Ep. 224: Philipp Carlsson-Szlezak and Paul Swartz on Macro Shocks, Crises, and False Alarms
Jul 12, 2024
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Global Chief Economist Philipp Carlsson-Szlezak and Senior Economist Paul Swartz from BCG discuss macroeconomic risks, false alarms on recessions, AI's impact on growth, and the resilience of global trade. They advocate for eclectic approaches over complex models, challenging the inflation debate, and analyzing the longevity of the US dollar as the world's reserve currency.
Career choice should be based on skills and interest, not just earnings.
Debt risk assessment should consider growth rates alongside debt levels.
Transition from global convergence to divergence poses challenges across multiple spheres.
Deep dives
Career Advice for College Graduates
Choosing a degree or career should revolve around what you are good at or interested in rather than solely focusing on earnings power. Excellence in your chosen field will lead to financial rewards. Emphasize building expertise and maintain a long-term view on career progression.
Debt Risk Assessment Approach
The assessment of debt risk should consider factors like nominal interest rates versus nominal growth rates (R versus G) rather than focusing solely on the absolute level of debt. Monitoring the relationship between growth and interest rates offers a more insightful perspective on a country's ability to service its debt.
Global Convergence and Divergence Dynamics
The transition from global convergence to potential divergence is seen as a significant inflection point in the international realm. While there are observable challenges in geopolitical, democratic, economic, and financial spheres, the resilience and complexity of global trade suggest that the impacts may not lead to a drastic and immediate downgrade. Historical insights present a nuanced view of how geopolitical tensions interact with the real and financial economies.
Dollar's Position as the Reserve Currency
The prolonged predictions of the dollar's demise as the world's reserve currency do not align with its enduring strength and position. The lack of a credible alternative and the historical burden and privileges associated with the dollar's status suggest a continued hegemony. The unique role of the dollar in international trade and finance maintains its relevance.
Influence of Reading 'Seeing Like a State'
The book 'Seeing Like a State' by James Scott influenced the speaker's perception of economics by demonstrating the limitations of top-down approaches to governance and economics. Emphasizing local knowledge and decision-making over broad, model-driven strategies challenged conventional economic thinking and emphasized the importance of holistic, multidisciplinary perspectives in navigating complex systems.
Philipp Carlsson-Szlezak is Boston Consulting Group (BCG)’s Global Chief Economist and a managing director and partner in the firm’s New York office. Paul Swartz is Senior Economist and executive director at BCG. He co-leads the Center for Macroeconomics at the BCG Henderson Institute in New York. They have recently published a new book, ‘Shocks, Crises, and False Alarms: How to Assess True Macroeconomic Risk’. In this podcast, we discuss why there are so many false alarms on recessions, models vs eclectic approaches, how will AI impact economic growth, and much more.