[Jon Stewart]

Now is this the basis points? And we all. Now there's a certain oracle nature till we wait to see what the central banks will do. And they always talk in kind of coded, mysterious language. And then they say 25 basis points. And we're like, yes, what is that? But. But is it now? Is that the signal Inflation has been defeated.

[Oren Cass]

It's not quite. We are getting there. We are. We are almost at target.

[Jon Stewart]

What are you pointing at My target.

[Oren Cass]

What's my target is to 2%. I want to get to 2%.

[Jon Stewart]

What is it now?

[Oren Cass]

It's 2.2. But I want to make sure that we are at 2 and that we stay at 2% because that's regarded as sort of stable inflation. And we look at that in the medium term. So we don't want to have one month and two and then another month at 2.6%. We want it to be steady, solid at two, at two, and we're getting very close.

[Jon Stewart]

Who was the two chooser?

[Oren Cass]

You know, interestingly enough, that was way back and I think New Zealand was one of those that started it.

[Jon Stewart]

And we're all following New Zealand now. That's what this is, New Zealand one day went, you know, what would be a good number two?

[Oren Cass]

Now, I, I think then all central bankers around the world thought, well, 2%, because then that leaves a little wiggle room to negotiate wages increases. We're not exactly sure the statistics are perfect. So there is, you know, room to maneuver on all accounts. And 2% is something that goes reasonably unnoticed as long as wages progress as well.

[Jon Stewart]

Right. Although when we say 2%, we've faced kind of a pretty large inflationary spike. So it seems like these higher prices have a certain stickiness that the corporations have gotten accustomed to. Like, well, the supply chains are a little better and things have eased. But $10 for a taco and people are still paying it, so why not?

[Oren Cass]

Well, that's the big difference between the level of prices and the increase in prices.

[Jon Stewart]

I see.

[Oren Cass]

So when you've had regular increases in prices, generally it doesn't move down. It's stays at that level. And that's when you talk about a level of prices.

[Jon Stewart]

Now why is that? Because. So what caused the inflation in the first place? Do we, do we have a handle on that?

[Oren Cass]

Yes.

[Jon Stewart]

Okay.

[Oren Cass]

Shall we take the last big, big inflation wave that we had? No, no, but. No. Okay, yes, but as an example, okay, so what caused it? You had three components. One is you had the worst pandemic ever since the twenties. Yes, the last twenties.

[Jon Stewart]

That's right.

[Oren Cass]

Then you had.

[Jon Stewart]

So a shutdown of.

[Oren Cass]

Shutdown of.

[Jon Stewart]

Now, that would seem to be deflationary because it would seem like demand would disappear.

[Oren Cass]

Well, some demand disappeared in some demand states, particularly when people continued to receive, you know, checks in the mail and had.

[Jon Stewart]

The mistake was keeping people alive.

[Oren Cass]

No, no, no, no, no, no.

[Jon Stewart]

I get it now. I get what's happening here.

[Oren Cass]

All right, okay. So supply chain completely disrupted.

[Jon Stewart]

Yes.

[Oren Cass]

First. Second, we had, at least in Europe, the worst war since the 40s.

[Jon Stewart]

Still going on in Ukraine.

[Oren Cass]

Still going on in Ukraine. Terrible energy, wheat, all sorts of commodity prices went down. Especially given that dear Mr. Putin anticipated that and weighed on energy prices. So they wait on energy supply. So that prices started going up even before the war started. He had planned that all along. So energy prices were a big component in the.

[Jon Stewart]

So supply chain disruption.

[Oren Cass]

Yeah.

[Jon Stewart]

Energy, now that's. In Europe. We did not have that to the same extent.

[Oren Cass]

I would assume you had some of it, but not. Yeah, right. Because. Because you have energy on site in the country. We don't have any energy.

[Jon Stewart]

Oh, sure. You know why? Drill, baby, drill. That's, that's. Did you know that's our national anthem? That's what we, we sing it before every ballgame. Something we do. So that's two. We got two. What's the, what's the third?

[Oren Cass]

I would say three. The pandemic, the war and the energy prices. So the three of them just pushed prices up in a big way. And more so in Europe than in the U.S. right. We went up on average in the euro area. Area prices went up to 10.6%. You never hit the double digit.

[Jon Stewart]

Right. Certain. I would imagine certain commodities would go up faster than others. That they don't. It's not linear, I wouldn't imagine.

[Oren Cass]

No. And. But it has a dribbling effect. So if you have oil prices going up is going to have an impact on pretty much all other products because you find energy everywhere.

[Jon Stewart]

So give me a sense of oil prices go up. How long does it take for that to insinuate itself into the supply chain system and create that inflation, that inflation.

[Oren Cass]

It moves relatively fast. So in a matter of, you know, four, six months, it's into the various prices where there is a lag which is much longer. It's on wages. Wages take more time to, to respond to that increase in prices. And it's, you know, I don't know.

[Jon Stewart]

If you know this, in America, wages have yet to respond. We're talking about from the 50s like it's wages don't keep up. It brings up an interesting point.

So.

Since the 80s, it feels like the economy flipped over to an investment economy.

[Oren Cass]

That's right.

[Jon Stewart]

Rather than a labor economy.

[Oren Cass]

Much more capital intensive and the remuneration of capital was higher than the remuneration of labour. You're right.

[Jon Stewart]

Correct.

[Oren Cass]

But it's been a long time. It's not just in the last 10 years.

[Jon Stewart]

No. It seems like the 80s were really that period of deregulation and then it sped up there. But our tools that we use, whether it's the Fed or, you know, quantitative easing or those kinds of things are still working at that supply side level. In other words, like in 2008, we bailed out more on the corporate side rather than the people side.

[Oren Cass]

Well, we secured the financial system to make sure that deposits of all the customers around the world were not completely lost. So that was the key, key proposal. Make sure that the financial system doesn't collapse. And then, then you're right. There was particularly in the last six years. Five. Five years since 2019 when we started. We had Covid. We tried to keep the economy afloat.

[Jon Stewart]

We tried to avoid the more demand side stimulus.

[Oren Cass]

Yeah, yeah, yeah. And certainly in this country. Yeah.

[Jon Stewart]

And that's where maybe the rubber meets the road. It feels like from what I've heard.

[Oren Cass]

Of economists, you want to dampen demand if you want to keep inflation down.

[Jon Stewart]

Right.

[Oren Cass]

But at the same time you increase demand by putting some fiscal fuel in the.

[Jon Stewart]

On the flip side, we kept people alive and in their homes. Like in 2008 when they decided on the quantitative easing and to give sort of that 0% interest window. And people were able to come in and borrow money at the corporate level.

[Oren Cass]

Right, right. At all levels. Households as well.

[Jon Stewart]

Household. But there was a horrible recession. A ton of people lost their homes. You know, was it crushing? The lesson to me is stimulating on the demand side was a more efficient use of capital and also had the moral bonus of covering the people. Human needs. Yeah. Rather than. So why does that seem now so controversial?

[Oren Cass]

It's not controversial in my books.

[Jon Stewart]

Well, because you're human. But these guys I'm talking to, they give me a whole. Like that last trillion really screwed us for the next 10 years. And I'm like, what are you talking about?

[Oren Cass]

Well, everything has to be reasonable and sensible. You don't want to overdo it to a point where you then have to sort of withdraw and you know, sponge the liquidities that are out there. And that's the reason why at some stage you have to stop quantitative easing and you have to also stop the fiscal stimulus and support that you. You've given to the economy in hard times because times are getting better.

[Jon Stewart]

Do the central banks have mechanisms that can be more responsive on that demand side, as you said, rather than it having to filter through the system more on that supply.

[Oren Cass]

The first tool that we use is interest rates.

[Jon Stewart]

Okay.

[Oren Cass]

That's the most efficient one and it's the one that that has been traditionally used. You talked about.

[Jon Stewart]

Certainly if you raise it will dampen the labor.

[Oren Cass]

Yeah.

[Jon Stewart]

Market.

[Oren Cass]

Yeah, yeah. And if you. And if you tighten which is if you reduce the interest rates, if you cut, then it should stimulate the economy and it should encourage people having lower financing cost to go out, borrow, invest, and buy houses and things like that.

[Jon Stewart]

Right. That's what I wonder. Is there any school of thought that thinks, boy, we've got this thing flipped on its head and we would be such a more efficient and humane society if we stimulated more like I'm thinking about. And you tell me if this is the wrong way of thinking about it. Trump came in $1.7 trillion tax cut. Most of it went to rich people. Cut the corporate tax rate from, I think, 35% to 21%. So that's a 14%. That's a huge amount of money, deregulated a lot of industries. So I would think as a package, that's trillions and trillions and trillions of dollars. A lot of it went to stock buybacks. It doesn't trickle into wages and the labor market, but it does pop up our deficit, making us less able to withstand, I don't know, a pandemic because we feel like then we can't put that.

[Oren Cass]

I'm a little bit scared when you talk about pandemic, because I watched the interview that we did together in 2009.

[Jon Stewart]

What did I say?

[Oren Cass]

Well, you said at the time, because we discussed the standing of the economy and I kind of said, things are getting better. And then you closed the interview saying, unless we have a global pandemic.

[Jon Stewart]

To the camera. I just want to address something very quickly. When she says, I said that she is not suggesting all Jews gave us what we're trying to do. And I only say that because there has been some confusion here in the United States, but. Exactly right. I'm wondering, as a central banker, is there a way to look at the economy less on the supply side? How do we get labor to benefit more efficiently from all that money?

[Oren Cass]

You have to, you know those things. You have two components, capital, labor. And you bring these together and you create value. The two have to be compensated. And for decades, capital has to be. Has been better remunerated than labor.

[Jon Stewart]

Yes.

[Oren Cass]

And the labor share in the value production has been reduced, then it's a matter of give and take. So if the labor market is tight as it is now, it is for the laborer to actually say, excuse me, I think that should be remunerated as well and probably better than it has for many, many years.

[Jon Stewart]

Right.

[Oren Cass]

So it's a question of is there.

[Jon Stewart]

A way to do it?

[Oren Cass]

Negotiations, discussions, and persistence.

[Jon Stewart]

Right. Yep. Is There a better way? Because it seems like for corporate subsidies they don't have to fight so hard. Like it seems like labor has to really fight for that seat at the table whereas the larger entities don't have.

[Oren Cass]

I think the balance of lobbying forces is obviously skewed to one side.

[Jon Stewart]

Right, right.

[Oren Cass]

In most countries.

[Jon Stewart]

So you would recommend poor people get better lobbyists. That would be. What about this? How about this? Do. Is there anything in corporate like when you talk about buybacks and it's all in stock, what if workers were automatically invested in that? I mean some, some companies do that. I think the tech industry does a pretty good job of that. You know, when you get hired there.

[Oren Cass]

You'Re immediately pay is one way to deal with it. But it's, it's a very small component to be a lot bigger.

[Jon Stewart]

Right. Do you think when you forecast out. What I worry about is labor is kind of been on the back foot and it seems like AI is going to further erode labor's position. Is that something that you guys figure in?

[Oren Cass]

I think that is a big concern. And I think that the discussions that are taking place now actually in New York concerning the governance of AI around the world and how it should be enhancing workers position, contribution to the economy rather than replacing workers is a vital discussion to be had.

[Jon Stewart]

Who's having that?

[Oren Cass]

I think it's engineered by the United Nation and there is a group of, you know, thinkers and philosophers and experts in AI who are saying watch out because if there is no global governance on that, just as we have global governance on nuclear, not perfectly complied with, but at least generally respected. Yeah, at least there is still here.

[Jon Stewart]

I'm worried about that. I happened to run into a couple of like leading lights of the AI movement and I said globalization, you know, really hit American manufacturing and we're still feeling it. And that's something that took decades to really play out.

[Oren Cass]

It also benefited the consumers.

[Jon Stewart]

Don't forget, no question that when you do that we did get much cheaper refrigerator and everything. Yes, yes, yes. But you know, that played out over years and there are still areas where it's decimated and haven't been back. It seems like I will do the same thing to the more white collar movement, but it's going to do it much quicker. And I said are you guys concerned about that? And the guy goes, and he's one of them big hitters in that. And he goes no, we'll be good. And I was like, oh, we're all going to die. Like this is, this is crazy. Will you adjust your.

[Oren Cass]

I don't think, I don't think we're going to die, but I think completely. Well, we will at some stage.

[Jon Stewart]

No, no, no, I understand. And by the way, maybe for a.

[Oren Cass]

Lot of people, but we should really be concerned about AI because where you are totally right is that it will affect all jobs. And those sort of white, White collar jobs which were not affected will be affected.

[Jon Stewart]

Right?

[Oren Cass]

And we, we have to be prepared. We have to improve our skill set. We have to be able to master that tool and not be the servant and the object of that tool because it is fast and it's transformative.

[Jon Stewart]

Do you know what they told me? It's already smarter than us because it is. What they do is it takes the 10,000 sort of years of human achievement and it swallows it in like six hours.

[Oren Cass]

I'll tell you something.

[Jon Stewart]

Yeah.

[Oren Cass]

This morning I wanted to check the price of butter because I thought you were going to ask me, do you do your. Do you do your grocery shopping? And did you notice that prices increase?

[Jon Stewart]

What kind of an animal do you think I am? Christine Lagarde? How dare you, If I may say so, I know your butler does the shopping.

[Oren Cass]

So I check and I check with one of those terribly smart AI engine. I say, what was the price in 2019? What was the price in 2024? I get the answer and it's totally skewed. I mean, it's cheaper now than it was in 2019. And my recollection is, so I tell this guy, this AI engine, I said, are you sure about your numbers? Can you check? Da, da, DA comes back and says, oh, terribly sorry, we made a mistake. Yes, you're right. It's the other way around. So that tells me one thing. We have to be alert. We have to check the facts. We have to be to exercise judgment. And we cannot be misunderstood.

[Jon Stewart]

Does it tell you that? Or does it tell you that AI is so far ahead of us that the plan was I'm going to give the head of the European Central bank the wrong butter figures. Absolutely plummeting her career. She's in charge of stability of Europe. Europe is then plunged into chaos. 500 years of Black Death. Oh, AI has got us by the.

[Oren Cass]

You must be behind that.

[Jon Stewart]

I probably am. The final question. So we're coming onto a period people were talking about the soft landing. It's still been rough for consumers. Do you foresee within the next. You know, because I know these things take time. 12 months, 18 months, 24 months, a better stability building into this obviously government without some sort of terrible catastrophe?

[Oren Cass]

Yes, I should think so.

[Jon Stewart]

Okay.

[Oren Cass]

Why do I say that? Because I think that the tools have improved. The analytical models and tools that we use to anticipate and to try to measure are better. And because we've learned in the last few years more than we had in.

[Jon Stewart]

Decades and the stable 2% and we.

[Oren Cass]

Know that uncertainty is going to be with us and we have to factor that in and make sure that we have tools to anticipate uncertainty, which is a big, big challenge.

[Christine Lagarde]

Sure.

[Jon Stewart]

We're anticipating uncertainty here in about eight weeks. So I feel ya. I feel ya. Thank you so much for joining us. It's always such a pleasure to see you. You're fantastic. Vice President Christine laguerre. Explore more shows from the Daily show.

[Christine Lagarde]

Podcast universe by searching the Daily Show.

[Jon Stewart]

Wherever you get your podcasts, watch the.

[Christine Lagarde]

Daily show weeknights at 1110 Central on Comedy Central and stream full episodes anytime on Paramount. This has been a Comedy Central podcast.