Firing Line

Doom and Boom, this week on Firing Line.

[MUSIC] As AI doomers sound the alarm.

- I won't lie to you, there are real dangers.

And Trump's new Fed chair defies the president.

- This committee will deliver price stability.

President Trump is not happy.

- Interest rates are too high.

The board is very hostile.

They're very political.

They're doing the wrong thing.

- The question of whether or not it was the right move or the wrong move spews out a more fundamental question about whether the Fed is the tail wagging the dog or really the dog.

-Economist Dambisa Moyo is chair of the Economic Club of New York.

She is the author of multiple best-selling books on economics, and she's a British baroness with a seat in the House of Lords.

- My Lords.

What does Dambisa Moyo say now?

Firing Line with Margaret Hoover is made possible in part by... Robert Granieri, Vanessa and Henry Cornell, The Margaret and Daniel Loeb Foundation, The Beth and Ravenel Curry Foundation, and by the following.

Dambisa Moyo, welcome to Firing Line.

Thank you.

Thank you for having me.

- This week, the Federal Reserve's Open Market Committee unanimously voted to raise interest rates.

- Yes.

- This is the first rate hike since July of 2023.

- Correct.

It is the first under President Trump's newly appointed Federal Reserve Chair, Kevin Warsh.

President Trump expressed disappointment with the hike, not pointing his finger at his new Fed chair, but writing, "Interest rates in the United States should be 1% or less because we are the best credit in the world."

You've been critical of easy money in the past.

Was this the right move for the Fed?

- The question of whether or not it was the right move or the wrong move spews out a more fundamental question about whether the Fed is sort of the tail wagging the dog or really the dog.

So clearly the market was of the view that there was going to be a rate hike and a rate hike was delivered.

There are plenty of reasons around inflationary pressures that we see, not just from the energy markets, but more broadly in foodstuffs and in real estate and other sectors that suggest and in fact Kevin Warsh himself has said that there is inflationary pressures that he was addressing.

So on that basis it feels to me that on balance it was the right move.

I'd like to have your analysis on how this rate hike will impact the bond markets because many people have a sense of the stock market and how it plays into the American economy.

But one reporter at The New York Times this week said the debt market is the most important market on earth and that many people have less of an understanding about how important it is in the daily lives of ordinary Americans.

So can you just break down for us what is a bond?

- Yeah, so let's, this is a great question because I would say that the sort of fundamental culture of the United States is very positive.

People are energetic about economic growth and prospects, notwithstanding sometimes we get a bit grumpy, but fundamentally Americans tend to be positive about the future.

And that's why the stock market's such a great sort of barometer for American sort of euphoria.

And I think that's why people like to point at policymakers, politicians, they love to say, "Look at what's happening in the stock market."

But you're absolutely right that ultimately the bond market is the most important metric, especially the 10-year bond market, which is basically the cost of borrowing that is set in the market every single day, but it's really driven by the Federal Reserve.

If you think about how companies think about investing, credit card debt, mortgages, car loans, student loans, all these things are based off of that rate.

And so it's really quite important in deciding how we think about how we do business and how we borrow across many different aspects.

And I think it is an interesting thing that the borrowing metric, the 10-year yield, for example, is not really much more well-known, and it's at not 5%.

What does it being at 5% yield mean?

So if you think about it from a business perspective, it means that corporations, in order to generate a return on investment, so if I ask you to invest in my company, you want to make more than 5% because ultimately you're taking a bet on the company, and you know that you're going to make 5% if you just put it into the bond market, assuming there's no inflation and assuming that the government doesn't go out of business, but you want to know that if you're going to give the money to any company, the S&P 500, you're going to generate more than 5%.

And so it makes it a higher hurdle to clear for corporations.

Another way of thinking about it is if you are a borrower for a car loan or mortgage or a student loan, you now have to pay at least 5% back to the lender in order to make it worth their while.

So it is making it more expensive for people to borrow money, but it's also a higher hurdle for corporations who borrow that money in order to make it worth your while.

Can you explain what Treasury Secretary Bessent meant when he essentially, it seemed as though he was daring the bond market to bet against him this week?

- Whenever people say, "Oh, well, Treasury Secretary is taking a risk," I say, "Well, it's my dream.

I have asymmetric information.

I am the house now."

So, right?

The fundamental problem that the United States has right now is that it has a massive deficit.

The debt to GDP ratio of the country now is over 100%.

The United States is not alone.

Many Western countries are also with those levels of debt.

So what does that mean?

It means for the US, where the GDP of the country is about $32 trillion, we owe more than $32 trillion in debt.

We owe $40 trillion in debt.

- And already the interest, just the interest payments that the U.S.

government is paying on debt is higher than the amount spent on healthcare, on education, to Medicare, Medicaid programs, but also until recently was higher than even the amount spent on defense.

So that is fundamentally the problem.

Now, we know that bond yields have been rising.

And the actions of Treasury Secretary Bessent was to try and reduce the back end of the bond rate.

And listen, I'm not here to speculate on, you know, what his motivations were or what he thinks can happen, but he clearly believes as being the House, really is responsible for the Treasury, that he can influence the back end.

And I think that that's where it becomes quite complicated.

To your point, I think the market has proven to be so complex that it has been even beyond the reach of the Treasury Secretary to control, it seems, the bond yields.

But let me ask you, President Trump's pick for the Federal Reserve, Kevin Warsh, was met with a high degree of skepticism from many in the U.S.

Senate.

Elizabeth Warren, Senator Elizabeth Warren, had described Kevin Warsh as Donald Trump's sock puppet, saying that he didn't have the courage or the independence to be the Federal Reserve chair.

The Wall Street Journal opined this morning whether Elizabeth Warren had sent her apology to Kevin Warsh yet.

Does this settle this question of Fed independence now?

You know, I don't want to wade into politics because I'm just, I'm not a politician, but it is to me just looking at his record objectively, you don't even have to put his name on his resume, just objectively looking at, you know, his experience working on Wall Street and in the private sector.

I think objectively this is not somebody who you would say doesn't have a background to be at the helm of these positions.

- As the chair of the New York Economic Council, how would you characterize the state of the American economy now?

Because there seem to be conflicting indicators to those of us who are laymen and not PhDs in economics.

So, you know, this is an economy that I would say on the whole may be challenged, but look at where the stock market is.

Look at the opportunities for growth from innovation and from the AI super cycle.

It's, I would say, is net positive.

Are there challenges?

Of course there are.

There's massive debt.

There's a huge deficit.

There's a lot of social friction in society.

Look at the American civil society's estimates on infrastructure.

The U.S.

gets a C grade.

There are some structural problems, but you don't want to bet against the United States because you can see enough flex in the economy.

This is a country that has arable land, it has energy, it has water, it is relatively borderless in terms of it's not got threats that other countries have.

So I think it's fundamentally a place that you wouldn't bet against.

And I think there's a lot of challenges, but I think there's also an opportunity to fix them.

Because you're a sitting member of the House of Lords, you also have a global perspective on the economy that offers you a degree of perspective about the U.S.

debt, U.S.

inflation, and the factors that are influencing the way Americans think about the economy.

How does your perspective help put into context what you're seeing in the U.S.

and globally?

I've been very fortunate.

I've traveled and worked in over 80 countries around the world, rich, poor, democratic, non-democratic.

I do sit in the House of Lords, which is a second chamber.

It's like being in the Senate, except in the United Kingdom we're all appointed by the monarch, by the king.

And it does influence a lot of what I think and feel are the big trends, deglobalization, issues around debt, issues around economic growth, changes in the world's demographics and how they will influence long-term prospects for human progress.

It absolutely does, largely because the United Kingdom is part of the OECD and one of the richest countries in the world, but at the same time is at the coalface of a lot of the challenges and demographic movements of people, trade flows post-Brexit that influence a lot of the discourse that we're dealing with in the U.S.

and beyond.

This program, of course, was first hosted by William F. Buckley Jr.

And in 1992, economist Robert Eisner participated in a debate on the debt and the deficit.

Take a look at this argument about the debt.

- It's not a national deficit.

It's not a national debt.

It's a federal debt, a debt of the federal government.

I tried to suggest to Senator Rudman a moment ago.

There are two sides to every balance sheet.

The federal debt is the credit of the American people.

The federal debt, all those bonds, all those savings bonds, treasure bills are owned by the American public.

Most of you haven't thought about that, but think about it.

If we take them away, we reduce American purchasing power, we make a lot of people miserable, but to no effect.

What do you make of that argument?

So that is a very popular position to take by people who don't believe that the government has any constraints.

And I tend not to be of that cloth.

My view is that if you're not growing, you have one problem.

If the debt is being invested or used for things that are not net generative in terms of growing the pie, in terms of innovation, in terms of infrastructure, et cetera, then you also have your problem.

And so it also seems to me that, looking back at that clip and where we are today, a lot of U.S.

government debt is now held by organizations, but particularly countries that are not necessarily our allies.

China is the third largest holder of U.S.

debt.

They have 2% of American debt.

You know, what happens if the rest of the world loses faith in the American economy?

It's been said to me many times by people in the financial industry that there's no other choice but the dollar.

And yet it seems there is a fear even to me amongst those who have been bullish on the dollar for many years that little by little it is chipping away at its credibility.

How do you see it?

- So look, on the one hand, is there a sense that people in the rest of the world are slightly getting worried?

Yeah, absolutely.

It would be wrong for us not to recognize.

You look at some of the big sovereign wealth funds, you know, international sovereign wealth funds have talked about reducing the Treasury position.

So, it would be naive to not understand that there's a risk of de-dollarization.

But on the other hand, this is a country that has natural resources in energy.

It has innovation, it has deep capital markets.

None of these things have gone away, notwithstanding the sort of political factions and concerns around public policy and even the debt.

But I think that the ability for the United States to grow out of this, we're in the beginning of an AI super cycle, which could add a lot of growth.

It's still a leading economy in terms of pharmaceutical innovation and education.

There's still a sense in this country of optimism, innovation, technological gains that we're very much in the early innings of.

So I'm still fundamentally optimistic about the US.

So is it your view then that artificial intelligence and some of these other innovative technologies will be able to grow us enough to overcome a $40 trillion debt?

So, the short answer is yes, I'm optimistic.

And I don't want to sound naive.

Of course there are risks.

I mean, there's still questions, absolutely.

But I think nobody, certainly in where I sit, from public policy or from corporations is going to sit back and not take a good look at what the upside is without thinking about the downside risks as well.

The advantages for AI and growing the economy are there so long as that 10% chance of annihilating humanity as was endorsed by many of the AI industry leaders last week after a mid-level employee resigned from Anthropic, warning that these frontier technologies really were presenting an existential challenge to humanity.

Very quickly after that individual resigned, OpenAI's CEO, Sam Altman, Anthropic's CEO, Dario Amodei, and others like Elon Musk, endorsed this position that AI could present a threat to humanity.

A wave of skepticism has met that initial wave of alarmism that has made very interesting bedfellows.

Former Trump's AI czar, David Sachs, and Lena Khan, who is a member of the Democratic Socialist Mayor Mamdani's administration in New York City, both agree that there is something very fishy about the fact that all of the AI leaders are now agreeing to federal regulation because of a resignation from a mid-level employee.

Does it seem suspicious to you?

So, I like to see myself as being a pragmatist, and so speculation is sort of, is of very little use ultimately to how we decide to move forward.

For me, I need to ultimately think about what does this mean for risk mitigation of institutions and organizations, but also we want to make sure we don't miss the upside opportunities that could be quite transformative in a positive way.

So how do we balance the cost versus sort of income, if you will, of these statements?

- Well, you wrote that as far-fetched as warnings of an impending AI apocalypse may sound, even a remote risk should not be dismissed outright when human extinction is at stake.

- Absolutely.

- To guard against a danger of such extraordinary scale, governments and companies need to go beyond conventional risk management strategies.

What are those strategies?

- Oh, some of them can be quite extreme, air gaps or kill switches.

I mean, some people are talking about bans.

I mean, we need to evaluate all of that.

But at the same time, we need to also think about making sure that we have the right staff in place.

I think one of the key takeaways for me is that the traditional cyber framework, certainly from a board or from a policy makers perspective tends to be, you know, once a quarter or once over a certain period.

We might need to review this stuff much more regularly.

So I think that there are timeline questions that we need to think about, but there are also about, you know, ways of making sure that if there were, God forbid, some kind of a problem, it wouldn't sort of dissipate throughout an organization that would make it difficult to operate.

Can you, as somebody who sits at the intersection of public policy, economics, the U.S.

economy, the U.K.

economy, the global economy, how do you understand the alarmism of the past week and then the skepticism of that alarmism that we have seen since?

Because it's very difficult to know who to believe.

Yeah, absolutely.

And I think what you're getting at also is that sometimes we have to weight the fact that there might be an asymmetry in goals.

So when they say, hey, we should be worried and we need more regulation, are they really trying to sort of undermine the open source option?

I need to at the same time think about the fact that a lot of open source, the most cost-effective but albeit still efficient AI solutions are coming from China.

How does that play out?

Is that something that we need to explore?

Is that something we need to think about?

So I don't just take things on face value.

You're asking somebody who has a background in economics to opine on risk mitigation, capital allocation, staffing in an area for which I have a blind spot because I'm not a computer scientist.

But at the same time, I need to have good enough judgment to make sure that the institutions that I'm supporting make the best choices and the best decisions with the right amount of information.

There has been skepticism from those who point their fingers at the doomers of AI, the AI doomers, that this is a ploy to get ahead of the regulatory framework that could be imposed upon the AI companies in order to influence the regulatory framework in a way that is advantageous to those frontier AI companies.

We've seen this in many industries.

Regulatory capture is what they call it.

And as somebody who has been on corporate boards, it understands the way the global economy works, and frankly, the U.S.

regulatory environment.

Does that seem plausible to you?

Look, I think the decisions I have to make are really focused on what we, whatever organization I'm involved with, can control.

So there's really no point in me, it seems to me, to speculate about what one administration, what organization might be doing.

I ultimately have to make the best decision for how to navigate what the facts are, as opposed to what they might be or what the motivation might be.

- As someone who has sat on the board of many corporations, public companies, it is unusual for a company to be eyeing an IPO and potentially going to the market to raise money from the market for a product that they have said could potentially have a 10% risk of annihilating humanity.

If you were advising a company like this, I mean, can you ever imagine a company saying our product is amazing, but there's a 10% chance of annihilating humanity?

What does that do to the process of the IPO itself?

And what questions does that pose for the Securities and Exchange Commission?

Well, I think the beauty of the American sort of capital markets and financial markets is that there's so many checks and balances from the investors, from the consumers, who are the ultimate buyers of these products, to the regulatory framework, legal and regulatory framework itself, that I'm pretty confident that that type of a statement will get checked, will get road tested way before we get to a situation where it becomes problematic.

- So President Trump and even Jensen Huang, the CEO of Nvidia, have said, "We can't slow down because we can't risk that China will outpace us."

And so go, go, go, in other words, has been their message.

And yet you have mentioned the nuclear nonproliferation framework as something that could be possibly applicable.

In what way is it applicable to adversaries in the Cold War still talking so as not to facilitate nuclear annihilation?

So I think the fundamental point is that nobody said it's 10% of Americans that will be dead.

Yeah, they said humanity.

They said it's humanity.

Yeah.

So there's a mutual, you have to believe that there's a mutual sort of a determinant wherever you are, wherever you are on the planet to see that this is done in a proper way.

So on that basis alone, it seems to me that whether you're in China in a Chinese lab or in a US lab, you are interested in seeing something that can progress for humanity.

Obviously we're at a time when there's been a lot of deglobalization and the key pillars of deglobalization in terms of trade and capital flows and immigration and multilateralism.

So, that might make it much harder, but I think at the same time, the urgency, because this is, they're talking about these estimates coming in the next four years, the sort of concerns beyond just human annihilation.

I mean, you start to think about concerns around data centers and energy use and water, child access to AI products.

The list goes on and on.

Joblessness.

These mean that this is quite a very complicated soup of challenges for which I, as somebody who is a big believer in globalization and is not big on bureaucracy, still would believe that there's a lot of benefit for having a much more global effort to try and address these concerns.

Do you think there really is a possibility in the Xi Jinping and Trump meeting next week to find a new kind of framework that is cooperative even though we are competitors on the global stage?

- I'm eternally optimistic.

And we've done it before, 2001, WTO, China was admitted.

But it's not just in terms of trade, but also military economic sort of agreements that have gone before that have been in the best interest of both countries, but also of the world.

And so it seems to me that why would you, it doesn't, it's not obvious to me why you would ring fence AI and technology, which is arguably the biggest supercycle in terms of economic growth, in terms of technological innovation for military actions, for aspects of public goods, education and healthcare.

Why would that be an area, a no-go area at a time when this could really propel the world, hopefully in the best way possible, into human progress, further human progress, but also comes with these big risks.

It would seem to me that it's in the interest of both administrations to have that conversation.

Dambisa Moyo, thank you so much for joining me on Firing Line.

Thank you.

Thank you.

Firing Line with Margaret Hoover is made possible in part by Robert Granieri, Vanessa and Henry Cornell, The Margaret and Daniel Loeb Foundation, The Beth and Ravenel Curry Foundation, and by the following.

(upbeat music) You're watching PBS.

(upbeat music)