In this episode of *Trumponomics*, host Stephanie Flanders reports from Bloomberg’s annual New Economy Forum in New Delhi, India. The episode explores the intersection of macroeconomic shifts, geopolitical instability, the rapid rise of artificial intelligence, and the challenges of managing global risk and economic resilience.
The episode opens with Tom Orlick, Bloomberg's global chief economist, drawing parallels between the global economy and the breakdown of rules of hospitality in Homer's *Odyssey*. Orlick discusses the rising cost of borrowing for the U.S. Treasury, noting that 10-year rates are now north of 5%. This increase is driven by a world where war is more expensive, geopolitical ruptures prevent traditional foreign buyers (like China, Russia, and petrostates) from purchasing U.S. treasuries, and shocks like the Iran war push inflation higher.
Orlick also highlights a striking paradox regarding trade and AI: despite Donald Trump's tariffs, trade deficits and surpluses have exploded to record highs. Unlike the early 2000s, when East Asian trade surpluses were managed by conservative central banks buying safe U.S. treasuries, today's massive capital is managed by nimble private investors channeling funds directly into stocks, corporate bonds, and the AI revolution. While AI optimists view this as an acceleration of growth, pessimists warn that a potential market crash would spread economic pain globally.
Host Stephanie Flanders then turns to a prominent panel session moderated by Eric Schatzke, featuring former UK Prime Minister Rishi Sunak, Blackstone President and COO John Gray, and Tata & Sons Chairman N. Chandra.
The panelists discuss the unprecedented nature of current global risks—a "cocktail" of geopolitics, climate events, market dislocations, and technological disruption occurring all at once. Chandra emphasizes that while his 160-year-old group has survived world wars and pandemics, the simultaneous nature of modern disruptions is unique.
Technology, particularly AI, dominates the discussion. Rishi Sunak describes AI not just as a new Industrial Revolution, but as a trifecta combining the Industrial Revolution, the Enlightenment, and the printing press. While AI will raise the floor for humanity, it lowers barriers to entry for bad actors, requiring policymakers to establish robust governance and public trust. Chandra notes the near-term labor restructuring and threats from bad actors, balanced by medium- and long-term potential.
Another major theme is Western fiscal sustainability. John Gray highlights the lack of fiscal sustainability in Western governments running deficits well above inherent growth rates, leading to bond market reckonings and affordability challenges, particularly in housing. While Europe faces severe constraints due to low growth (such as in France and the UK), Gray argues that the U.S. benefits from a younger population and higher growth driven by AI investments and capital inflows, though America will eventually face tough choices.
The conversation shifts to resilience versus efficiency. Gray notes that while supply chain diversification adds incremental costs, companies are largely absorbing them due to robust revenue and margin growth. Chandra firmly rejects the idea that resilience is the opposite of efficiency in a volatile world, asserting that designing for resilience *is* optimizing for efficiency. Sunak points out that building resilience—such as energy storage—is inherently inflationary and requires careful government incentives without sliding into protectionism, referencing the "small yard, high fence" concept of de-risking rather than decoupling.
Looking toward the future and predictability, Chandra explains that Tata operates on generational timeframes, focusing on fundamental needs like steel, power, advanced manufacturing, and semiconductors. John Gray states that Blackstone is betting heavily on electricity infrastructure (as AI moves to the physical world), digital infrastructure, defense, life sciences, and the exceptionally bright economic future of India.
Finally, Rishi Sunak concludes that just as a country cannot be high-income without being high-energy, the critical infrastructure of the coming decades will be intelligence and compute, alongside the enduring power of human ingenuity.