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Gita Gopinath

lines on the record: 36
first: 2026-05-29
most recent: 2026-05-29
sittings or episodes: 1
sources: podcast

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“From AI investment and the hope that it's going to generate all that productivity growth. If that story goes away, we have a problem in terms of the concerns around fiscal positions around the world.”
2026-05-29 · Odd Lots · Gita Gopinath on Why Interest Rates Have Surged All Around the World · IDENTIFIED FROM THE TRANSCRIPT · source
“I think it's very important what's going to happen with AI and the productivity boom that we are hoping for, that is going to be very important. If it turns out that there is very little showing up in productivity from AI, or we have a setback that comes from just discovering that, though there's so much of hallucination that it's just you can't really use it for anything very important, if that's the case, then I could see a situation where the pricing of debt, it drops even more, it's a lot more concern about what's going to happen in terms of government's ability to repay all the debt that they have, and not just now, but that's expected to come into the future. So for me, that's one thing. I mean, it is important that there is growth in the economy and that that growth is coming from good places. At this point, it seems like the growth is coming from...”
2026-05-29 · Odd Lots · Gita Gopinath on Why Interest Rates Have Surged All Around the World · IDENTIFIED FROM THE TRANSCRIPT · source
“or other Asian economies in East Asia are going to just say, well, that's okay. We are okay with China dumping all these goods on us. Going to put tariffs on China. China is aware of that, which is also partly why they are trying to see how they can manage their own exports to some extent. They will move in that direction. But I'm not a buyer of the whole China produces everything and does everything on itself and somehow we still continue buying from China. That makes little sense to me.”
2026-05-29 · Odd Lots · Gita Gopinath on Why Interest Rates Have Surged All Around the World · IDENTIFIED FROM THE TRANSCRIPT · source
“Of interventions and government policies is actually looking quite bad. So the weakness and the property markness, the weakness in consumption, if China is running surpluses at this point, it is because investment has dropped in China. You have that come both from the property market crash, but also because of all the excess supply and the overcapacity that they've created. You've seen a decline in investment. So 2020 Phi was the first year when investment in China actually declined. That explains why it's running a big trade surplus. Now, yes, there are a lot of exports coming out of China. Forget about the surplus deficit part, but just the fact that they are sending a lot of goods out of their country is a source of competition for manufacturers around the world. I believe that this is not sustainable. I don't think Europe...”
2026-05-29 · Odd Lots · Gita Gopinath on Why Interest Rates Have Surged All Around the World · IDENTIFIED FROM THE TRANSCRIPT · source
“China ultimately gets to do everything. Secondly, usually if you get to a point where if you're so good at manufacturing making everything, you ultimately are going to have very high levels of investment given the level of savings in your country, that usually means that you start running trade deficits, right? So it cannot be a story of China being very successful in its investment and being very productive because any kind of high productivity investment boom story means the country running deficits. What has happened in China is basically very a lot of consumption suppression because of that you're seeing surpluses that the country is running. And we are also now seeing all the problems of very high levels of investment that's come from the fact that the crash in the property market, which despite the last four years,”
2026-05-29 · Odd Lots · Gita Gopinath on Why Interest Rates Have Surged All Around the World · IDENTIFIED FROM THE TRANSCRIPT · source
“I read a lot of pieces on this that somehow China will continue to run trade surpluses because Everything it wants, it produces for itself and produces for the rest of the world. And so that's that. I mean, that makes little sense to me. Firstly, if you just look at China's pending behavior, they run the surpluses on their goods trade front, but they run a deficit on their services trade front. And so one of the reasons why China's overall deficit, current account deficit or trade deficit, is around 3% of GDP as compared to like 10% of GDP before the great financial crisis is because they are big consumers of services around the world. Chinese tourism has been a big contributor to incomes around the world and the service deficit that they run. So just that, right? So there's nothing, there's no sense in which”
2026-05-29 · Odd Lots · Gita Gopinath on Why Interest Rates Have Surged All Around the World · IDENTIFIED FROM THE TRANSCRIPT · source
“all over the world, not just in the US, but in many other countries. So the expectation is that that will continue. And going back to where we started with this conversation, just given how high debt levels are, that's just increasingly questionable, which means that I think governments are going to move towards far more unorthodox approaches, including price controls, financial repression, the kinds of things that we haven't encouraged in a long time.”
2026-05-29 · Odd Lots · Gita Gopinath on Why Interest Rates Have Surged All Around the World · IDENTIFIED FROM THE TRANSCRIPT · source
“We have this mindset right now in the policy world, and therefore people who are investing in markets, that the state is there to fix a lot of the problems. And we see it right away even now what's happening with energy prices going up is that there are many countries that are capping fuel prices, that are cutting energy taxes. The instinctive reaction is to protect households and protect their spending power. When you do that, that helps corporate profitability. And that is going to be favorable for markets. So we've been in this environment. Now, either explicitly or implicitly, I mean, there has to be this notion that the economy has been resilient and it is a reflection of what I call bliss, which is big lasting state support, which has helped economies.”
2026-05-29 · Odd Lots · Gita Gopinath on Why Interest Rates Have Surged All Around the World · IDENTIFIED FROM THE TRANSCRIPT · source
“That was one. Second is the AI boom is a big player right now. If we didn't have AI and if we didn't have the increase in demand coming from AI, we would be looking at just much lower growth rates in many parts of the world at this time. And we would also see trade being much weaker. I mean, trade is being held up a lot by AI inputs flowing around. That's also been a big contributor. We've had these positive offsetting events. The question is what happens in the next crisis? In the next crisis, countries do not have the fiscal space to provide that kind of support. And we may see much less resilience than we've seen the last few years. I mean, I think that's something we should keep in mind. I don't think we should take this resilience as some sort of an absolute structural shift that keeps economies growing at their long-term trends.”
2026-05-29 · Odd Lots · Gita Gopinath on Why Interest Rates Have Surged All Around the World · IDENTIFIED FROM THE TRANSCRIPT · source
“Been a combination of things that I've helped, and some of it have been surprises. Again, since we're talking about death, that increase in debt has come about because of the very large amount of support that governments around the world give during each of these crises. So during the pandemic, I mean, advanced economies spent about 25% of GDP. If you look at the combination of not just outright support, but all kinds of loan guarantees and equity infusions and so on, that was huge. Those were much higher levels than anything we'd seen in recent times. And because of that, households and businesses came out of the pandemic with stronger balance sheets than they did going in. And that has helped hold up demand also and also has therefore helps hold up profitability in a lot of businesses because of that strength that came from all that large amount of support.”
2026-05-29 · Odd Lots · Gita Gopinath on Why Interest Rates Have Surged All Around the World · IDENTIFIED FROM THE TRANSCRIPT · source
“We have the opposite. So it is Countries try, have tried it in the past, and these are usually the countries that the IMF works with because they eventually find themselves in crisis. But what typically happens is you get a tiny period when it looks like this is helping, and then you just get much higher interest rates. And you just don't get any of the benefits of the central bank buying your debt.”
2026-05-29 · Odd Lots · Gita Gopinath on Why Interest Rates Have Surged All Around the World · IDENTIFIED FROM THE TRANSCRIPT · source
“If a central bank comes out and says that we are different from our mandate of Price stability and full employment, regardless of what's happening there, if we are going to go out and buy Long term debt, then that's what's going to happen you're going to see inflation expectations drift up and then the nominal rates are going to go up and real rates will also go up because of the risk associated with inflation. Premium will go up. And that will be the end of the wonderful era that we've had of central bank independence and that's helping to keep interest rates low. That strategy just doesn't exist. You can play for it for a little while, but eventually it gets priced into markets. So, I mean, unless, of course, it is a tool for monetary policy because you've hit the zero lower bound. Sure. And you still need to simulate the economy, then you do that. But right now we have 500 lower down.”
2026-05-29 · Odd Lots · Gita Gopinath on Why Interest Rates Have Surged All Around the World · IDENTIFIED FROM THE TRANSCRIPT · source
“And that has been very helpful to bring back a fast recovery of the world economy every time after every shock. And we talk about resilience. So in a case where we end up with just debt levels that are really high, it's just costs going up everywhere. And that will eventually... Slow down economies, if not just trigger a financial crisis right away, given how sanguine financial conditions have been.”
2026-05-29 · Odd Lots · Gita Gopinath on Why Interest Rates Have Surged All Around the World · IDENTIFIED FROM THE TRANSCRIPT · source
“A crisis in a developed economy would look more like a credit crunch that then leads into a financial crisis. So we would see a sharp increase in borrowing costs that will affect many other asset classes. You would see a slump in investment, the economy. So is this debt overhang, the high levels of debt and that you have to roll over on a daily basis, that overhang which slows growth, slows dynamism? That is what a typical crisis looks like. And yes, you can have financial crises. One of the wonderful things about the last several years is despite all the shocks, we haven't had a financial crisis in develop what we're in an emerging market, any big emerging market.”
2026-05-29 · Odd Lots · Gita Gopinath on Why Interest Rates Have Surged All Around the World · IDENTIFIED FROM THE TRANSCRIPT · source
“Having to face higher borrowing costs. The US, I think, is still the exception in the sense that even though tenure eels are at, say, 4.5% right now, just given the level of supply of debt and what's expected to come out in the future, markets are still treating it as giving it some privilege, even if it was not as big as it used to be in the past.”
2026-05-29 · Odd Lots · Gita Gopinath on Why Interest Rates Have Surged All Around the World · IDENTIFIED FROM THE TRANSCRIPT · source
“Developed world is moving into that space where their debt costs and their borrowing costs are far more volatile, far more sensitive to market conditions. I mean, the stock case is the UK, where you see that on a day-to-day basis, but you see that in other countries too, in Europe, in some of it in France, and more generally, even Japan, where for the longest time we didn't have to worry about borrowing costs, those have squarely moved up. The tenure rates have moved up. Germany's tenure rates have moved up. So everywhere we are seeing developed economies also now.”
2026-05-29 · Odd Lots · Gita Gopinath on Why Interest Rates Have Surged All Around the World · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes, exactly. He got lucky. Or productivity growth will boom above average growth. And I believe that's what we're betting on this time with AI. The hope is that with AI, we will get growth from 2% up to 4%. And then that will certainly solve all our problems if we have that on a persistent basis. Countries, especially develop countries, have tended to rely on that. And then you have inflation. If you go back even further, and also obviously during right after the pandemic, inflation helped bring debt to GDP levels down. And then, of course, the third is what we see with developing countries is you end up with default and restructuring and crises. And then again, you bring debt to GDP down that way. So those have been the typical path. We've never had to worry about debt crises in developed economies, but now more and more, and I think this is also a new feature of the world we live in, is”
2026-05-29 · Odd Lots · Gita Gopinath on Why Interest Rates Have Surged All Around the World · IDENTIFIED FROM THE TRANSCRIPT · source
“That has come about either because you are some sort of a commodity exporter and you just had positive terms of trade shock. And because of that, your debt to GDP comes down.”
2026-05-29 · Odd Lots · Gita Gopinath on Why Interest Rates Have Surged All Around the World · IDENTIFIED FROM THE TRANSCRIPT · source
“I mean, we have the additional problem that I think policymakers actually are not really keen or particularly worried about where their debt-to-GDP is. If you look around the world, again, except for places where the bond markets are simply just not letting you do more spending, even in the US, I don't believe there's anybody in Congress who's truly worried, there are, sorry, not. There are a couple in Congress who are worried about the U.S. debt level, but not enough given where debt levels are and given the foreseeable path of spending that's happening. But again, just step back and see, it's helpful to look at what has happened historically and when have countries been able and how have they been able to bring their debt to GDP levels down. It's a couple of things. It is one is just a spurt.”
2026-05-29 · Odd Lots · Gita Gopinath on Why Interest Rates Have Surged All Around the World · IDENTIFIED FROM THE TRANSCRIPT · source
“That countries are just going to be spending a lot more on this. It's just that it depends on whether you are a country that can afford to raise the finances for it or not. But everybody is heading in that direction. So if you look at the list of all the sources of demand for capital, that is a very, very long list. And if you look at the sources of supply of capital, there's just one category, which is aging demographics. We often tend to blame old people for the fact that we need to spend so much on retirement and on health for the future. But the truth is the reason interest rates are not much more higher than they would have been is because of the supply of savings coming from aging demographics around the world.”
2026-05-29 · Odd Lots · Gita Gopinath on Why Interest Rates Have Surged All Around the World · IDENTIFIED FROM THE TRANSCRIPT · source
“How do we make sure that we don't have to import fuel from the rest of the world and how can we have our own fuel at home, either through renewables, whatever we need to do, or maybe just returning to coal for now? We're going to see, we're seeing that defense expenditure, we need to be able to not just spend more on defense, but make sure that we can actually produce more of the weapons that we need semiconductor chips, rare earths. Yes, there are, I think there's so little trust in the world right now in terms of relying on your trading partners.”
2026-05-29 · Odd Lots · Gita Gopinath on Why Interest Rates Have Surged All Around the World · IDENTIFIED FROM THE TRANSCRIPT · source
“We're seeing a lot of that. I mean, we moved squarely, firmly, decisively away from the pure efficiency-based model of I'm going to buy from the cheapest place and I'm going to sell if I'm the cheapest source to one where everybody is building up their own capacity as much as they can. And of course, depending on the country and depending on how much of fiscal space you have, that can be a small group of things or a big group of things. For sure, energy security is everybody's paying attention to it.”
2026-05-29 · Odd Lots · Gita Gopinath on Why Interest Rates Have Surged All Around the World · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes. I mean, because you know, hey, there are now more ETFs than there are actually companies being created on the market. So if one, if you wanted to spend a lot of time picking and choosing, you could be selective too.”
2026-05-29 · Odd Lots · Gita Gopinath on Why Interest Rates Have Surged All Around the World · IDENTIFIED FROM THE TRANSCRIPT · source
“Coming both from domestic investors, but also from foreign investors. It's, I mean, we're at 40 trillion in terms of foreign holdings of US equities that is at a historic high, even if you look at it as a share of the rest of the world's GDP. It's about twice as high as what it was just before the 2000.com bust, I guess at the peak of the dot-com. The world has never been that invested in US equity markets. It's like it's the only game in town. So, you know, if there's a glut, if there is a gluttony rather, I would say it is for US equities. We're all in this together. And as we know, in terms of what's coming into the markets right now, I mean, we have some very big IPOs and that will make us even more all tied at the hip when it comes to AI and stock markets.”
2026-05-29 · Odd Lots · Gita Gopinath on Why Interest Rates Have Surged All Around the World · IDENTIFIED FROM THE TRANSCRIPT · source
“No, we don't have a global savings glut Amor in proof of that is real rates going up, interest rates going up. So that's that. What we suddenly seem to have in the US is, I don't know what to call it, but gluttonous demand for US equity”
2026-05-29 · Odd Lots · Gita Gopinath on Why Interest Rates Have Surged All Around the World · IDENTIFIED FROM THE TRANSCRIPT · source
“Early, but you know, I use the technology and I find it terrific. I mean, it is been really great for my own productivity. It's not affecting my wages or anything so far. It is very valuable technology, but there is a lot of uncertainty, which is what is very curious about the markets, right? Because on the one hand, it is impressive where the stock markets are, again, close to a record high. And maybe one can explain that by this by saying that, well, there is a scenario where everything goes perfectly well. But there are so many other scenarios I could play out between now and next year or even two years from now. And you barely see that being priced in markets. That's frankly most surprising than just looking at what's happening with just the level of the stock market.”
2026-05-29 · Odd Lots · Gita Gopinath on Why Interest Rates Have Surged All Around the World · IDENTIFIED FROM THE TRANSCRIPT · source
“There is absolutely a scenario where we could be in that wonderful place with higher productivity growth and At the same time, we don't have civil unrest or rogue forces Using AI for ill, that is a scenario, but I do not know a single person who will put a probability on that scenario and say that that's going to happen, you know, with a significant amount of certainty. There is a very high degree of uncertainty, and there are several who also believe that it's yet to be seen whether there is going to be any major productivity gain of the kind that there are analysts who believe that productivity could go up by two percentage points a year over and above what square it is right now, which is around two percentage points a year. I mean, that is huge. There is no evidence right now of that kind of a productivity wave coming through.”
2026-05-29 · Odd Lots · Gita Gopinath on Why Interest Rates Have Surged All Around the World · IDENTIFIED FROM THE TRANSCRIPT · source
“This is about making a distinction between now and what comes next. Now, clearly, it is about the high levels of investment.”
2026-05-29 · Odd Lots · Gita Gopinath on Why Interest Rates Have Surged All Around the World · IDENTIFIED FROM THE TRANSCRIPT · source
“The big question whether the AI productivity boom is going to mean that you don't need that much of an above R star interest rate or do we have too many other forces coming from energy prices passing through into core inflation, the lesser lower levels of immigration in the country, just general trade disruptions, supply chain disruptions. And those are the main drivers in case, in which case maybe you need to keep interest rates even higher. So being able to tease that apart is, you know, I think that's where the tough decisions are. But what is quarrelling the case is that we are looking at higher nominal interest rates, regardless of whether R star is coming from the good kind or the bad kind.”
2026-05-29 · Odd Lots · Gita Gopinath on Why Interest Rates Have Surged All Around the World · IDENTIFIED FROM THE TRANSCRIPT · source
“Because it's just generating our star without generating the higher growth that comes that should come with it. And that can be a problem from a policymaker's perspective, of course, you have to firstly be able to tell what is driving the R-star. Is it a good kind or is it a bad kind? But regardless, if R star is drifting up and you have an inflation target of 2%, you are looking at higher nominal interest rates. So right now the Fed has an R star forecast of about 1%. We put 2% inflation on top of that as their target. We're looking at 3% nominal rates, which is a clear shift away from what it used to be pre-pandemic. Then you have to check to see whether the R star increased is actually slowing the economy down or the increase in your nominal rates are slowing the economy down. And how much higher than that R-star do you have to be to be able to bring inflation down because there is obviously above target inflation in the US at this moment?”
2026-05-29 · Odd Lots · Gita Gopinath on Why Interest Rates Have Surged All Around the World · IDENTIFIED FROM THE TRANSCRIPT · source
“I mean, what matters crucially is what we believe are the main drivers of our star at this moment. Is it coming because of higher productivity growth, which is then leading to higher investment and therefore demand for capital? All of that is good as a kind of the good kind of increase in our star, because that's an economy that is projected to grow at a faster rate. And that helps, that helps on many fronts, including in terms of bringing debt to GDP down. The other reason our star is going up is because of the increase in fiscal deficits and just general high levels of government borrowing in the US. That is less appealing because that tends to be not necessarily growth enhancing, that the money that's being raised is not for productive, necessarily productive infrastructure investment that's going to generate enough growth. So that's more problematic.”
2026-05-29 · Odd Lots · Gita Gopinath on Why Interest Rates Have Surged All Around the World · IDENTIFIED FROM THE TRANSCRIPT · source
“And pass through from energy prices into also core inflation. So I think that's the more of the higher inflation, higher rate path. The story is coming from other forces on inflation as opposed to what's coming from AI itself. And then you have the real rate path, which is going up also because it is the general risk environment that we're in, but also because of what's coming from this increase in capital demand coming from the AI sector.”
2026-05-29 · Odd Lots · Gita Gopinath on Why Interest Rates Have Surged All Around the World · IDENTIFIED FROM THE TRANSCRIPT · source
“So, both of those are in play right now. So, that's the difference between what's happening to real rates versus what's happening to nominal rates. And what's happening to the pricing of the Fed rate path, right? So the first channel that you mentioned, which is just the fact that there is so much of demand from the private markets, from AI investors, AI companies for capital is going to raise real rates, even if there is no effect on inflation or inflation expectations are not moving, we should expect to see real rates rise. And that's certainly we're seeing some of that. And then the other is the effect that's working through the demand for the different inputs that go into AI, and that's creating an inflationary pressure, which would then need higher nominal rates. And that is also playing out. I think right now, I suspect that the real rate piece is more important. The inflationary part has been driven a lot by what's happening with energy prices.”
2026-05-29 · Odd Lots · Gita Gopinath on Why Interest Rates Have Surged All Around the World · IDENTIFIED FROM THE TRANSCRIPT · source
“Iran conflict, and we still have the Strait of Hormuz closed, if that is not resolved in any time soon, in the next month or so. And you see even steeper increase in oil prices and crude prices going up to say $160 a barrel, which is what some of the projections would be in that case, then we could see much more demand destruction that we are seeing today. And we could be back in that space where at least at a short end, interest rates are being cut pretty rapidly”
2026-05-29 · Odd Lots · Gita Gopinath on Why Interest Rates Have Surged All Around the World · IDENTIFIED FROM THE TRANSCRIPT · source
“Least when we look at the pricing in markets, that seems to be the case, especially when it comes to equities. Everybody wants to have a piece of the AI boom. And yes, I think there is that sense that, well, this is a sector where we could really see real gains, especially in terms of productivity increases and profitability. And that's going to help be something that they want to be a part of. There is that demand for corporate bonds and for US equity, which is coming again both from domestic investors, but also from international investors, where AI is the trade. I mean, that's where all the dynamism is, and that's where people want to park their money. Now, we pointed at all the reasons why rates are likely to stay high. But I just want to point out that since we still have the ongoing...”
2026-05-29 · Odd Lots · Gita Gopinath on Why Interest Rates Have Surged All Around the World · IDENTIFIED FROM THE TRANSCRIPT · source
“Strengthen the economy, quantitative easing was part of the toolkit. And so that helps keep the interest rates low. But that's changed. And now we have the central banks everywhere who have either stopped buying or they're running it down like it's happening in Japan. And the marginal buyer are the more volatile investors, hedge funds in the US are the market makers over here. And so whenever there are any shifts in global market conditions, you see a lot more rate sensitivity than you would have seen if it was mainly official credit flows. And by the way, that's also true about capital flows coming into the US. Previously, the buyers of US Treasuries used to be foreign central banks. They are not doing as much anymore. It's mainly coming from non-bank financial institutions, from the rest of the world. And so they're also much more volatile and fleety.”
2026-05-29 · Odd Lots · Gita Gopinath on Why Interest Rates Have Surged All Around the World · IDENTIFIED FROM THE TRANSCRIPT · source