Talking Tariffs and Trade Wars with Grace Blakeley and Kathryn Edwards

Summary

Summary of "Talking Tariffs and Trade Wars with Grace Blakeley and Kathryn Edwards" on The Money with Katie Show

Podcast Information:

• Title: The Money with Katie Show
• Host: Katie Gattytosan
• Guests: Grace Blakeley, Katherine Edwards
• Episode Title: Talking Tariffs and Trade Wars with Grace Blakeley and Kathryn Edwards
• Release Date: April 23, 2025

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Introduction

In this episode of The Money with Katie Show, host Katie Gattytosan engages in an in-depth discussion with economist Katherine Edwards and author Grace Blakeley. The conversation delves into the complexities of U.S. tariffs, trade wars, and their broader implications on the global financial system and domestic economy. The guests explore the sustainability of the U.S. as the world's reserve currency, the impact of financialization on inequality, and the rising challenge posed by China's technological advancements.

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1. The U.S. as the Global Reserve Currency

Key Points:

• The U.S. dollar's status as the world's reserve currency has underpinned the American economic system.
• Grace Blakeley questions the benefits of maintaining this central role for the U.S., highlighting the advantages it provides to the wealthy and asset-rich individuals.
• Katherine Edwards emphasizes that a decline in the dollar's reserve status would necessitate massive restructuring of the U.S. financial system.

Notable Quotes:

• Grace Blakeley [00:32]: "Does it benefit the US to have this role at the center of global finance?"
• Katie Gattytosan [04:50]: "I had shared a meta analysis of what I was reading about tariffs... what your next move was likely to be would depend on your current position and which theory you believed to be most faithful to reality."

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2. Impact of Tariffs and Trade Wars

Key Points:

• Katie Gattytosan discusses her analysis of tariffs and their role in the current economic discourse.
• The guests explore whether the tariffs initiated under Donald Trump were merely a populist tactic or part of a broader strategy to maintain U.S. hegemony.
• Katherine Edwards suggests that tariffs may not be about immediate economic benefits but about preserving long-term dominance.

Notable Quotes:

• Katherine Edwards [01:10]: "The US's economic system relied on its imperial dominance... a tectonic shift."
• Grace Blakeley [09:05]: "We're at this moment of peak dissatisfaction with the US economy... this is a big fight."

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3. Shifting Dynamics in Global Finance

Key Points:

• Grace Blakely explains the unprecedented "run on U.S. Treasuries," signaling a loss of confidence in the dollar's safety.
• The conversation highlights how historically stable assets like U.S. government bonds are now perceived as riskier.
• Katherine Edwards points out that although the dollar's dominance has been declining over decades, recent policies have accelerated this trend.

Notable Quotes:

• Grace Blakeley [07:39]: "Investors are already talking about the dollar losing its safe haven status."
• Katie Gattytosan [14:04]: "Rest assured... the decline has been ongoing for decades."

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4. Financialization and Economic Inequality

Key Points:

• The U.S. economy has increasingly favored capital owners over workers, exacerbating wealth inequality.
• Katherine Edwards discusses how the financial sector has grown disproportionately compared to manufacturing, leading to fewer jobs and greater concentration of wealth.
• Grace Blakely emphasizes the role of financialization in all sectors, including technology and manufacturing, limiting the creation of quality jobs.

Notable Quotes:

• Katherine Edwards [32:16]: "The finance sector has grown relative to other sectors... wealth inequality has gone parabolic."
• Grace Blakeley [33:55]: "Financialization has come to dominate the way that a lot of other corporations work."

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5. China’s Rise as a Technological Superpower

Key Points:

• The guests discuss China's evolution from a manufacturing hub to a technological powerhouse.
• Grace Blakely outlines how China's long-term strategic investments have enabled it to become a formidable competitor to the U.S.
• The conversation addresses the U.S.'s response to China's advancements, questioning the effectiveness of tariffs in countering technological competition.

Notable Quotes:

• Grace Blakeley [55:23]: "China is a technological superpower... They have this really unlikely adversary stance."
• Grace Blakeley [59:37]: "Trump has launched this trade war... due to China's rise as a technological superpower."

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6. Domestic Implications and Future Outlook

Key Points:

• Loss of reserve currency status could lead to higher interest rates, impacting mortgages, loans, and overall economic stability.
• Katherine Edwards and Katie Gattytosan discuss the stagnation in homeownership rates and access to financial benefits for the lower and middle classes.
• The need for policy intervention to address structural imbalances and promote equitable economic growth.

Notable Quotes:

• Katie Gattytosan [46:49]: "You would pay higher for every loan you've ever gotten."
• Katherine Edwards [20:12]: "It's just a matter of trade-offs... it's not sustainable for the US economy."

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7. Backlash, Public Dissatisfaction, and Potential for Change

Key Points:

• Rising public frustration with economic policies and increasing inequality is leading to activism and collective action.
• The guests express optimism that this backlash could drive meaningful policy reforms.
• Emphasis on the importance of participatory democracy and leveraging existing laws to combat economic imbalances.

Notable Quotes:

• Grace Blakeley [68:35]: "Federal workers organizing against Elon Musk... it's so exciting."
• Katie Gattytosan [69:17]: "The backlash to what's going on will be our saving grace."

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Conclusion

This episode provides a comprehensive examination of the intertwined issues of U.S. tariffs, global financial dominance, economic inequality, and the rise of China as a technological leader. Katherine Edwards and Grace Blakeley offer critical insights into how current policies might be reshaping the global economic landscape and the potential domestic consequences for the average American. The discussion underscores the urgent need for policy reforms and collective action to address the systemic issues exacerbated by financialization and trade policies.

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Additional Insights

• Historical Context: The guests reflect on past economic shifts, drawing parallels between the current trade dynamics and historical events like the Cold War era's economic competitions.
• Policy Recommendations: While not delving into specific policies, there is a consensus on the necessity of leveraging existing regulatory frameworks, such as antitrust laws, to curb the excessive concentration of wealth and power in the financial sector.
• Optimism Amidst Challenges: Despite acknowledging the bleakness of present economic trends, both guests express hope that public dissatisfaction will catalyze positive change.

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This summary captures the essence of the episode, highlighting the critical discussions and insights shared by Katie Gattytosan, Grace Blakeley, and Katherine Edwards. For a more detailed understanding, listening to the full episode is recommended.

Transcript

[Katie Gattytosan]

Hey, Fidelity, how can I remember to invest every month?

[Grace Blakely]

With the Fidelity app, you can choose a schedule and set up recurring investments in stocks and ETFs.

[Katie Gattytosan]

Huh, that sounds easier than I thought.

[Grace Blakely]

You got this?

[Katie Gattytosan]

Yeah, I do. Now where did I put my keys?

[Grace Blakely]

You will find them where you left them.

[Katherine Edwards]

Investing involves risk, including risk of loss.

[Katie Gattytosan]

Fidelity Brokerage Services, LLC Member NYSE SIPC.

[Grace Blakely]

Does it benefit the US to have this role at the center of global finance? It's certainly benefited some Americans, it's benefited those at the very top, and it's also benefited, to an extent, those who have lots of assets and big 401ks. And now that imbalance is coming home to root because there's an extent to which people who have been left out of this bargain are rebelling against that.

[Katherine Edwards]

I'm Katie Gattytossan, and this is the Money with Katie Show A few weeks ago, I shared what I would generously call a meta analysis of what I was reading about tariffs in the newsletter, and it felt like a necessary precursor for any thoughts that I wanted to share on the financial moves that you might be considering right now. Because there were so many theories about what all of it meant and what was coming next, that I realized what your next move was likely to be would depend on a your current position and b which theory you believed to be most faithful to reality. And since we're at the beginning of a four year term, it feels like this might be our new normal for a while. Yay. One thing I wrote about was the way in which the US's economic system relied on its imperial dominance in the world, because that dominance is what enables the infinite money spigot that powers the U.S. economy. And this means, in essence, that a period of decline would probably mean absolutely massive changes in how our country's financial system works. A tectonic shift shift. And as the opinions flew online, I found myself unsatisfied with the most popular explanation that Donald Trump is just dumb and he just loves tariffs. Like nothing to see here. Because okay, while that may be true, I really wanted to know if there were other alternative explanations. Were there people who were writing about or theorizing about our current moment under the assumption that there is an end goal here? Or at the very least, what's happening right now might offer some insight about the precise ways in which this country doesn't quite see itself clearly anymore, especially with respect to China? Maybe the most damning response that I came across was from the economist, whose work was cited as the foundation for the policy His OP EDS headline was the Trump White House cited my research to justify tariffs. It got it all wrong. Among other errors, the pass through rate that the administration is assuming, so that is the portion of the tariff hike that is likely to be passed on to consumers in the form of higher prices is only 25%. And he asks where does 25% come from? Is it related to our work? Before answering, I don't know, he suggests that the pass through rate that their research found was 95%. That is to say that almost the entirety of a tariff is paid by the end consumer. So today I wanted to pressure test some of my thoughts, some of the things that I haven't been able to stop thinking about with two people. Katherine Edwards, a fan favorite economist, and Grace Blakely, the UK's author of Vulture Capitalism and the prominent anti capitalist voice who's produced some of the most clarifying assessments I have read that take a much wider view than most of the voices that we hear from in the American media, mine included. I will tell you that I had a stack of questions prepared for these two and we recorded for an hour and a half. We made it through approximately two of them. So here is my conversation with Katherine Edwards and Grace Blakely. Kids, Grace, welcome back to the show. Thank you both for joining me again and this time together.

[Grace Blakely]

It's great to be here. Thanks for having us.

[Katie Gattytosan]

Yeah, thank you so much for inviting me back.

[Katherine Edwards]

I think you two are probably the most popular guests that we've ever had. So I'm actually really interested to see how the dynamic is between the three of us. Okay, let's dive into it. So Keds, you and I spoke, I think two days after the tariffs were announced. I had made a comment to you about, about how damaging I thought something like this must be to global trust of the United States and of the administration. Because if you are another country and you're trying to do business with the U.S. you're now thinking, okay, this is like an erratic, unstable actor. I don't really want to entrench my interests or entwine my interests with them any more than I have to. And you said something that really, really struck me. You said, well, like was it really about trust before? Like, did they actually trust us or did we just have more money than them? And I wanted to talk to you about that and what you meant by that comment because I think it might be an interesting and useful entry point for the conversation today.

[Katie Gattytosan]

Yeah, I mean, I think that for so many people who are listening, they find what's going on in our country to be so repugnant and so at odds with our values. I mean, everything from, like, how the tariffs are unreal rolling to what Musk is doing to the government, to Republicans having gag orders on town halls because they don't want to hear criticism. I mean, it just. It feels so un American. And we can basically imprint that on how we're reading the global landscape of, like, I'm so embarrassed and ashamed of what my country is doing. That must be how they see me. And I think it just helps to. They did not lend us money through treasury sales or interact with the US and the global economy because they were our best friend, you know, and we just jolted them and said we were going somewhere, to a bar, but then, like, didn't show up. That's not what just happened. I mean, this has always been like, yes, America has ideals and values and institutions and norms that other people in other countries love and still love, but this was about, like, kind of, like, pretty complicated financial flows internationally. And that has less to do with how much they like us. I mean, because bankers, God love them, kind of vicious creatures on certain levels, and they're not going to be charitable towards a country because they feel like it. The trust that you feel has been broken in your heart with your country is not what's going on in the global economy necessarily. I would say even not for the most part. There's probably a lot of people that are like, oh, dealing with America again, like, don't love that they do this, but still love their reality shows in Hollywood. Right. It's much more complicated. And feelings matter less when money is on the line.

[Katherine Edwards]

Yeah. I want to kick this to Grace in a second, because you are not in the United States right now. You are in another country. But I feel like the narrative or the story that I've heard is that if the United States has been, since the end of World War II, kind of the dominant global economic power, their money is the reserve currency. Everything kind of flows through them. They're a big decision maker. And so if you were another country in the global economy, you kind of have to work with the US and you kind of have to incorporate their desires, their institutions, their decisions into whatever you're doing. And that because of these erratic tariff announcements, there may be the risk that these other countries are going to start to look for ways to go around the United States and to not involve the United States as much, or how can we ally with one another in such a way that we can kind of remove this erratic middleman that we don't really necessarily feel we can rely on anymore, or like that their involvement is complicating things for us in a way that we would rather just avoid if possible. Does that resonate with either of you and your understanding of what's going on? Or do you think that that's maybe jumping the shark a little bit?

[Grace Blakely]

So in some ways what we're seeing right now is a bit of a tectonic shift in the sense that there was a run on U.S. treasuries. That isn't something that's happened in a very long time, certainly not during periods outside of very severe financial and economic crisis. It's not something that you expect during a period of economic volatility in other sectors. So when investors are expecting a recession, as they are today, they tend to put their money into safe havens, right? So that could be anything from gold to US Treasuries and dollars, which are considered to be the world's safest assets because nobody expects the US to default on its debt. But even more than that, markets expect the US State and particularly the Fed to act as the kind of guardian of global capitalism. So when the shit hits the fan, the Fed steps up. You know, we saw this in 2008 with the swap lines that the Fed opened up with other central banks, which are basically facilities that allowed other countries to borrow dollars, which was really important when so much international investment and lending and borrowing was taking place in dollars. So other countries banks needed dollars. You saw the same sort of actions in the wake of the COVID 19 lockdowns and the market panic that took place in March 2020. The Fed again stepped up. And what people are looking at right now is a United States government that is actually acting to kind of exacerbate volatility in markets rather than stepping in to ride to the rescue. Now obviously we first saw that in equities market. So for lots of different reasons, investors already noticing that particularly tech stocks were overvalued. But then looking at the potential for recession across the global economy, the potential impact on of tariffs, on inflation, big sell offs in equities across the board, what nobody expected to happen was that then to hit Treasuries, so to hit bond markets, what you would usually expect is that money that flowed out of equities to flow into bonds, Investors are thinking the economy's going to take a hit from tariffs, companies aren't going to make as much profit as before. So we're going to move our money into Government bonds, which are safe, they provide a steady payment even during times of uncertainty. And you only really see that relationship shift. So a run on bonds when investors are panicking about the capacity of a government to repay its debts or to kind of back up the financial system that relies on these debt instruments, which is what we saw in the UK with Liz Truss a few years ago. That usually only happens, as I said, kind of when there's a potential financial crisis or you expect a government, a poor country, to be unable to repay its debts. So it's hard to explain this as anything other than a perceived increase in the risk premium of holding what was supposed to be a really safe asset. So investors are looking at what's supposed to be the safest asset in the global economy, the underpinning of the plumbing at the heart of the international financial system, US government bonds. And they're saying this is riskier than we thought it was. And the corollary of that is that that asset is no longer going to be thought of uncomplicatedly as the foundation of the global economy. That means the dollar is no longer again, thought of as necessarily the ongoing reserve currency. And again, there's lots of kind of ums and ahs associated with this. But investors are already talking about the dollar losing its safe haven status and the US potentially losing its centrality when it comes to global finance in particular. And that's huge because if the dollar loses its status as the world's reserve currency, if it ceases to be as central a part of the architecture of international finance, then suddenly people's willingness and desire to hold dollars and dollar denominated assets, particularly Treasuries, is reduced. And that compromises the US's ability, what's called the dual deficit. So the fact that it has a current account deficit, a trade deficit, and a fiscal deficit, so the government borrowing more money than it gets in taxes, that's when you start to see a real tectonic shift in, like, the way the global economy works. This happened maybe like once a century when a great power loses power relative to another rising economy. So that's big.

[Katherine Edwards]

Right.

[Grace Blakely]

And it's kind of already happening. To be fair, it's been happening for a while. Central banks have been holding fewer dollars. But this is like a big shift.

[Katie Gattytosan]

Yeah. Rest assured for listeners that this is not something that Trump has caused. In a week, we are building towards something. The US as the global reserve currency, you can see like how many dollars other countries are holding. And it's been declining for, I mean, I think like two or three decades. It has not been sudden.

[Katherine Edwards]

Oh really?

[Katie Gattytosan]

Yeah, it was like, I think our peak was in the late 80s.

[Grace Blakely]

I think it was like 70% of central bank reserve assets were held in dollars like 20, 30 years ago. And it's now in like the mid-60s. So yeah, it's been falling for some time.

[Katie Gattytosan]

Yeah, they've been trying to diversify away from the dollar for a while because it has downsides for them too. I mean like we have a certain amount of power as well as a cost to that power for being the reserve currency. But as my mom would say, like no matter how flat the pancake, there's always another side. There is a cost to not having your reserve currency be your own currency and there's a loss of control to that. And so many other countries have been trying to diversify away from the dollar for a long time. And even in the aftermath of the pandemic, Janet Yellen, who was Biden's treasury secretary, she had several congressional hearings where she talked about like the US Was at a precipitous state for being the reserve currency of the world. And so this is like a trend that's been happening for a, that has accelerated over the course of about two weeks. That is really this simmering question underneath. Are we putting all of our eggs in the US Basket? And is this a good idea, a question that people have had outside of the US For a while that is just very stark and also front and center in news coverage and thinking. So it is very different. But it's also not out of nowhere. Trump is not single handedly causing a crisis of the US As a global reserve currency to some de because there has been rumblings of it for a long time. And I think Yellen had tried to propose that we ought to have a global reserve currency. A lot of liberal macroeconomists in the US have said we need a global reserve currency that's not tied to one country. To have basically the Fed's de facto role as the world's defender of capitalism be something that is a global institution as opposed to a US Institution. And people for decades have written about this is not sustainable for the US economy. We should have a truly global reserve currency that is not the US dollar.

[Katherine Edwards]

We'll get right back to this conversation after a quick break. This one is for my investing listeners, both new and seasoned. Public.com is the investing platform with a wide range of tools and asset classes that can help you build the multi asset investment portfolio of your dreams. Like for example, if your allocation goes beyond stocks and bonds to include things like options trading, you can also generate fixed income with a suite of yield accounts like Public's High Yield Cash Account that set an industry leading 4.1% APY. You can also tap into Alpha Public's AI powered investment research Assistant that can answer questions about any stock. Public is a US Based company and a member of FINRA with an award winning customer support team that's trusted by millions. Fund your account in five minutes or less and you could earn up to $10,000. Yes, I said $10,000. When you transfer your old investment portfolio, [e-mail] MWK that's public.com MWK paid for by Public Investing. Full disclosures in Podcast Description it feels like up until this point, maybe the last couple decades, it was everyone else that was asking are we really sure if we want, you know, everything to kind of go through the US but this decision feels like it's the US asking do we really want to be at the center of this? And I'm curious when you say it's not sustainable for the US economy for this to be the way things are run. Tell me more about what that means and in what ways that becomes unsustainable.

[Katie Gattytosan]

It's just about relative positioning and movement and grace. I would love to hear your thoughts on this because I'm a labor economist and so I'm just like swimming in different waters right now talking about this.

[Katherine Edwards]

Well, at least I'm a girl with a microphone, so you're definitely both more qualified than I am to talk about this.

[Katie Gattytosan]

We had very similar conversations during the 2008 financial crisis of that was such a direct test of the global financial system that had all kinds of failing marks. And even then there were calls to say we have to have a global currency system. And a former an economist in the us, Joseph Stieglitz, who's a Nobel Prize winner, super lefty, he also writes popular books and if you are interested in economics and want to know more about it, I would recommend Stieglitz's book. I think he's a strong writer and he explains things well. But Stieglitz, back in the aughts was saying we should have a global reserve currency because again, it's not about is it sustainable but is it a role that we want to keep playing with our currency because it makes certain things harder and certain things easier and there's a trade off to both. And so it's not about like there's this system that's going to collapse under our own weight and we're all going to be crushed. It's just you play a role and is this the role that's the best for our economy anymore? That might not be clear, but it's a question that's been around for a while and sometimes crises force your hand. Sometimes crises are made by one person. A lot of things can happen. But the global financial system is not a fixed point.

[Katherine Edwards]

Okay?

[Katie Gattytosan]

So that, I mean, so rest assured, at least I think this is me being like, hey, remember that I'm optimist economy and I don't want you to feel too bad about the world. Yeah, lots on fire, but it's been dry kindling for a while.

[Katherine Edwards]

Yeah, you're like, but it's not just that it's bad now, it's that it's been bad. So rest assured it didn't just get bad. You didn't even know it was bad.

[Katie Gattytosan]

But this is a question, is the U.S. falling out of the global reserve currency bad?

[Katherine Edwards]

That's what I'm trying to understand.

[Katie Gattytosan]

It's just a matter of trade offs. The share of US debt that is held by foreigners has been falling. I mean it's been falling a ton. But part of that is also because you know, as you no doubt know Katie, when you get closer to retirement, you need to ditch equities and pick up some bonds. Right? Well we have a population that is massive. The youngest baby boomer is 61. They are moving their trillions of dollars of retirement wealth into bonds. That's where most of them are. And so they've, they've made a very large competitor for foreign debt holders from American debt holders and their pension funds and their 401ks. Right. There's always shifts happening in this market globally for dollars and safety and what the US's role should be. It helps to navel gaze. What I will also add is that we think all the time now about China, but we none of us were prime age in the 80s when the question was like what are we going to do about Japan? So it's different villain, different question, different challenge, different, different answer. But like we have been here post World War II before.

[Grace Blakely]

I really want to pick up on this question about is the US's role as the kind of provider of the world's reserve currency. What does that mean for the U.S. economy? Right. And to understand that I think we just have to understand a little bit about what that means and about the kind of dynamics of international trade that underpin it. So trade 101 current accounts when you have a current account deficit with another country. So when you purchase more goods from that country than they buy from, you have a current account deficit. Let's use the example of the UK and Vietnam. Let's say if the UK ran a current account deficit with Vietnam, then Vietnam will be selling more to the UK than vice versa. What that means is that for the UK to purchase those imports from Vietnam, the people who are buying those imports have to sell pounds sterling in order to purchase the Vietnamese currency to buy their exports. Right. This is a really important thing to understand the currency dynamics of international trade, because generally speaking, you're going to have to buy the exports of a country in their domestic currency in one way or another. Effectively that's going to involve some exchange rate dynamics. So when you run a big current account deficit, you're basically selling a lot of your own currency to buy the currencies of other countries. And what that generally means over the long term is that your currency depreciates. And this is supposed to be a kind of self equilibrating cycle. You lose the value of your currency by running a current account deficit. That then means that your currency devalues, which makes imports more expensive and your exports more competitive, and that then rebalances the current account deficit. So that means that you end up with a trade becoming rebalanced. This has always been the argument about how trade kind of naturally returns to equilibrium through these dynamics of currencies when you allow your currency to kind of float vote on international markets. Now what is interesting about the US and this has been true of the UK as well for a while, is that it's had a current account deficit for a very, very long time and it hasn't suffered the kind of attendant dramatic depreciation in its currency that you would expect alongside that. And that's because you have to understand the other side of this, these sets of flows. So when we're talking about international trade, you can't just look at goods and services, which is the current account. You have to look at flows of investment as well, which is the capital. Now if there are all these dollars that are being kind of basically gotten rid of or sold on international markets so that the US can purchase all of these imports, what's happening to those dollars? Other investors, other countries are snapping them up and they're snapping them up for loads of different reasons. Firstly, oil's been priced in dollars for a really long time. You need dollars to buy oil. Secondly, international finance runs on dollars. Dollars. Banks kind of clear Loans, all these different sorts of things take place in dollars. They borrow in dollars. So you as a central bank want dollars. If you're going to be able to back up your financial system, you as a bank want dollars to be able to kind of make sure that you have those on your balance sheets equally. A lot of those dollars have flowed into purchases of US government debt, right? We've seen this with foreign holdings of US government debt. And recently vast amounts of money have flowed into internationally, have flowed into US equity markets. International investors all over the world have been buying equities. This has been the case for loads of different asset classes. This is the way that America's role as the kind of center of global finance works is that, yeah, it has a big current account deficit, but that money ends up coming back as investors plow money into US assets debt. And this has kind of been the case for the UK as well. This was the case for the UK in the past. We had a huge, huge financial sector which meant that even though we had this big current account deficit, loads of money was flowing back into the uk. People still wanted pounds to do things like invest in property, invest in finance. And that gave us a really imbalanced economy. Right? This is the crucial thing because on the whole, these balances might work out, you might be losing lots of money in terms of the current account deficit that might then be flowing back in, in terms of investment. But that's going to skew your domestic economy. Because if you haven't got any production of goods, because you are relying on the import of goods from other countries, you have a hollowed out manufacturing base, that's where a lot of jobs are, right? And if you then have a huge amount of economic activity being devoted to basically the management of financial flows, which is what you see in the US is what you saw in the UK in the past, that then pulls jobs into those sectors that tend to exacerbate inequality, have lower levels of employment, often rely on kind of international talent rather than providing opportunities for people in the domestic economy. So you get this kind of skewed domestic picture which we definitely see in the US with the combination of deindustrialization and the growth of these kind of mega financial hubs. And in fact, you know, the fact that the largest private banks on the planet are in the US in some of the most powerful financial institutions in the world, that's been an internal rebalancing of the US economy that reflects these international dynamics of trade. So when we ask the question, is it a Benefit for the US to act as this kind of guardian of global capitalism. Is it a benefit for the dollar to be the world's reserve currency? Well, it means that some people get very rich. It also means that the US has a consistent amount of demand for bonds, for government bonds, so it can basically spend as much as it likes. But that doesn't necessarily benefit ordinary Americans. And I would argue that it tends to create costs for ordinary Americans.

[Katie Gattytosan]

I'm going to jump in and say a few things. One, so in this is like such a mind blowingly good definition of trade or explanation of trade, but if we had a global reserve currency, basically the current account deficit of dollars would not be matched by people trying to buy it. They would be buying the global reserve. And so this idea that trade would balance over time as your dollar, we have to sell a lot of dollars in order to buy something. But then where do those dollars go? That, you know, it's just supply and demand. If you have more dollars that you're selling, the value of the dollar falls. That's propped up by people holding it as a reserve and wanting to have US dollars. But if we had a global reserve currency, that wouldn't be the case. And that amount, the propping up of the dollar would be really different. So when I said that this is about choices, the question is do we want to keep using this kind of counterbalance to our trade deficits to be the dollar, or do we want something like a global reserve currency? The second thing which I thought was really interesting was when you talk about deindustrialization from the trade perspective. Absolutely. The US and the UK lost manufacturing jobs because the relative value of the export made them very expensive. But this is kind of we're going to get to the dark factories. Katie. It's also not clear industrialization would mean jobs today. And that we find ourselves with this other challenge of like, well, we would love to rebalance trade and so we can make more things here. But making more things here equals employing more people here in these jobs. That's not a guarantee anymore. And in fact, if you looked at any type of evidence of manufacturing employment, you should assume it is going to take a nosedive down. We are not going to use many people to build things in the future. That puts this hole of like, well, what are we risking and what are we gaining? I mean, if you could like flick a switch, snap your fingers, have a less demand for the dollar and then we get 30 million manufacturing jobs back. Well, yeah, it seems like it's a win but you could have the would be production of 30 million manufacturing jobs done with maybe a half a million people. It still leaves, I think, the biggest question for post industrial economies in an era of incredible automation and technology, of where are your good jobs going to come from?

[Katherine Edwards]

Yes.

[Katie Gattytosan]

And how are you going to guarantee them? We have had one answer to this question. Good jobs come from manufacturing. We have to come up with a new answer that's not going to come from manufacturing anymore. We can bring some jobs back, but you will never have a middle class sustained by manufacturing again. So we either accept that fact and find another way to do it, or we just like, continue to, like, just nose dive into nostalgia because we wanted to come back. And so when you were talking, I thought this was such a beautiful explanation. It's such a great way to understand so much of our economy and our place in the world. But also this big challenge and this big unanswered question with all of Trump's movement of like, how do you think you're going to get there? Because it all comes back to going back in time instead of seeing the future. And so, Grace, what I tend to shill is making jobs better in the US that you can't export.

[Grace Blakely]

I totally agree with that. What came to mind as you were talking was actually the fact that if you look at the kind of the disputes that existed between labor and capital during the 70s and 80s before globalization really took off and a lot of these jobs were lost to outsourcing, a lot of those disputes were about the automation of the production process. So workers, unionized workers in the US Were saying to bosses, we are not going to let you automate our job jobs because we want to have jobs in the future. Right. And then this magical thing of globalization comes in and suddenly all the bosses say, oh, actually we can't afford to employ workers here anymore. We're going to employ workers in China because they're way cheaper. And that's not anything we can help. It's just globalization. And then eventually labor costs in other countries rise and they go back to the original strategy of automation. But they've gone around that confrontation with labor. They've avoided the confrontation with labor over automation, which is always so political, using outsourcing as a way to discipline workers into accepting job losses. And then they bring those jobs back eventually in the future, now without creating any new employment.

[Katie Gattytosan]

The discourse of the US Economy, of every major issue that has ever affected you, has a reason, has an excuse, and has a fall guy. And globalization and trade is such an enormous fall guy for so many people in our economy. This like big get out of jail free card of, oh, it's trade. Because no one wants to say, sorry, a robot can do your job. And so I'm going to just have a robot do it. And too bad.

[Katherine Edwards]

Grace, when you mentioned the imbalanced economy that this sort of dynamic creates, it sounds like what you're saying is that the status quo effectively privileges capital over goods and services. That that is kind of the outcome that you get when you structure it this way. And the finance industry's share of GDP has more than doubled since 1950. It was around 10%. Now it's I think around 22% as of 2020. At its peak in the mid 20th century, the manufacturing sector had 40% of all profits and 29% of the nation's jobs. So there's some parity there between the amount of money that's flowing into it and the jobs. Whereas today the financial sector has 40% of the nation's profits. So the same as manufacturing used to, but only 5% of of the jobs. To your point about the imbalanced economy that you get as a result, you have a high employment industry being replaced by a low employment industry, but effectively capturing the same piece of that pie. And I know that the global economy is extremely complex, but it does feel like that little nugget of oh yeah, well, if almost half of the country's income is flowing into finance, that that kind of does a lot to explain why we might be having a lot of the problems that we're having in the labor market and why wealth inequality has kind of gone parabolic, particularly since 2008. I think that's really noteworthy here.

[Grace Blakely]

The finance sector has grown relative to other sectors. That's true, but it's also the logic of finance and financialization has come to dominate the way that a lot of other corporations work. So it's not just like, like you've had the growth of horrible mean banks at the expense of nice productive manufacturing enterprises. Instead you've got the financialization of all areas of the economy. So what does that mean? Okay, yeah, so the bank's share and by the way, increasingly now non bank financial institutions. So the hedge funds, private equity, all those different non bank financial institutions that by the way, were a big part of the chaos that we saw in the markets the other week. So finance in general has grown. Absolutely. But look at the big tech companies, for example. They're not just companies producing a useful good in exchange for normal profits. They are either monopolists or oligopolists. They are hugely oriented in terms of their day to day business operations to managing their share prices, managing their relationships with banks, lenders, investors, thinking about their own investments in financial markets, thinking about mergers, acquisitions, all of these processes that deeply involve banks and other financial institutions. They've become extremely closely linked. And that's not even talking about the ownership of the shares in these firms, which are yes, in part owned by foreign investors to a large extent, but also by huge asset managers, which, you know, the big three asset managers, the blackrocks, Vanguards and State Street States, own an astonishing share of the world's assets. Right. They own trillions in assets and they have this kind of huge amount of kind of authority over what happens in the rest of the economy as a result of their concentrated ownership structures. Even if you look at manufacturing itself, this is a sector now that has in a way become financialized because it is less about creating good jobs that, you know, produce stuff and then selling that on domestic markets, are much more about thinking, okay, how do we optimize global supply chains in such a way that allow us to take advantage of the cheapest labor, take advantage of the most tax loopholes, optimize kind of our trading relationships to allow us to exploit arbitrage opportunities and exchange rate hedging and all of these sort of things that again really significantly involve finance. So I would say what's really happened, and this is, I think where these questions around who benefits are really important is ever since the 1980s, labor has been significantly defeated all over the rich world and big corporations across the board have just succeeded in gaining so much more power over society, over our politics, over international trade, and they've used that to suck wealth up towards them. And workers are the ones who've been screwed over across the board. This is, I think, this question about does it benefit the US to have this role at the center of global finance. It's certainly benefited some Americans, it's benefited those at the very top and it's also benefited to an extent those who have lots of assets and big 401ks. And now that imbalance is coming home to roost because there's an extent to which people who have been left out of this bargain are rebelling against that. Although in a way that kind of isn't necessarily going to be that productive for them.

[Katie Gattytosan]

Oh yeah, they did not back a winner on that one. But they are angry. It's also worth stopping here. I mean, again, what a banger explanation. But it's helpful to remember that, like we also made choices to accelerate this wealth accumulation rather than decelerate it.

[Grace Blakely]

Yeah, 100%.

[Katie Gattytosan]

I mean, stock buyback. Buybacks used to be illegal because it was manipulation of your stock price so you couldn't have a stock buyback. Not since 1982. And now every year it's a record number of stock buybacks, which is just re concentrating wealth. And we have now pretty good evidence that stock buybacks depress wages. Yeah, but do we let people do it? Yeah. And when we had a corporate tax cut, it's all about making sure that they can pay their workers more taxes, are keeping them from paying their workers a lot of money. You know, what do they do? It's the largest year of stock buybacks in US history. That is a problem that has a policy. Can turn it on, can turn it off again. I mean, we have monopolistic companies. We also have an antitrust law that could be enforced, which in our antitrust law is actually pretty severe relative to other countries. I mean, the US's antitrust law is very good. It is not very enforced. If we were to change that, I mean, why would a company like Amazon own a production studio for movies? Nope, doesn't make sense. Split them up, right? Like we can identify market concentration. Economists, we have like four different indices for market concentration. We can tell you exactly how monopolistic all of these companies are. That policy could change that and say, okay, you're a monopoly. Too bad. I mean, Facebook is in court or Meta is in court right now fighting this as hard as they can because you know they're saying like, look, it's a monopoly. You shouldn't own WhatsApp and Instagram and Meta. Like you need to spin these off. So before you go into this despair, the little guy has some pretty massive tools that in its toolbox and at our disposal that we are not using.

[Katherine Edwards]

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[Katie Gattytosan]

Say we, are you referring to policymakers like U.S. policymakers?

[Katherine Edwards]

Yes. Those making these decisions within government decided to accelerate that process. And when you say the little guy has the power, are you referring to the fact that with effective collective action, you can force people's hand to enforce the laws that are already on the books?

[Katie Gattytosan]

It's bleak out there. I won't pretend like it's not bleak out there.

[Katherine Edwards]

She's like, but I'm optimist, economist. So give me a second. Step back.

[Katie Gattytosan]

This is what they don't pay me for.

[Katherine Edwards]

Sorry, this is what they pay me. The medium books.

[Katie Gattytosan]

Well, yeah. The thing to stress is things cook for a long time in the economy. And even if you see the acute moment like last two weeks, will the US Be a global reserve currency and what does that mean for our economy? Sure. Last two weeks it's been acute. Last two decades it's been a question that has been transforming. I mean, same thing with the concentration of wealth and the power of the financial sector and the lack of regulation over corporate dollars and corporate concentration and wealth accumulation going to the top, it's been cooking for a long time and the breaking points get reached. So, no. Have you ever called your member of Congress and said, I'm worried about stock buyback regulations from 1982 and whether or not we should reverse that policy? You probably haven't. You want them to be better and act better on your behalf. But it's not like it doesn't happen overnight. All these things take time. Even the things that feel like they don't take time took a long time. And so I think in the 80s there was this, because the economy was so bad, there was this view that we basically have to let these businesses do whatever they want. Going to offshore, they're going to go away. We know now because of the kind of Fed as the global capitalist protector.

[Katherine Edwards]

Capitalism's policemen.

[Katie Gattytosan]

Capitalism's policemen. There's a lot of things that aren't going to leave the US like companies benefit from being here and we don't force their hand in any way to make it benefit us the way that we could. That can change, I think a lot of aspects of neoliberalism, a lot of aspects of capitalism first workers, last that we have had. We gave them like four decades of Runway and it hasn't really worked out in their favor. I mean that stuff can change and you have to fight for it. You know, when the nihilism comes from, well, it didn't change without me doing anything or just being upset. They're not acting as my hero, they should be doing better by me. But they're listening to the people who are talking to them, paying them, people who are paying them. And it, I mean y'all, it's a big fight, but that doesn't mean we'll lose it. Think of it this way. Imagine how hard this fight was before we had any laws in place protecting us. We have have the laws, we have the enforcement. How hard was it to unionize before we had the right to unionize? Pretty hard. Yeah, we have it now. We have an antitrust act, we have, you know, corporate regulation. Like we've got a lot on our side. We have to exercise this muscle, don't give up and know that like yes, wealth has gone upward, but that's not because it's the only direction it's capable of going. What I took away from the 2024 election was in some ways this big crucible moment of all right, this four decade system built on the concentration of wealth at the top and the like, you'll get, you'll catch up eventually is really starting to break. But at least the anger is there, at least the frustration is there. What they're not going to get is results. Yeah, focus on that. They have anger. They won't get results if they won't get results. And we know how to deliver results. Focus on results. So that's my big like, don't Despair, nihilism speech. Other thing I want to bring up though is that you have benefited from this system and it's in a really way that you probably don't care about. But it's through interest rates in the US Being this bond market in the US in which people make tiny little loans to the federal government at a pretty low rate, that's actually highly influential of how much you pay in a mortgage. And the mortgage market in the US it's the other safe bet. Mortgages very highly regulated in the US goes through pretty extensive underwriting, 30 year process guaranteed by the federal government. Mortgages are another safe investment bet. And when mortgage rates are determined by who it's competing with as the other safe bet, because it's not as safe as the federal government, but it's a lot safer than equities. And your interest rates that you can get on a mortgage are influenced by what the federal government bond market is doing. And if that market were to become unstable because people aren't interested in dollars or they just not necessarily even unstable, just less desirable. We aren't the global reserve currency anymore. You will pay higher for every loan you've ever gotten. You'd pay higher for your student loans, you'd pay higher for your mortgage, you'd pay higher for your small business loan, for the addition onto your house, the car that you want to buy. Everything that we borrow in the US is cheaper because of the US dollar as the reserve currency, keeping our interest rates relatively low.

[Katherine Edwards]

Yeah.

[Katie Gattytosan]

So I know that having a cheap auto loan or a cheap home loan is not the same as having like universal healthcare and a high wage. But it is worth noting, like we have benefited from this and when that benefit maybe stops, we would be absolutely catastrophically moved of like, what do you mean mortgage rates now stay at 8% all the time.

[Katherine Edwards]

I guess the translation that I would make there is that yes, there are elements of this global economic order that have been bad for Americans, but in some ways Americans are also the biggest beneficiaries of it. And I think that that's kind of a contradiction in terms, that over the last, say hundred years the United States has really enforced global capitalism. If any country tries to try something different, America's like, boom. Nope. And so when we talk about capitalism as Americans of like this thing that we don't like, and we should also keep in mind that it's the best for us, we have these qualms with it, and yet we are the ones at the top of this pyramid. It is interesting to kind of hold those two truths simultaneously. I do want to talk about the idea that when it comes to the case that we just laid out and this idea that the global economic order has created in the US an imbalanced economy that privileges capital over workers, goods, services, et cetera, that I think someone could walk away from that going, okay, so it sounds like something did need to change. Okay, so it sounds like there actually was a problem with trade or something that, like, maybe these tariffs are attempting to address. Yes. And Grace, you wrote the other day about how part of what this tariffs move indicates or part of what's happening here, you really can't understand or interpret through the language of economics that we've used for the last 50 years, because it doesn't really make any sense if you try to decode it using that language, that you have to use the language of power to understand what's happening. And, and you wrote, quote, trump's tariffs are about defending America's declining position in the world system and preserving hegemony, even if it means sacrificing prosperity at home. And I wanted to talk about what you meant by that, the sacrificing prosperity at home, because it feels in some ways counterintuitive to what we've just been talking about with, like, well, we've been this hegemonic power and these have been the downsides for Americans. I wanna spend some time squaring that.

[Grace Blakely]

Yeah. The way you square it is that there is no American national interests. There are class interests within American society. Right. And this is kind of what I've wanted, been wanting to drive home this entire time. It's the current order benefits the very wealthy, it benefits the owners of capital, it benefits kind of senior executives, people with very well paid professional jobs within this system. It benefits the politicians who are paid by those same people. And to an extent, it benefits the segment of the population who own assets. And therefore some of that, well, trickles down in inverted commas to them. So if you look at who the real beneficiaries of this kind of system of American economic dominance has been over the last 40, 50 years, it is the top 1%. The higher you go up the 0.01% of benefit the most than the 1%, then the 10%, then the 20%. Right. So anyone in American society who basically, like, owns assets and has a stake in American capitalism has benefited from this model. And that's actually incidentally why in some ways we had the financial crisis. It was an attempt to exploit the fact that as Ken was Just saying interest rates were low, which allowed more workers to be brought into this economic order by offering them cheap mortgages. That meant that they would have a stake in this system, they would own housing and event they would end up having a 401k and owning equities and other forms of investments. So the whole economic order of the US and to an extent the world, has rested on encouraging as many Americans as possible to identify with the interests of capital and capitalists by making them owners and by giving them a stake in this growing, expanding system of equity markets and housing markets and bond markets that has thrived as a result of America's role in the, in the world economy. The issue is that as we've, as we've seen, a lot of people have been left out of that bargain. And if we were to look at, I would say the average American, this is, I think, what has shifted. Thirty years ago, I think you would be okay saying the average American has benefited from this because the average American was more likely than not to maybe have some own equities or own a home or whatever. That middle ground has shifted so that more and more people are now excluded from the benefits of this system because it was always, to an extent, unsustainable. But it's been particularly unsustainable as China has kind of been eroding. To some extent, the US is dominant to the heart of this system, but also as growth has dulled. This is the kind of crisis that we've been seeing all over the world. There's been less of an issue in the U.S. but the growth that has existed in the U.S. has been really unequal everywhere else. You've just seen growth really plateauing much more than it has been in the past. Productivity not growing nearly as much as you would want or expect, and lots of kind of countervailing dynamics that suggest that global capitalism cannot maintain the momentum that we've seen in previous decades. Which means that you do get this kind of shrinking class of extremely wealthy people who are trying to protect their wealth in a system of decline. And that that's us kind of bumping up against the rails right now, which is that there's this growing segment of Americans who've been left out of the bargain of the last 40, 50 years. And there's no one who is articulating what's actually happened really, other than now, I guess Bernie and AOC kind of trying to do this. But for the last 50 years, there hasn't been anyone saying this because the whole narrative has been free Trade and the particular type of free trade that we have right now is good for everyone. And actually, I think it's interesting that we talk about the kind of system of international flows of trade and investment as the system of free trade, when actually most of the changes to international trade in recent years have had very little to do with trade in goods. There's this saying amongst people in the trade community, like, free trade agreements aren't free. They aren't about trade, and they're not agreements. Right. They're, like, enforced by a dominant power. They're generally about investment and intellectual property. And you don't really get a choice as to whether or not you're getting involved in this. So the idea has been this kind of system of the liberalization basically of kind of trade and investment flows have benefited you. And if you don't realize that, it's because you don't understand that you've actually been getting better off this whole time because you've been able to buy a really cheap TV even though your community has been devastated by deindustrialization and you can't find a job anymore.

[Katherine Edwards]

Right?

[Grace Blakely]

So I don't think there's been enough of a recognition of the domestic distributed implications of the kind of trade liberalization and financial liberalization that we've seen over the last 30, 40 years, which is not, by the way, an inevitable result of globalization. It's a result of the kind of globalization that we, and particularly the US has chosen to adopt, which is one that is designed to benefit those at the top. And it's so ironic that the backlash now is coming from a president whose entire modus operandi is benefiting the wealthy. That's why all these Wall street guys were so excited when Trump was coming back in, because they were like, great, we're going to get 2017 tax cuts again. We're going to get a stock market boom, boom. And, you know, Trump has now got this really difficult project of trying to maintain American dominance in a world where it's slipping away, meet the interests of his wealthy backers, and then also give some red meat to his base who think that he's going to get their jobs back when he's not. For all the reasons that Keds has just said.

[Katie Gattytosan]

I agree and also disagree with so much of what you say. Maybe I do think that if you look at certain measures, the US has undoubtedly become more wealthy. And things like asset purchases of like, who owns a car, who owns a house, Those are not the same as they were. Who has investments in the stock market there was a ton of progress made. I think the problem is less that it's slipping away and more that it's stalled. It's not that the homeownership rate has fallen to 50%, it's just that it is not moving up. And even with all the money and even all the wealth, we are not extending homeownership to the bottom third. Same thing with 401 gatekept by employers. They get to decide which workers are worthy. They've had 40 years to show they're never gonna find the bottom half worthy. And so you've opened up a lot of wealth to people in like the maybe like second quarter, you know, not the top quarter. They always had it. Not like the second quarter. Like the top of the middle class, like they are getting access to a ton, a lot is failing to translate to the bottom half. And this kind of like, just you wait, you're gonna get it too. That has failed. So I don't know if I would characterize it as a fall so much as a stall. And like we're reaching the limits of how much redistributive capitalism is going to work. And this is when policy needs to take a really firm hand. But I thought what you said was such a beautiful way to characterize it in a very on the nose way to characterize. The messaging around our economy has been we have all this wealth and you'll get a piece of it. And so we need to preserve wealth in order to preserve your future access to it. But that is running up against the reality that that wealth has stopped. The amount that's going to flow downward is not turning on anymore. It's completely stalled.

[Katherine Edwards]

I don't think you two, to my ear, disagree as much as. Katz, I thought you were going to say, I think maybe the critical difference here is that one of you would probably still consider yourself a capitalist and the other would consider yourself a socialist, which I think is. That will continue to be an area where like, like we're going to agree up into a point and then it's going to dovetail away on the solutions. But I think that there's this question that we've kind of been circling about global dominance and the role of global dominance. And we've brought up China, we've brought up manufacturing. So I want to pull all those threads together here. The Americans who are alive today have never known a world without US Hegemony. I mean, it's been basically unthinkable. And there was a recent episode of the Ezra Klein show in which he spoke to another New York Times columnist named Thomas Friedman. And they talked about China. And Friedman gets on and basically says, look after Covid, all the American business presence that was in China, mostly left, it has become like a four letter word in American government. Where that's like one thing Democrats and Republicans can agree on is you don't say anything nice about China. And he said, I went back and I was there for a little bit. I went to these factories. Huawei used to make phones. And the Chinese Communist Party was like, nope, you guys do EVs now you're going to do electric cars. And how they will just repurpose things and throw money at it until they innovate and until they come up with something that is competitive globally. And he basically said, Americans have no idea what's going on over there. The comments that JD Vance has made about the Chinese people being peasants, he's like, dude, dude, there aren't even people in those factories anymore. It's all robots. They don't even have to turn the lights on. There is a level of advancement that has happened in that manufacturing sector over the last 30 years because they were just so locked in and so focused on becoming a superpower that I got the impression after listening to this interview and after doing some independent digging into like, let me see these dark factories, let me see these like robots products. It kind of feels like if we're just going to tariff the shit out of China, but we are not going to have any of that same sort of investment or interest in modernization or manufacturing advancement. It's like we kind of have our heads up our asses. You can tariff China a thousand percent, we still can't make EVs like theirs. That overnight is not going to fix anything.

[Grace Blakely]

This transition from China as faster manufacturing, then a kind of investment led and now a technological superpower is I think what's really at the crux of this trade war. I don't think Trump has launched this trade war as a way to get back American manufacturing jobs to the extent that that's even a realistic goal. I believe that he has started this trade war because there are a lot of people in the U.S. a lot of very powerful people in the U.S. who are terrified about the fact of China as a technological superpower. China as a manufacturing superpower was always fine, but as the US companies owned the intellectual property, they controlled all of the assets and they basically outsourced the boring stuff stuff to low paid workers in China. China is an investment powerhouse, was Fine. Because, you know, that manufacturing base created the foundations for the Chinese government to then invest in infrastructure that made production easier. What is not okay is the idea of Chinese competitors to American companies. That's what's really freaking everyone out. How did we get to this point? It was stitched in to the very nature of the globalization model that we've had over the last 40 years. What was fascinating about the Chinese approach to industrialization is that it was a long game. So when the Chinese economy started to open up in the 1980s, they allowed all these manufacturing firms to set up that would produce inputs for US Capitalists, that would produce goods that would. Would be exported around the world. And slowly they started to gain the knowledge that would allow them to creep up the value chain. Eventually, the Chinese government imposed rules that forced U.S. companies to share the technologies that they were producing their intellectual property with Chinese counterparts there was the role of what are called joint ventures. So basically, if you were a US Company looking to invest in China and set up, let's say, a manufacturing plant, advanced manufacturing, then the Chinese government would demand that you go into a joint venture with a Chinese entrepreneur and share the knowledge that would allow you to undertake this efficient technology with that company, company. Now, America was really annoyed about this at the time. There were loads of. This is partly why the World Trade Organization broke down when it did, because there were all these disputes between the US And China. And a big part of that was the idea that China was forcing America to share its technological innovation. It was kind of stealing American ideas and American intellectual property. And what we're seeing now is the end point of that very slow process of ideas and technology and IP seeping viral osmosis from the US To China. And nobody knew, I think, until Deep Seek, how far it had gone. And then when Deep Seek happened, there was this like, oh, shit. These guys have this. Not just advanced manufacturing, like a technological knowledge base to their economy that we have not got a grip on, and that already spooked equity markets before all this trade stuff. And I think it was probably a big part of why. Why Trump decided to go so hard in the end.

[Katie Gattytosan]

So I love history, and I'm a massive history buff. And while you were talking, I couldn't help but think about Khrushchev in the 50s telling the US we will bury you. And it's interpreted a lot of ways, but he was talking about the economy in capitalist systems. And I think another perspective that is lost is that we kind of of. You know, you said, Katie, that we. We're in this world that like, we're the dominant country and that we've like lost this memory of who we were squaring up against. And for a long time the Soviet economy was outperforming ours. And it is not as if capitalist economy has always been like number one, unseated, undefeated.

[Grace Blakely]

Right.

[Katie Gattytosan]

Like we, we've, there's been lots of periods where it's like, hey, you know, the, the communists actually were crushing us for a time. And when he said, we will bury you, he was not wrong. They had a moment where they were ahead of us. And it's interesting to hear this about China to kind of put into perspective what is it that we can do that they can't.

[Katherine Edwards]

What is it that the United States can do that China cannot?

[Grace Blakely]

Yeah, there's lots manufacturing airplanes, for example. The Chinese don't have their own kind of aerospace sector. That's a huge thing. There are loads of really complicated forms of production and advanced manufacturing that the US still does better than everyone else.

[Katie Gattytosan]

Yes. And we focus so much on how to keep China in a box, how to keep our competitors in a box, how to keep Japan in a box, how to keep China in a box, how to keep the Soviets in a box. And I think what makes our economy will out in the end, what makes us victorious in the end to stay dominant, is ultimately what we can do that they can't and not what we prevent them from doing.

[Katherine Edwards]

I feel like we're striking a tone here that's reminiscent of something you said a little bit ago, which is basically like, we need to devote more energy to figuring out how are we going to get better.

[Katie Gattytosan]

Yeah, because we have some things that China fundamentally doesn't have, like free speech, like free and fair elections. We have really good universities that are built on like a liberal arts education that is not entirely based on tests that you took your entire life. We have a lot that makes us a very different environment, not just economically, but socially, culturally and politically. I think you have to see that whole board. And the biggest threat to China is if their people aren't happy. The biggest threat to any country is dissatisfaction with the people inside it. And we're at this moment of peak dissatisfaction with the US economy, peak dissatisfaction and nihilism with the US politics. And I think for me the answer is really obvious of like, well, let's give people what they want. Childcare and paid family leave and good jobs and health insurance. And like, I don't know. Part of me is like, let's fuck them up. Y'all like China. The government of China told you how many kids you are allowed to have. We don't have to dig too deep to think about what will always make the US a more desirable place. And that gets reflected in our economy. I think I am a cold hearted economist. I don't have blood pumping through my veins. It's all just money and numbers.

[Katherine Edwards]

It's just macro data, just macro data.

[Katie Gattytosan]

But I think it shouldn't be lost on people how much. Our economy is also an expression of self, of our character as a country, of our identity. And I think that as Grace was talking about this like, transformation that China has undergone, I wanted to have a parallel to say, and then here's what we did, here's how we transformed.

[Grace Blakely]

In some senses, Trump is sacrificing those things that you're talking about, freedom, the rule of law. You know, I've been seeing videos of people being literally like just picked up off the streets and deported.

[Katherine Edwards]

Yeah.

[Grace Blakely]

In the US right now, that's like the type of thing that you would see in China.

[Katie Gattytosan]

Yes.

[Grace Blakely]

There are all of these fundamental norms of American democracy that are being deeply undermined, deeply eroded. And, and you know, in the case that Trump does actually manage to break the courts, break any form of resistance that he faces, you do get to a point of being like, right, okay, this is getting towards authoritarianism now. And that's when the real danger starts to come in.

[Katie Gattytosan]

That's when the real danger starts. It's so funny because I'm in the same mind. I'm like, everything that's going on in the economy, I'm like, it's okay. Economy takes hits, economy moves forward. We have, have market drops, y'all. We had a 10 year period in which the total return to the US stock market was zero. It was a lost decade. You don't remember it? I mean, like, yeah, this was a bad week, but do you remember when we had like that bad couple of decade? No, because we moved on and we, we kept going. Like, we have very short memories sometimes. And I would, especially when it comes to economic, certain aspects of our economy that we hyper focus on in the moment. But yeah, I, I can't help but think that the backlash to what's going on will be our saving Grace. This guy's been in office 84 days and Marjorie Taylor Greene had to tase a guy at a town hall because he kept on asking her questions. Right? Like, we haven't been here for 10 years and we're finally pushing back. I mean, this is a Talk about swift and immediate backlash. Now, he's not responding to it and it's not exercising control over him, but he is not being like paraded around the streets as a hero. Hold on to that anger and that dissatisfaction because that will be our saving grace when we decide we don't like any of this.

[Grace Blakely]

I want to highlight an example of that which I wrote about last week, which is federal workers who aren't allowed to go on strike organizing against Elon Musk coming into their departments with a chainsaw, forming a new union and encouraging people to get out on the streets and protest and try to build this big coalition with ordinary Americans, saying we, we do a lot of the work that makes this country go around and we need your help, we need your support and solidarity and that actually working really well. I think that's so exciting.

[Katie Gattytosan]

Yeah. I mean, there's lots of rays of light that are coming in of people having a backlash. And I think it goes back to the economy in some ways, but then also the economy is more like, it's not the leader, it's the laggard. I will remain optimist, but I will tell you that the dissatisfaction and nihilism you feel with the political system, I don't say this to sound harsh, that nihilism is a two way street. Yes, I don't have faith that my member of Congress is a freedom fighter out there thinking only of me. But I also don't have the pessimism to think that all I have to do is be dissatisfied and complain about it to a friend and they'll pick up on it.

[Katherine Edwards]

Yeah.

[Katie Gattytosan]

And if we need to have a rebirth of participatory democracy, which we are already seeing, then, y'all, that's a good thing. And yeah, I mean, he poked a bear. We're going to slash his face. Like, we've got the clause we are in a democracy. China is not in a democracy. We are in a democracy. These people have to win a popularity contest for their job. But it still comes down to the ballot box. Are they trying to prevent who gets in the box? Absolutely, they do because they know that they're not popular. So you just have to ride on the fact that the, the harder they fight. Right. To rig democracy, the more it means they know they're going to lose. You have the upper hand. We are in the right. Fight back. And nihilism is fine. But like, do it after the march, y'all.

[Katherine Edwards]

You're always good for a pep talk, which I appreciate.

[Katie Gattytosan]

Do it after the protest. Do it after you call Congress, do it after you you stand up for someone. I yeah, the backlash to what is happening will be incredible and there's a lot that we'll be able to rebuild from what is happening.

[Katherine Edwards]

Well, thank you both again so much for joining me again this time together. We'll have to do it again sometime soon. That is all for this week. We will see you next week for an episode about employee ownership and how workers are taking back some power, but with an unlike unlikely advocate, an unlikely guest. Our show is a production of Morning Brew and is produced by Henna Velez and me, Katie Gattytosan, with our audio engineering and sound design from Nick Torres. Devin Emery is president of Morning Brew. Content and additional fact checking comes from Scott Wilson.

[Grace Blakely]

Hi there. I'm Lale Arakoglu, host of Women who Travel. At the start of this year I spoke to my friends and colleagues at Conde Nast Traveller, Megan Spirrell and Artie Menon, who've masterminded a bumper list of where to travel in 2025. It was fascinating to hear the places they're excited about, like Kodiak island in Alaska. The thing that I'm really excited about is the native owned Kodiak Brown Bear Centre and if you stay in one of their lovely cottages, there's the opportunity to share space with a large subspecies of brown bear in the world. And this both terrifies me and makes me all warm and tingly inside. In 2025 there's going to be like banya style steam baths and saunas and whatnot. So you can come face to face with a bear and then go to your steam bath to if I come face with a bear, I better get a steam bath or share the steam bath with a bear. I mean, stranger things have happened. Join me on Women who Travel for More Adventures. Wherever you get your podcasts.