About this transcript: This is a full AI-generated transcript of Why the US Dollar Will Remain the Dominant Currency for 20 Years — Gita Gopinath — FO585 Raj Shamani from Raj Shamani, published November 8, 2026. The transcript contains 17,200 words with timestamps and was generated using Whisper AI.
"I think in 20 years, the dollar will remain the dominant currency of the world. It's hard to see a scenario where any of these other options play out. AI valuation, do you think it's overvalued? I personally think that there will be a correction. It's hard to explain how each of these companies who"
[00:00:00] Geeta Gopinath: I think in 20 years, the dollar will remain the dominant currency of the world. It's hard to see a scenario where any of these other options play out.
[00:00:10] Speaker 2: AI valuation, do you think it's overvalued?
[00:00:12] Geeta Gopinath: I personally think that there will be a correction. It's hard to explain how each of these companies who are investing close to a trillion dollars now globally in AI just in 2026 will be able to make the kind of profits that are needed to recover that investment. So that's, I think, the question mark.
[00:00:31] Speaker 2: Geeta Gopinath, former chief economist of the IMF, Harvard professor, and one of the most influential economists in the world. If you want to understand how money actually works, where it comes from, who controls it, this episode is for you. We all are distracted by these tariffs and wars, but the real problem that we should be talking about is debt. Why do you say so? Is that the point which is really scaring you today as well?
[00:00:53] Geeta Gopinath: I worry about the fact that government debt levels around the world are as high as they are right now. When their debt goes up, they have problems and they have crises and so on. For example, the UK is a country where debt level is not high enough that markets are not giving it that much space. Interest rates go up quite a lot. France is another country where this is becoming an issue.
[00:01:15] Speaker 2: Let's say America's case. They have so much savings and they can print all this money. Why do they need to borrow so much more money?
[00:01:22] Geeta Gopinath: If you're going to print money, you are going to create an inflation problem. That money becomes worthless and you can't use it, which is what countries around the world have experienced. Right. That's exactly like Zimbabwe. But Argentina, I mean, there's many countries around the world.
[00:01:39] Speaker 2: What is the biggest opportunity for India right now which can actually help us become much more stronger?
[00:01:45] Geeta Gopinath: Everybody in the world who are looking to new partners, India has done very well in many dimensions, but it is not an important player in global supply chains, especially in manufacturing. And so that is an opportunity for India in terms of becoming a bigger player and being able to, for people around the world to come in, start a business in India, which is not that easy. It's fairly complicated to do it. These are the kinds of things that will hold back the scale of growth that can happen.
[00:02:11] Speaker 2: The question that probably millions of people were asking, IMF gave money to Pakistan. Right after the attacks happened, out of the 35 years, 28 times Pakistan have asked you money. They keep coming back again and again. The economy has not been able to repay and is funding terrorism. You guys actually give them the loan. Why? So. I have a small favor to ask you. I need you to subscribe to our channel. The more subscribers we have, the better and bigger guests we can bring and provide you more value through these conversations. And the full audio experience of this show is also available on Spotify, where you can follow us and listen to the new episodes as well. When you're trying to do your best work, you need a laptop that allows you to focus without interrupting your flow. That's why I use the Asus ExpertBook Ultra. It comes with up to an Intel Core Ultra X9 Series 3 processor that delivers up to 50 Watt TDP performance so that it can keep up with your thinking. It's also an AI PC with up to 180 total platform tops and built-in Copilot plus AI giving you ultra powerful AI capability. And because it's CPU, high-performance GPU and NPU all work together, you get ultra-fast performance no matter how heavy the work gets. The Asus ExpertBook series is available on Flipkart. Check the link in the description below. Where does the money come from, who prints it, who makes it, how is this getting valued at such a price? If you have to explain to me from a very fundamental basis, how would you explain to me that?
[00:04:03] Geeta Gopinath: So the question is, the way I like to think about it is that there is a certain level of savings that's happening. You and I save, we save money, you have your bank balances, you've put money, you've saved in different forms. You have a certain level of saving that you want to do. Okay. Your consumption is not that high that you're wiping out your entire income. You're making more money than what you spend. So you have that saving. Then there are these investment opportunities, which is what companies around the world do, is that they take that money and put it, you know, that they have ideas, they have projects they want to invest in. And so when you say where is the money coming from, there is a large amount of savings in the world.
[00:04:56] Speaker 2: Okay.
[00:04:57] Geeta Gopinath: And that is the case also because the world as a whole is aging. And when you have aging populations, there's a lot of saving happening. So the most amount of savings happens when you're in your 40s, 50s, and 60s. And then afterwards, you may be running down your savings because you're not earning any more and you're using your savings to consume. But there are those years when you save a lot.
[00:05:22] Speaker 2: Okay.
[00:05:24] Geeta Gopinath: And since the world demographic cycle is such where more and more people are now in their 40s, 50s, and 60s, there is a large amount of saving. And so there is actually a lot. Therefore, there is a lot of money to invest, which is the reason why, even though, you know, there are, you know, public debt around the world is as high as it is, and it was government debt is as high as it is. So interest rates are not through the roof is because there is a large amount of savings in the world right now.
[00:05:55] Speaker 2: So all these savings, these institutions will collect, and then they actually fund these kind of booms and valuations and stuff like that from different forms.
[00:06:04] Geeta Gopinath: So the different ways that you can use your savings, right? So you can, you can decide that I just want to put it in a simple savings account in my bank. And then the bank is the one who's going to use that and decide where to invest it in terms of lending it to companies, which is what, or, you know, typically what they do. Or you may decide that I actually, I'm going to hold directly equities in the stock market. And so I then get an account, an institutional account, and through that, I start literally holding directly those stocks. So there are different ways, I could also hold government bonds directly. So there are different ways, so it doesn't have to be just the banks themselves who are allocating where the money goes. And increasingly, you have the role of what's the so-called retail investors. It's basically, now you have platforms online where it's easy for you to go and trade stocks and so on. So you're seeing more and more of that more decentralized nature of it. Most countries in the world, the savings that goes from households to companies gets done through the banking system. The U.S. and the U.K. to some extent, but the U.S. really is quite the exception in terms of how it is not necessarily, it doesn't necessarily go through the banks and loans to the banks, but there's a lot more borrowing where it was just through the stock market, through corporate bonds, which get traded on markets and not just simply relying on bank loans.
[00:07:38] Speaker 2: And so if there's all these savings in the world, which is the access money, at what point does the government print more money?
[00:07:46] Geeta Gopinath: So the government is, you know, there is, what, this is now we're getting back to, we're getting to central bank policy, right? And what the government is doing is saying that there has to be some very liquid asset in the world that's helpful. Now, what was money used for money is, why do we want money? We want money because I can use it very easily to transact, right? So there's a value to having that note that's floating around. There are companies who, when they are, you know, buying and selling to each other, they can give you confidence that I will be able to pay for you because I have this much of money sitting in a bank as reserves, it's just literally cash that I can give it to you. So that's, so there's the value that gets created because of money, right? It is what, it's, there's a purpose for it. And what the central bank is doing is just to make sure that the amount of money in circulation relative to the amount of demand for that money exists is at the level that keeps inflation at some particular target of about, you know, in the case of the US, it's 2%. In the case of India, it's 4% plus or minus 2%, right? So that's the, that's the role of, that's the role of the central bank.
[00:09:13] Speaker 2: Okay. And when the central bank changes one number. Yes. Let's say increases the interest rate. Walk me through what happens and how over the year, like when, when they announce a number, everybody goes like, yeah, whatever. Like the common people, right?
[00:09:29] Geeta Gopinath: Yes.
[00:09:30] Speaker 2: And they don't even realize that within a year or two years, or I don't know at what point, everything for them starts getting expensive. Everything for them starts getting bad. How does that happen? Walk me through this chain.
[00:09:43] Geeta Gopinath: Right. So, so firstly, importantly, the central bank is trying to be the solution, not the problem.
[00:09:49] Speaker 2: Okay. But to me, they, they create problems.
[00:09:53] Geeta Gopinath: Because I mean, you know, you can go wrong. At least that's the attempt. The goal is not to be the problem. Now, of course, this is an incredibly complicated problem you're trying to solve. So you could absolutely make mistakes and you could create problems.
[00:10:05] Speaker 2: Because it hits my rent, it hits my job, it hits my salary, it hits my loans, it hits my back, like home, everything, my stock portfolio.
[00:10:14] Geeta Gopinath: So, so, so the central bank, this is the objective function of the central bank is to say, we want to make sure that inflation is at its, close to its target. Right. And then the question is, what can generate inflation deviating from target? It could be that there is so much of a boom in demand in the economy now for multiple reasons, including say, you know, the rest, you're getting a lot of infusion of foreign money, multiple reasons for it. There's a big increase in demand or the government, which is very also typical, could be doing certain programs that it's putting a lot more stimulus into the economy and demand is going up. While supply isn't, hasn't changed that much. Then you worry about the fact that inflation will get very high. And that is a problem because inflation is a problem for people. And so what you do is then you would raise interest rates. And when you raise interest rates, you are making it costlier for people to take a loan, to invest in anything, will, and therefore they will have less demand for goods and services. Because if you, if you can't take a loan very easily and you can't start a factory very easily, you're not going to hire construction workers. You're not going to hire material. You're not going to buy material. So that's going to reduce that demand. You know, you are not going to, your own demand for a house is going to come down because your mortgage rates are going to go up. You're not going to be able to take, you're not going to want to do as much of that. So you are making an effort. So if you see yourself saying, okay, well, now interest rates are now higher. I can't do as much. It's because the central bank actually thinks that maybe there's too much activity right now that it needs to, you know, reduce it some so that inflation doesn't get out of control. Okay. So for you as an individual, you think, well, how does it matter if I buy another house or not? Right? But that's the central bank's problem. Central bank is like, if everybody thinks like you and everybody is doing the same action as you, you could end up with an inflation problem in the country. And so you're moving the policy lever to prevent that from happening.
[00:12:27] Speaker 2: Interesting. Another childish question on this, which is when, when government, let's say America's case, they have so much savings because there's an aging population and they can print all this money. They can control the rates up and down. Why do they need to borrow so much more money? Because the American economy is in debt.
[00:12:49] Geeta Gopinath: So firstly, if you're going to print money, you are going to create an inflation problem. Right? So it is not for free. It is not for free for a central bank to just simply say that we are just going to, you know, the example of saying, oh, well, we are the central bank. We're just going to buy up everybody's debt. I'm going to buy up Roger's debt and everybody's debt because, hey, I have like an unlimited supply of money that I can just print. That money becomes worthless and you can't use it, which is what countries around the world have experienced. Right? That's exactly like Zimbabwe is the classic example. But Argentina, I mean, there's many countries around the world. What happened? Tell me. So what happens is basically the following. So you have their classic story is there's a government. It's collecting some tax revenues and it wants to spend, right? And it says, okay, I'm going to spend, I'd like to spend a whole lot more than what I'm collecting in tax revenues. And now what I can do is I can go and borrow money from the people. So, you know, people who save in the economy, you know, I can borrow from them or I can borrow from international investors. But let's suppose that neither of those people now really are interested in lending you money, which is what happens is at some point, there's the people are also very worried about what the central, what the government is up to and says, okay, I'm not going to give you any more money. And then the bank, and then the government turns to the central bank and says, well, hey, apparently you can print money. So can you do that? And that's the typical cycle. So you have the government who turns around and has a central bank saying, central bank, print money for us, and we will take that money and then give it to people and we will spend on it. And then that's when you have super high inflation, hyperinflation. And so ultimately the government cannot give you anything because whatever money the government gives you, it's getting wiped out with inflation and you can't buy anything more from it. And that is the repeated cycle of a lot of countries who make that mistake.
[00:14:59] Speaker 2: Okay. And then coming back, you were explaining, so government can't do that. But for that, why do they need so much more money? Like why are they borrowing so much money? Like why is America borrowing so much more money now?
[00:15:13] Geeta Gopinath: Right. So firstly, there is nothing wrong. And in fact, it's a case of strength too, when you see sometimes a country on net borrowing money. Right. Right. So first of all, it's not like the country is borrowing money. These individuals making decisions and it turns out that they're borrowing money. So just very simply, think about if you wanted to start a business, you have a great idea. Everybody agrees you have a great idea. You don't have the money right now, but people will lend it to you.
[00:15:47] Speaker 2: Yeah.
[00:15:47] Geeta Gopinath: Right. Because they think you have a great idea. So you are borrowing money. In a similar way, if you think of the US right now, the US is like a very attractive destination for investment. It's the country that's at the frontier on AI. It's where you think people think that this is going to be huge productivity increase, huge returns I'm going to get from it. And so you lend to it. So it's a good thing. It's like saying that you shouldn't have to generate your own income to invest. You can borrow it.
[00:16:23] Speaker 2: Yeah.
[00:16:23] Geeta Gopinath: If it's you as an individual, you borrow it from the bank. If you're a country, you're borrowing it from everybody else. Right. But this is not the entire story for the US, but I'm just saying that there's nothing wrong in it. Yeah. And in fact, it can be a sign of strength.
[00:16:40] Speaker 2: Fair. But if I borrow 38 trillion, then I'm bankrupt and nobody will trust me. At what point other countries or other institutions or other people stop trusting a country that they will ever be able to pay back or not? Because at least on the paper, the 38 trillion looks too high.
[00:17:01] Geeta Gopinath: Yes.
[00:17:02] Speaker 2: Is it too high or it's not? It's like, okay, they'll be able to fund it.
[00:17:06] Geeta Gopinath: So the logic of the argument always is that the US has the ability to tax its people. It's not as if people are taking the money out and escaping with it. So there is a very big tax base that the US government has. So if push comes to shove, they're going to raise tax rates and they get the revenue for it. And they'll be fine, right? Similarly, if you project AI to do as phenomenally increased productivity in the US, and US growth goes up from 2% to even 3.5% a year, that's enough. So that's the expectation. That's what's different about a country, which is government can actually tax you and there's hope in growth. But if on the other hand, you're a country where there's no such hope and people don't trust you, then that's when interest rates go up. Nobody lends to you. And then you go to the IMF, my former institution.
[00:18:05] Speaker 2: Yeah. Okay. So fair. And then is that also the reason why US is the country with the most amount of debt, and yet people consider it the safest country to put money?
[00:18:19] Geeta Gopinath: So first of all, it's not the country with the most amount of debt. The country among the large economies that have very high levels of debt, Japan is the highest. So Japan's debt to GDP is around 230%. The US federal debt to GDP is around 100%.
[00:18:36] Speaker 2: But the absolute number of the US would be bigger, right?
[00:18:39] Geeta Gopinath: Yes, because as a share, because it is, it is. But that in a sense, the absolute numbers that is a little bit uninteresting, right? Because it is about the size of the economy.
[00:18:47] Speaker 2: True, true. Yeah. Okay. But, and then I was asking, so that also becomes a reason for a lot of people to put money because they're like, "Hey, we trust the ability for them to repay."
[00:18:56] Geeta Gopinath: No, I think what, one of the reasons people put a lot of money into the US is also because, because the reason the size helps is it helps because of what's called better liquidity, right? So let me put it this way. So if you have a very few, a very small amount of debt being traded and a very few people trading that, then if one person decides to sell, that's going to have a big price impact. That's going to have a big impact on the price. You agree, right? Yeah. But when you have a very large $40 trillion amount of debt floating around, no, I mean, you could sell billions and you don't have to worry that, oh, the minute I sell billions, my price of that, that particular asset is going to drop a lot because I'm so, it's such a big part of the market. And so, yes, so the size of the market helps in that sense. But what is very important, of course, is still the remaining, the belief that one, the US will pay its bills. There's never a question about it, that they will have the revenues. It has always paid its bills. It will pay its bills. And the dollar will also not lose a ton of value.
[00:20:10] Speaker 2: Yeah. Talking about dollar, that gets me to yuan. You have co-written in the economy thread, the yuan is undervalued. Wow. Yeah. Why?
[00:20:22] Geeta Gopinath: This is going to take a very long conversation. Go ahead. It gets into some very technical details. So the yuan being undervalued comes from the notion that if you take a country that has grown as much as it has, that should be a country if it followed a similar pattern to other countries who grew like China has, if you take Japan or if you take South Korea, or 80 station economies of that rapid growth, you should have seen their exchange rate appreciate, the real exchange rate appreciate, buy more than it has. And the reason it hasn't is because China has followed policies that have kept consumption, in a sense, not the main driver of the economy. So consumption as a share of GDP is around 40% in China, pretty much anywhere else in the world, including India and the others, we're talking in consumption shares of like 60%, right? So it's a growth model that has, in a sense, kept consumption weak. And that is the reason why the real exchange rate has not appreciated as much.
[00:21:37] Speaker 2: On the surface level, when we don't understand certain things, what looks like is the reason why they're undervalued is a trust. Like a lot of people don't trust the economy, they're closed. So no matter what the story is, a lot of people are reserved to not value them as much as they value other countries.
[00:21:55] Geeta Gopinath: So firstly, China has policies that make it very difficult to take money out of China, or to bring money into China, right? So it's not just that there's no trust, but China doesn't want a lot of the, doesn't want a lot of the action, which is again, a reason why the real exchange rate is... Why don't they want a lot of action? I mean, it is, so in most, this is okay, more generally emerging markets as a whole, and this includes India, are a little careful about allowing a lot of capital inflows and outflows, because that can be very whimsical, and that can create problems for you, right? And so the East Asian crisis, for example, which involved Indonesia and Malaysia and Thailand and others, was a bit of an example of that, which is that if you don't have the right guardrails at home, and you don't have the right levels of regulation at home and so on, and you let a lot of money just come in, you could find that it leaves very quickly and you could be left in a crisis, which is what happened with the East Asian economies. So China is that, but China certainly is more, it's not just that. I mean, they want to be very controlled in all aspects of who's putting money in, who's taking money out, hyper-controlled. It's remarkable what restrictions exist if you want to take money out of China, right? So they are very controlled in terms of who brings money in. So just to be clear, there are good reasons why an emerging or a developing country doesn't want to have U.S. style open capital for policies. But China is also much more, you know, puts many more constraints.
[00:23:40] Speaker 2: Got it. And those guardrails actually led to the tariffs, the guardrails mismatch between China and U.S. and India and U.S. and a bunch of other countries, right? The trade mismatch because of certain guardrails that existed. So did that achieve anything at all? Like when they put tariffs, like when U.S. put tariffs in China, did it achieve anything at all? Because what I know of, I can be wrong, is a lot of people started using Vietnam as a tool to now started exporting a lot to U.S. and U.S. started importing a lot from Vietnam instead of directly from China.
[00:24:19] Geeta Gopinath: So this goes back to my great gamble, which is that if you said we've had geopolitics in the past and we had the Cold War, you know, what's the big deal? Back then, there was no country in the middle that could, that had the capability of saying, we're going to just reroute trade. But now we do because we have many more middle powers, many more countries within. And so therefore, even if the U.S. has put these large tariffs on China's imports, even though U.S. direct imports from China have dropped by a lot, because China has gone, it's not just about just simply China exporting to Vietnam and Vietnam exporting to the U.S. It's actually that China has built factories in Vietnam and built factories in Mexico and built factories in Thailand, right? And so through that, they're using that part of their manufacturing supply chain to then also export to the U.S. But it's not just that they're exporting to the U.S. They're also exporting now a lot more to Europe. They've kind of moved their exports from the U.S. to Europe. So there's also the chains of destinations that they sell to. This is not without cost for China. It's just not as if that this is, okay, we just easily move these things around. It is costly. It does have an impact on their profit margins. It has an impact on the amount of hiring that they do. Jobs, I mean, the youth unemployment rate is at the highest right now in China in a very long time. So this is not, I mean, I always, you know, I'm surprised when people present China and where China is right now is like, oh, this is all happening because they're doing everything really great. And this is like good stuff. What we're seeing in China, in fact, is like weak demand, slowing growth, and a reflection of policies that have gone wrong. Their property markets are in real trouble. They have excess capacity with electric vehicles, solar panels, with many other things. So it is not a strong China economy that we have right now.
[00:26:30] Speaker 2: Interesting. And you said people, they have paid the cost. Who have paid the cost? Is it the end consumer and a person who's buying Chinese goods in America, which is coming from Vietnam? Are they paying the price for it? Or is China actually subsidizing and they are paying the price for it?
[00:26:48] Geeta Gopinath: So if you look at the, in terms of the evidence of where the incidence of that tariff has fallen on, I mean, the vast majority is on the U.S. importer, right? So then consumer, how much the end consumer is not the U.S. importer, right? The U.S. importer. The U.S. importer will put that price
[00:27:07] Speaker 2: ahead and then the head and the distributor. So that's not necessarily, not necessarily,
[00:27:10] Geeta Gopinath: right? So some of it, they absorb in their profit margins. Some of it that they pass through to the, to the end consumer. So for sure, the cost has been borne by Americans at some point, some stage. But at the same time for China also, the fact that it has lesser demand coming directly from the U.S., has to do these complicated supply chains, has to redirect goods to other parts of the world, does have an effect on their profitability too.
[00:27:38] Speaker 2: Interesting. 20 years from now, something will replace dollar. Will it be yuan? Will it be rupee? Will it be euro? Will it be pound? Will it be some new stable coin? Or will it be dollar itself in some new form?
[00:27:56] Geeta Gopinath: I think in 20 years, the dollar will remain the dominant currency of the world. It's hard to see a scenario where any of these other options play out. Now, of course, you know, if it, there are, I'm basing this on the current set of policies that have been done, right? If, you know, this, suddenly the U.S. Federal Reserve loses central bank independence, or the U.S. government says, oh, actually we're going to default on some of our debts and so on, then obviously all bets are off. But based on everything I know right now, and making reasonable assumptions about the path of policy going forward, I would, I expect that the dollar would remain the main currency.
[00:28:41] Speaker 2: So, everyone who doubts the U.S. economy, everyone who's like, maybe the change in world order is coming, maybe the dollar will get devalued, or whatever XYZ reason or the bubble is coming and something will change, right? Right. What do they get wrong about the American economy?
[00:28:59] Geeta Gopinath: So, first of all, there are the people who are sitting, who make these statements, and then there are people who are making decisions on where to put their money. The people who are making decisions about where to put the money are continuing to put it in the U.S. Yeah. So, so I think there is, there is a broader narrative around how things can change and so on. But if you just look at the decisions being taken by, you know, investors in your own country in terms of where to put their money, the U.S. remains the most popular destination for it. Now, I, that, by the way, I, there could be a scenario where the dollar depreciates. That, that is not the same thing as talking about the dominance of the currency, right? There's plenty of reasons why you could see a weaker dollar, because it's strengthened so much in the last 15 years that you could see some, you could see a depreciation happen. But that's separate from whether we're going to now suddenly find the, the yuan or the renminbi as being the, or any BRICS currency. By the way, none of that makes any sense either, just to be clear. Well, there's no such thing as a BRICS currency in terms of creating a new fictional currency.
[00:30:04] Speaker 2: Fair, but at least at this point, we don't know, like looking at current scenario, there's nothing like that.
[00:30:10] Geeta Gopinath: Right. No, I think what people should understand that it's not like I wake up and you say, I'm going to create this new currency that's 10% rupee, 20% renminbi, and somehow stitch it together. And that will be the currency that everybody does. No, you need, you need a whole central banking apparatus that's trying to maintain a particular value of a currency, which central bank is going to try and maintain the value of that, of a bundle of currencies, a synthetic bundle.
[00:30:41] Speaker 2: Fair, but my question is, what does an average individual get wrong about American economy? What's the fundamental thing about American economy?
[00:30:50] Geeta Gopinath: Who's your average individual here?
[00:30:51] Speaker 2: Like so many people who just think about really, you know, esteemed investors globally. Yes. They write stuff about changing the world order. They talk about that maybe is rise of some other countries all around the world. They continue to put their money here, which is true, but they still talk about it. So why is this chatter? Why do you think what is actually helping people have this kind
[00:31:15] Geeta Gopinath: of luxury belief? No, there are, I mean, no, you can absolutely at this moment ask yourself whether there needs to be a different world order, you know, given the chaos that's coming out of the U.S. in terms of policy and world policy. That can always, that is a question you can ask. You know, even people like Mark Carney, the prime minister of Canada, is talking about how we need to have the middle powers come together, how Canada is going to work with Europe more than it's doing with the U.S. and so on. All of that is well and fine. As an individual person making economic and finance decisions around the world, I actually don't think it is your business to be sitting and thinking of how to change the world order because you cannot do it. True. And so you're taking the order as it exists and putting a very tiny probability that it'll change because that's a fair assessment and then going about your business. Okay. So you could have, I mean, obviously, you can have countries like China, which put major capital controls and who sends money out of China, who can buy a Chinese company and so on. The U.S. can do that too. So you have some global actions that can happen, but for the rest of us, it's quite a bit, this is the world that exists. Fair. And let me flip this question in this way,
[00:32:44] Speaker 2: that because we were talking about China and China has these guardrails about having a less transparent or rather rigid financial system. Can they ever become as big as economic power at the U.S. with the kind of financial system that they have today?
[00:33:04] Geeta Gopinath: No. Never? No, that's a choice. So if they decide that they're going to open up a lot more, you know, replicate what's in the U.S. in terms of people can take money in, out freely, large depth of markets, independent institutions, financial institutions, like truly independent financial institutions and so on, then of course, then there's a possibility of something changing, but in the absence of that, no.
[00:33:33] Speaker 2: No, but will people still trust them because of the lack of democratic processes there?
[00:33:38] Geeta Gopinath: Well, so a world where all of that happens is a different world. It doesn't come together in the current political setup.
[00:33:46] Speaker 2: Fair. Yeah. And let's talk about India a little bit. You've seen India, you're born there. And as someone who understands India from because of the way India is, because you're born and brought up there, then you saw it from the IMF lens and you obviously understand the world. What is the biggest opportunity for India right now, which can actually help us become much more stronger?
[00:34:13] Geeta Gopinath: Firstly, I think there is everybody in the world who are looking to new partners, right? And India has done very well in many dimensions, but it is not an important player in global supply chains, especially in manufacturing. And so that is an opportunity for India in terms of becoming a bigger player and being able to, for people around the world to come in also to start a business in India, which is not that easy. It remains the case that it's fairly complicated to do it. So the kinds of of policies that we've always recognized as being choke points for people in India are also choke points for anybody else to come in and engage in India, right? The judicial process, the way it works, the fact that you can have contracts that get violated and you're in courts for like 10 years. I mean, this is not, these are the kinds of things that will hold back the scale of growth that can happen.
[00:35:19] Speaker 2: So the opportunity is to become the supply, like play a larger role in the global supply chain. But the choke point is the processes inside India, or is it because something they're doing outside?
[00:35:32] Geeta Gopinath: No, the way I always like to say this about any country for that matter is not so much, okay, here's what you should do. But to look at all the things that are preventing people from making good independent decisions and figuring out for themselves, you know, which is the, which is the, which is the enterprise that's going to give them the highest returns, right? And so I think, I think the opportunity, I would say, rather, is for India to use this moment to say, we are going to do a lot of big bang reforms in addition to the ones that have been done. And there are several that have been done, which are very valuable, but we're going to address the big bottlenecks, be it on the judicial reform side, be it on land titles and the ability to be able to trade land, ease of doing business, not being harassed by, you know, by people, by the officials who go around and asking for stuff. If we can fix those kinds of problems, can build up human capital, human skilling, do it differently. I think if you can move quickly on that front, then this is a great moment to do it because everybody would love to be much more invested
[00:36:43] Speaker 2: in India. And why do you think we're not able to do it? Because these are things that everybody knows. And this is the conversation that I've been hearing and listening to since last 10 years, 12 years,
[00:36:52] Geeta Gopinath: since the time I started reading. Right. Okay. So firstly, I always like to point out that it's not all, you know, that nothing ever happens. We have been, you know, there have been big reforms, the goods and services tax is a big one, the whole, you know, the UPI, that's phenomenal, physical infrastructure, phenomenal, bankruptcy codes, phenomenal. So there, it has happened. Uh, but it's going to take, I mean, much more political action for it. And...
[00:37:24] Speaker 2: And what's stopping? Because there's, the judicial one is a big one. Yes. You, you pointed out very loosely that going out there, some officials asking for whatever the stuff, that's a very common thing, right? In, in some parts of the country. Yes. Why we have not been able to change it?
[00:37:40] Geeta Gopinath: Yeah. No, corruption is, is a, is a big problem. It takes, um, you know, it takes a bit of, you really do have to rip the bandaid off in a sense, when you do these, some of these policies, right? So let me give you the example of, Argentina recently and president Millet. For the longest time, it was always the case that the country was run, the governments were running very big deficits. They were spending too much relative to the income that they make. And they were using the central bank to print money. It was like an endless cycle. It happened over and over and over again. And then they went from one crisis to another crisis to another crisis. And then Millet comes in and he just completely changes things, right? Like it's a huge transformation. It's basically saying, no, we're going to not do this. We're going to only spend what we, what we collect in revenue. There's going to be no central bank printing of money. These are very dramatic shifts. Typically for most countries, it takes crisis after crisis to land in that position, right? And so if you're a country that's not in a crisis, and that you're growing at seven and a half percent, it's a difficult one to say, well, you know, let's take a big sledgehammer to the problem. Fair. So it's just big political will.
[00:39:10] Speaker 2: Yes. If you boil down to one thing.
[00:39:13] Geeta Gopinath: And bringing along the people to make sure that they are with this, because, you know,
[00:39:18] Speaker 2: Yeah. Transitions are never easy. Yeah. You're going to, there's always there,
[00:39:22] Geeta Gopinath: there are multiple stakeholders who are benefiting from the current system that exists, right? Multiple, multiple people, and they can be very loud. And so when you're trying to change something, it's a huge, it's a huge change. And it's so, on the other hand, you're like, oh, I have seven and a half percent growth. That looks pretty good.
[00:39:40] Speaker 2: Hmm. Has there, has there been any country in history where they have gone from a lot of corruption to zero corruption?
[00:39:49] Geeta Gopinath: Oh, a lot of countries have, I mean, the US itself is a country that used to be, used to have much higher levels of corruption at all levels of government, including in the judicial system and all of that. And that is, that is not the case anymore. Well, there is always, there is certain corruption happening at very high levels, but for the average person on a day to day basis, it's not something that you encounter. So it does, absolutely. You do go through, you do graduate.
[00:40:15] Speaker 2: Okay. And how long does graduation take usually?
[00:40:20] Geeta Gopinath: It takes time. That is true. It does take time.
[00:40:22] Speaker 2: Decades?
[00:40:23] Geeta Gopinath: Decades. Decades.
[00:40:25] Speaker 2: And not like one political figure can actually change it.
[00:40:31] Geeta Gopinath: It is, I mean, for it to be done, like I said, it's usually going to work. For instance, if you inherit a country that was in totally in crisis and in a bit of a basket case, right? Then you get the people who are willing to tolerate, okay, disruption, huge amounts of disruption. And there's no excuse anymore. And so then you can make things happen. So even on corruption, Malay has done that. The other way to do it, of course, is the way China is doing it, which is, you can just simply take people and disappear them and moves much faster. But otherwise, if it is, you know, your country, you're growing, there's not a crisis in hand, then it is a, it's, it's difficult. It can take time.
[00:41:21] Speaker 2: You said somewhere, I was reading about it, that the global economy has changed, right? What has changed? What, how do I know as a normal person living in a city that the world has changed and I'm not noticing it?
[00:41:37] Geeta Gopinath: So, you know, I actually had this line at the start of the year where I said, we're in a world where everything has changed and yet somehow nothing has, right? Which was, which is basically the point that if you were to look at measures of like global growth, global growth for 2025 and for 2026 is pretty similar to what was projected for these years in 2024, right? So it's not very different from what was projected even before we knew anything about tariffs, about AI explosions, the boom that we're seeing right now, the whole geopolitical conflict, all of that, which is shaking things around. But I think what's important to keep in mind is that if you look at just the overall numbers, you really will feel like, wow, much ado about nothing. But if you look underneath that, under the surface, that's when you really see the changes playing out. So that's one, which is for one, the reason things are still holding up is because we have positive stuff that's happening, which is the AI and the AI investment that's happening right now. That's offsetting the negative stuff that's happening, which includes tariffs, but also now with this whole increase in oil prices and diesel prices and gasoline prices, right? So we're having offsetting forces. And so overall, the picture looks for the world looks just like what we would expect it to be without any of these events. But there are parts of the world that are actually getting hit really badly. So if you happen to be a country in the Middle East and not just Iran, I'm talking about Saudi Arabia, UAE, your growth is being downgraded quite a bit. If on the other hand, you're a country like Taiwan or South Korea, and you're a big part of the AI global supply chain, then you are seeing blockbuster growth, right? You know, like growth that is twice what you've experienced typically, what you typically experience, right? It's like as Indians that are growing at 7%, it's starting growing at 14%. So we're seeing these very different numbers depending upon the part of the world that you live in. And secondly, or the third point I would say is that there's the headline, and then there is what actually happens. So the headline in 2025 was Liberation Day, tariffs 25% on average for the world that the US was going to impose. But in actuality, that wasn't the case. Now, because, you know, the markets reacted, Trump decided he had to, you know, step back and reconsider. And ultimately, now, tide of rates are around 10% or 12% that the US is imposing on the world. And so there are, in a sense, some kind of natural guardrails in the global system that's preventing some very big actions from being taken. But I do think this is adding up. You know, we're getting to one too many negative shocks. The fact that the US Federal Reserve went and raised interest rates was not anticipated in 2024, but is a reflection of the fact that we have too many shocks that are causing inflation to go up. So inflation is something that everybody is realizing. So I think, I mean, even in India, over the last 12 months, inflation has gone up, and people are noticing that. So that's the real thing. Okay, interest rates are going up. And that's a real thing. So we are, we are seeing this. And we are in a fairly, I would say, remain in a huge amount, with a huge amount of uncertainty. And things still look highly precarious.
[00:45:25] Speaker 2: Okay. So you said, you use a bunch of words. Yes. Yeah. And I want to go one by one. You said, what we predicted, the world looks similarly, like the growth and everything looks kind of similar. It's not very different. Right. And the large reason is because it's not that everything is growing at an exact pace that we thought of. But there are a few countries which have just gone down. And there are a few countries which are going exceptionally great. And that's why the world look balanced right now. Is that largely what you just said?
[00:45:59] Geeta Gopinath: But there are also countries like the US, which is doing the way it was expected, kind of maybe even slightly higher growth than it was expected to have. But here is where there are two upsetting forces, the tariffs are the negative, but the AI is a positive.
[00:46:14] Speaker 2: Okay.
[00:46:15] Geeta Gopinath: So in this case, there's a different sectors are getting affected differently. So the economy as a whole is doing okay.
[00:46:23] Speaker 2: All right. So underneath factors with these, like these two different things. Yes. And then you said inflation is rising, interest and rates are rising. We'll come to that part as well. Okay. But when, when there are like, when we look at economy as whole and everything looks great, right? Because as a whole, it's looking good. It's, it's growing world. And then, and there are a few places, few, few countries where things are not doing well. You call this phase a great gamble?
[00:46:56] Geeta Gopinath: So the great gamble phrase is to, to say that we have these two major forces, which is AI and geopolitics. And by the way, everything I said earlier was indeed about which side of this you're on. Hmm. So you're benefiting from AI. If you're a part of the AI super cycle, you're getting negatively impacted by the geopolitics. If that's where the Tadehs and the Iran war is affecting you. And so far it's been a wash. So the reason I'm referring to this as a gamble is that these are very big policy decisions that are happening in the world. We are moving away from a, we've moved away from a rules-based trading system where we had agreed rules on what tariffs countries impose on each other. And, you know, we had the World Trade Organization that was guiding that work. We've moved away from that, especially with the action that the US has taken. We have a hugely transformative force, AI, which has great promise, but also we are, we should be absolutely careful about the risks, including the safety risks associated with it. We saw that very recently. And in an environment where because of the loss of trust across nations, there is no coordination or thinking about, okay, how is it that we can ensure that this transformative technology doesn't destroy humanity? So we're completely in this gamble. We're like, we're rolling the dice. The world is rolling the dice right now. Thankfully, the dice is working out well, the negatives are being offset by the positives and it's all hanging together. But I think that's, I think we're taking a huge chance. And that's the great gamble. So who's rolling the dice? Each one of us in terms of every country is going about their business at this point. We are hoping that so far it's been good. It'll continue. We don't, there's no urgency to do something differently at this point. You know, they're right now the United Nations is meeting. Nothing is going to come out of it in terms of how to address AI safety risks through that. There's no sense of, we need to solve this problem. So we are all hoping, and it's not the fact that there are people who are not concerned. I think our people are concerned, but we're not able to come together, you know, and figure this out. And so it is a problem. And the reason I call this great gamble is because it's not as, this is not the first time that geopolitics is playing a role. We had the Cold War for decades of it, when it was the US versus the Soviet Union. It's always been the case that countries use economic policy for foreign policy objectives, this so-called economic statecraft. That's nothing new there. The reason this is a great gamble is because the world has never been more integrated at this than it is right now. If you took at any measure of global trade to GDP or anything of that kind of how complex global supply chains are, we've never been this integrated. So that's one. And then second, we have power that is much more diffused across the world, which means that it's not like there's just one superpower, which was the US state in the Cold War. You have the US, you have China that's catching up really close and behind. But then there are the middle powers, there are the non-aligned nations, including India, that are very capable, play a big role on the global stage. And, you know, Prime Minister Modi recently said at the BRICS summit that, you know, we should not be rule takers, we should be rule makers. So that combination can generate big unintended consequences, which is unlike anything we have seen in the past. So that's why it's the great gamble.
[00:50:54] Speaker 2: And who started it? What do you think? There must be somebody somewhere who must have been like, forget the World Trade Organization, forget the world, forget what's going on. I'm going to take care of myself. And that's how everybody else would have started thinking like that too.
[00:51:09] Geeta Gopinath: Yeah. So that's a good, it's a great question about where do you pin the origins of this? There are different, I mean, there are different views. There is the view that the great financial crisis in a sense was a bit of the origins of the discontent in the US. After the great financial crisis, there was this long period of high, you know, higher levels of unemployment in the country. And then the question is, who do you blame for that? So you had the sense that not everybody was benefiting from this so-called expert-led policies of the world. There's too much inequality. And then you get politicians who are able to then play off of that discontent. And then you get, you know, you get Trump. But even before that, even with Biden, there was also very much a sense of we need to be more protectionist than we've been in the past. China has been, is a big part of our problems. We have communities that have been decimated because of China. And so the, you know, all of the people who talked about globalization being a wonderful thing were wrong. And then you have Russia goes and attacks Ukraine, you know, cuts off, gets gas, Russia cuts off its gas supply to Germany. And we're like, wow, you know, Germany relied almost entirely for its energy on Russia. It was like, that was a mistake. You shouldn't have done that. And so complete rethinking of what the benefits are of globalization, of integration, questioning all the experts who were like, yes, this is what we should do. And then a whole level of new kind of populism that's now arisen everywhere. I think increasingly it is, you know, populism driven politics and economic policy.
[00:53:05] Speaker 2: So it looks like right now the gamble is not working out, at least in this part of the world, because everybody has become protectionist. If that's the word that you want to use. PM Modi is doing his thing. China is doing its thing. Trump is doing his thing. Like everybody's super self-consumed. Right. So if what, like, what do we lose if we all roll this dice badly?
[00:53:29] Geeta Gopinath: Yeah. So firstly, I think it is not the case that we're all countries have managed to become inwards. Right. So in fact, actually, in the case of India, there are a couple of things that India has done, which I was not really, would not have placed on the cards before, which was having trade deals with the European Union. That has been in the works for a long time. But it took the current global environment to say, okay, well, we need new trade agreements with other countries. And so you have that happen. So we're seeing that. We're seeing that we're not seeing a general retreat from globalization. We're seeing new alliances being created, new treaties being created. And if you look at global trade overall as a share of world GDP, it's at the highest it's ever been. So the world remains highly interconnected. It's just that we've made it a much more inefficient process, a much more costlier process, which is why we're seeing prices go up, many more inflationary forces around the world. You are losing in terms of economic efficiency by a lot. So in that sense, the reason I think, so I actually think that many countries are not facing that much of of disturbance from this. The Iran war clearly with the prices and the effect of what's happening on energy prices is now having a consequence. Many countries are squarely worse off, but on the globalization front itself, I don't think people necessarily are waking up and seeing that the slow attrition of breaking up the old rules-based order, it's slow. It doesn't seem that dramatic at this time. I think that my concern is that people don't realize that this thing adds up. And 10 years down the line, you look back and you're like, "Oh God, how did we get here?"
[00:55:29] Speaker 2: And that's what happens every time when you actually start losing control over the economy, right? Brexit, it's a similar thing that for two years investment dried up, nobody saw it coming. People were thinking, "Oh, it's great. Everything is like nothing has changed at all." And then boom, all of a sudden, you start feeling it. Do you think that the world is in that two-year phase right now?
[00:55:53] Geeta Gopinath: So yeah, so I think the two-year phase was right after Brexit was one where investment kept rising. And then there was a sense of much ado about nothing, and then started slowing. And then 10 years later, you look back and the economy is in much worse shape than it would have been in the absence of Brexit. So I do think that we are in those two years where things are doing okay, though in fact, it's getting kind of bad really quickly. We have the added benefit of AI, which Brexit UK did not have during Brexit. I think this new AI technological transformation that's going on is in a sense of setting what would have been a much more slowing economy, including for the US. Not just the fact that the technologies are wonderful and doing great things, but just the stock market and how it's booming and the effect that's having on wealth and spending. That's an important part of holding up the economy right now. So we do have the AI story, which is different and a different transformative force. But if I just focused only on the piece that was about globalization, first of all, I mean, I do believe that we should have been a little, we should have been more careful about the consequences of just completely economic efficiency driven globalization. I do believe that there is important to be concerned over national security. You know, we economists were not pointing at Germany and saying, "Why would you want to be dependent 100% on Russia for your energy?" For the benefit of hindsight, they should not have done that. So I can see arguments, absolutely arguments for investing more in resilience and more in your national security and so on, your supply chain resilience. But the problem right now is that it's just, there's no guardrail. So we're kind of going off the cliff in terms of, you know, the US is just putting blanket tariffs on many, many, many countries completely indiscriminately. And that is the, that's what troubles me.
[00:58:03] Speaker 2: And right now you just said that because of AI boom, we have been able to actually have these, have it look like that the global economy is in right shape. So do you feel that the moment AI bubble bursts or something happens, even if it's not bubble, something wrong will happen, the recession will come and all of these things will just start trickling
[00:58:22] Geeta Gopinath: down? So if there is a, an AI correction, there is a sudden realization that, okay, all these valuations are too high and they shouldn't be where it is. Do you feel that the valuations are too high? It's okay. So let me, let me come back to that. But on the basic, basic mechanism is if there is a big correction in stock markets, then, you know, by any, by any math, you would be looking at a growth in the US being at least just going down to zero and maybe slightly negative. So we will be talking about a recession. So typically these recessions don't tend, don't, are not long lived, they tend to be short lived when it's just a stock market driven recession. But I think we're in this space where we, it's very complicated how the financial engineering has happened with the AI boom, that it could be more than what we are projecting. But yes, if there was a big correction in the AI markets, we would see, we would see, we would be talking about a recession, even if it may be
[00:59:25] Speaker 2: short lived. Why could it be more? You said the financial engineering has been done in a way that we
[00:59:30] Geeta Gopinath: could be see. Right. So we have companies that are listed right now on the market and we know what their valuations are. There are still a couple of companies that are to be listed like OpenAI and Anthropic. There is, what we do know is that there is very much a, you know, there are interlinkages in terms of, you know, Nvidia, which is a listed company is providing money to some of these AI labs to use that so that which the AI labs then use to buy chips from Nvidia. So there is a, there is a lot of circularity in this, which means if, if Nvidia were to collapse or any one of the labs were to collapse, that would have implications for Nvidia, you know, that those kinds of linkages we don't see. Similarly, with the financial system, the way it is, there's an big part of the financial system that we don't have that much oversight over. Right. So we, the typical banks, the standard banks where you can have a deposit and you can put money in the, in a bank, those ones are very regulated. But if you look at the old bunch of other financial institutions, you know, the Black Rocks and the, you know, the, the Polos and so on, we don't have that much visibility into their balance sheet or how they are, how much they rely on the AI cycle, how much are they connected to the banking system. It's that kind of interlinkage that usually becomes apparent in, once you start seeing the economy slow down, which is what happened during the great financial crisis, right? When the great financial crisis started with, you know, some houses losing value, this is, these were the subprime mortgages, right? They're basically, you know, houses in places, not great value. They shouldn't, nobody should have been able to buy those houses, but that happened. And so, you know, the federal chairman at that time, Ben Bernanke said, yes, we see it, but it's a small problem. The subprime mortgage problem is not a big part of the market, but we didn't realize that that was just the tip of the iceberg because that tiny subprime mortgage shook the entire banking system because it, the banking system was, which we hadn't seen before because we were, there was not enough supervision of it, was invested in that subprime mortgage. There was all kinds of new kinds of securitization of mortgages, complicated financial
[01:02:00] Speaker 2: engineering that unraveled once the crisis started. Coming back to the AI evaluation question, do you
[01:02:08] Geeta Gopinath: think it's overvalued? As an economist, what do you think? Yes. I mean, I, I personally think that there will be a correction. I'm of that view. That it's impossible to tell when that correction will happen. I'll tell you why I think that they, that there's very likely to be a corrupt, a correction is because that even though this technology is phenomenal in terms of capabilities is getting better and better, it is an industry that's very competitive, right? So it's hard to explain how each of these labs and companies who are investing close to a trillion dollars now globally in AI just in 2026, will be able to make the kind of profits that are needed to recover that investment. So that's, I think the question mark. Just besides, besides, besides, by the way, I would, on top of that now, I would also add that, you know, the current chips that everybody's using, the GPUs that everybody's putting in place, you could, you could get better chips that come in. Those could make the existing data centers require replacing those chips. So those chips could come obsolete much, very quickly. We could have a cyber risk event that was real. That actually was not just a threat and a good story, but actually created some damage. And so there are many things that can, that can go wrong. And so I
[01:03:39] Speaker 2: think, yes, you know, I was reading somewhere that you joked that you can finally use trade wars instead of trade tensions. I had to ask you that, what is one sentence you've been wanting to say, and you couldn't during your period in IMF?
[01:03:57] Geeta Gopinath: I know there's a lot, there's a, at the IMF, you know, you are a diplomat too. In addition to being an economist, you're also a diplomat. And there's good reason for that because you want to be of use to the country. You don't want to be a problem. And, and so therefore that's your, that's the role, right? Now, as a professor, I am more, I can say, this is just me speaking about, you know, as myself and not representing an institution. So on pretty much every topic, I can say what I want to say. For example, you know, I can use, I can take the names of all the politicians I want to take, I can say Trump, I can say Modi, I can, you know, you don't do that as a, as a diplomat, you have, you're more careful because you don't want a headline which says that, you know, X institution said Trump said, said, said, said this, right?
[01:04:45] Speaker 2: What was one thing you wanted to say and you couldn't?
[01:04:48] Geeta Gopinath: What I want to say and I couldn't.
[01:04:50] Speaker 2: You wanted to and you couldn't.
[01:04:52] Geeta Gopinath: No, I mean, it's, there are many things, frankly, there's. Give me one. No, just for example, on what's happening in terms of tariffs and the kind of chaotic policymaking in the world. Just the fact that I'm saying that is not something I could say.
[01:05:10] Speaker 2: Oh, okay. And let's, let me, let me ask this question in a much easier way. That, that is, what is one thing that IMF did wrong when you were still there?
[01:05:23] Geeta Gopinath: One thing? I'm glad it's only one thing. I, you know, I, we have to all remind ourselves that economics is a social science, right? Which is, you know, Richard Feynman, this, the physicist who said that this is think how much harder physics would be if electrons had feelings, right? So this is that kind of a science where everybody has feelings and everybody. So the, you know, the, what a particular economic policy does on the ground in reality can be different from what you anticipated. It would be because people react in different ways and so on. So there is that, which is that there's always the, you know, the fact that you're doing your best to help countries, but it could be that the outcomes are different. And secondly, the fact that you're not the person in the, in the seat making the decisions in any case. So that can be different too. So I think in that sense, I, I actually, you know, I went in from academia to the IMF and I had very little understanding about how the institution works. And to an important extent, it is, it is a bureaucracy. Your job is pretty much safe. I mean, you, you know, nobody's going to take it away from you very easily, but the staff of the IMF work flat out, I mean, they work incredibly hard for me. That was the most striking thing about the IMF was how committed the staff was to do the right thing for countries.
[01:07:03] Speaker 2: The question that probably millions of people were asking around May, which was about a decision that IMF gave money to Pakistan right after the attacks happened. Right. Out of the 35 years, 28 times Pakistan have asked you money. They keep coming back again and again. They fund terrorism. And yet IMF, the one economy has not been able to repay and is funding terrorism. You guys actually
[01:07:35] Geeta Gopinath: give them the loan. Why? So firstly, Pakistan is not the only country that has many rounds of borrowing from the IMF. There are other countries like Argentina is our, is the biggest, you know, client of the IMF on many, many, multiple- They don't have the terrorism angle. Right.
[01:07:55] Speaker 2: So that's why they're not funding them. There are other countries too, in the, in the,
[01:08:01] Geeta Gopinath: in the list of countries that the IMF lands to. So that's, I mean, the step back in, first of all, when countries are, countries that find themselves in deep crises are not well run, extremely well run, managed economies. Right. I mean, that's the reason why they are in the crisis that they have. So if your criteria was, you know, whether we, that only you lend to countries that have all the right rules and do exactly things the way that you, you know, what you define would be ideal for an ideal society, then that's not, that doesn't exist. That's a null set. So the reason the IMF was created was to say, okay, you see countries, they are in deep economic distress. This is a problem for millions of people who live in that country. There are consequences for neighbors when you have a country, usually in deep distress, by the way, it's also a fueling ground for terrorism and for everything to spill over. That's an important factor. But the way the IMF simply thinks about it is that this is, and the IMF, by the way, is its membership, including India, a decision about, are you going to help the people of this country in the midst of this massive crisis? And so it is a decision that you're making, and it is a decision made by the membership, the votes of the members, in terms of whether to give the money to the country or not, give the loan to the country or not. And so a decision was made by the membership on it. This is not a decision made by the management of the IMF. This is not a decision made by the membership to make that happen. So it is really a statement about there are these millions of people who live in our country who are going to be in deep distress because the IMF is like a financial firefighter. It's not about whether I'm going to build another bridge in 10 years from now. It's about, are you going to help the country right now? So that's the decision that you're making. And is the country putting in policies that are in line with what you would like you to do when it comes to fiscal policy and monetary policy. That's the mandate of the IMF. As long as those conditions are met, then you are in the sense, the charter of the IMF is to give money to the country.
[01:10:27] Speaker 2: But how many chances are too many chances for IMF? Like 28 times they keep coming back. And I'm sure there are other countries of the way you're saying it. Yes. Then like, till what point you keep funding? There has to be some limits, right? At some point that, okay, now we can probably do this less.
[01:10:50] Geeta Gopinath: The decision about whether you lend to a country or not is whether you have confidence that the policies that this new government, by the way, whoever is going to be in power, will be able to move the country away from the abyss. That's always the test. Nobody ever has defaulted to the IMF, by the way. Everybody repays the IMF, so that's not the question. But the question is, the whole purpose of you that the IMF was created was to be a financial firefighter. And you have a country that's coming to you. Maybe it's coming to you for the 30th time. But it is coming to you and saying, okay, we've decided we need to change policies. We need to do things differently. We're inviting you into the country to come and check our books, see what we're doing, what we're not doing. It is not the right thing for the IMF to say, okay, now I'm sorry, no, I'm moving away. It is the job
[01:11:52] Speaker 2: of the IMF to help the country. And you talk about membership, the decisions being made by the membership, right? America is the largest shareholder in IMF and effectively they have a veto. So do they ever take shots? Instead of membership, like whatever America would like, whoever America would like to
[01:12:11] Geeta Gopinath: fund, the IMF will fund. So firstly, the veto of the US, you're absolutely right that the US is the only country that has enough shares that it has veto power. The veto power does not apply, for instance, to when you give money to a country, right? So there is no, what's required for giving money to a country is that on paper is like a majority say yes. The US's vote share is around 17%. So if everybody else agrees, it can happen. So in theory, it doesn't, that doesn't, there are some other decisions on which there is veto power, but it's not about whether you're giving money to a country. Now that said, in practice, obviously, it does matter what the big economies around the table want to make happen. And that's the case. But what I have found to be true is that because the IMF has this financial firefighter role, there is, you know, you really have to ask yourself, are you going to let this country go off the cliff and put tens of millions of people or even hundreds of millions of millions of people in real trouble. And I have found that that usually that makes politics a little less salient because it's just so time, it's so urgent, it's so consequential that
[01:13:39] Speaker 2: I think the stakes are much higher. But did you ever feel pressure that you have to probably take a decision because of someone else who's had much powerful position than you?
[01:13:50] Geeta Gopinath: You know, this is very interesting. I actually did not, but that was maybe just me because I'm completely a straight shooter. And thankfully, until I left, all my counterparts I dealt with were people who I could talk to them and maybe I would go to the edge in terms of what was possible. But I don't think, you know, no point did I think there's always diplomacy, there's always politics, there's always something, but not in a way that's super consequential. Like I don't, that was not the case.
[01:14:26] Speaker 2: Interesting. And because we're talking about debt, we're talking about countries lending, that is something that you've said before as well, which is like, we all are distracted by this tariffs and wars, but the real problem that we should be talking about is debt. Because almost all the countries is sitting on high amounts of debt, no plan to getting it down. And why do you say so? Does that, is that the point that, which is really scaring you today as well?
[01:14:51] Geeta Gopinath: Yeah. I worry about the fact that government debt levels around the world have, are as high as they are right now. I mean, global debt is going to reach a hundred percent of GDP in a couple of years. We just, we're basically second to what it was right after the second world war, right? I mean, and that required a massive amount of debt buildup. So it is a problem. And while in the past, it used to be that, okay, this is a problem only for developing countries, when their debt goes up, they have problems and they have crises and so on. I think now that is filtering down to advanced economies. For example, the UK is a country where whose debt level is not high enough that markets are not giving it that much space. Whenever there's any news about spending higher than was expected, interest rates go up by quite a lot. So France is another country where this is becoming an issue. The US I don't think is there, is not there yet. There's been an increase in interest rates, but it still gets treated as, you know, probably gets biggest benefit of the doubt. Yeah. But it is going up and it's getting to very large numbers. And the problem is, it's not just where it is right now. It's the fact that if you project ahead about where debt to GDP is going, that's very high. But why is nobody scared then? Because actually right now there is a lot of savings in the world. This whole demographic shift that's happening is supplying a lot of savings to the world. And that's why you're not seeing much movement, but it's interest rates have gone up. They haven't gone up. I mean, you know, it used to be in the US, the 10 year borrowing cost. If you issued a treasury bill or the treasury bond that would pay off in 10 years, the interest rate on that used to be, you know, two and a half, a little bit over that two and a half percent. Now it's 5%. So it's much higher. But, you know, it's not, it is still not in the dangerous space, which is why I think that this is the moment when you should be using again, the opportunity for the world to try and bring that debt down.
[01:17:11] Speaker 2: So at what point does that become dangerous for governments?
[01:17:15] Geeta Gopinath: At what point does it become dangerous for governments?
[01:17:20] Speaker 2: You said like right now it doesn't look dangerous because of savings in the world and what's going on. So at what point does it become dangerous?
[01:17:27] Geeta Gopinath: Well, I think we, if we keep going this way in 10 years, and if we just look at the amount of spending that has to happen between now and 10 years from now, we're looking at debt levels getting to very high numbers. Japan's cost of borrowing is going up by a lot. So one of two things will happen. Either all these governments will have to cut back on a lot of their welfare programs that they have because they have to pay interest payments on those debt that they have, which is very large at the time. So that's one possibility. So when it gets dangerous, it's going to be completely a function of, first of all, what's growth going to be between now and then? And if AI is going to generate a big boom in growth, then we're all in a good place. If there is going to, and when things start looking precarious, usually then the governments also say, okay, well, we're going to have to do something on spending, right? So that's the, whether you get that responsible reaction. So there's no, there is no like simple, okay, yes, date by when something can explode. It's entirely a function of what we choose to do.
[01:18:36] Speaker 2: Okay. So what can trigger the explode? Out of all the things that we've spoken about right now, what do you think can actually trigger the large explode? Is it the AI bust? Is it the valuation? Is it the interest rate? Is it the government borrowing a lot more? Is it another sort of war or tariff or just protectionism going out of the way? Like what?
[01:19:03] Geeta Gopinath: So I think a trigger would be another major crisis that leads governments to spend again, a whole lot of money. And if they project that that's going to be the case, then suddenly they decide that now, because there's now recession in the country, we're going to now run deficits in the US of not just six and a half percent of GDP, but 10% of GDP. Those are the kinds of things that are going to create problems. And it's not just that that raises costs of borrowing for the US, because the US borrowing is kind of the foundation of interest rates in a sense around the world. Yeah. So the US starts paying higher interest rates. It's always been the case that the rest of the world starts paying even higher interest rates. So it's a bit of my debt, your problem kind of situation. That's usually the dynamics, how it's been now that could change in this new geopolitics, in the world of geopolitics and so on. But usually what happens, by the way, is that governments try many things before they stop spending, which is they do what's called financial repression, which is requiring more and more banks to hold more and more, buy more and more treasuries, more and more government debt, forcing savings into government and debt as opposed and away from any private debt. So all of those kinds of things can happen.
[01:20:25] Speaker 2: There's a saying that, right, like when government starts spending more on their interest rate than the military, that's where the country is going to go down. Right, have you heard that?
[01:20:38] Geeta Gopinath: I mean, I've not heard that one. That's a very particular metric, but sure. I mean, the US is at that level.
[01:20:46] Speaker 2: Level, exactly, this year it happened.
[01:20:47] Geeta Gopinath: Yes, but there's no fact like that.
[01:20:50] Speaker 2: No, there were like enough countries. Like when you, I think I read it, I'm forgetting this guy's name, it was in my head, but he always read about the fall of Roman Empire and then Ottoman and like a bunch of other empires. Yeah. And like he was trying to just make that case. So that was, I was asking like, have you ever heard it? It would be interesting to know your point of view on that.
[01:21:13] Geeta Gopinath: I have not heard that. And I'm always very skeptical of people who try to use thousands of years of one, three data points over a 2000 year period to then say something about now. I mean, that just seems so.
[01:21:27] Speaker 2: But do you predict, do you predict certain scenarios in your head?
[01:21:32] Geeta Gopinath: Well, I was in the business of forecasting when I was at the IMF as chief economist, we were constantly projecting what growth was going to be two years out. I don't think anybody can really tell you what can happen past five years. I think five years is the horizon for, to have any bit of confidence. Okay. Maybe this has happened. The first two years, in fact, two years ahead is probably as good as it gets. Five years gets tricky. But speaking about something five years after, I mean, after five years is just tough.
[01:22:01] Speaker 2: Like 10, 20 years? No. It's tough. Yeah, it's very, very hard. But not even your head. Like sometimes you just go on like, oh, maybe this will happen. Maybe it looks like this is how the world will play out. Do you ever go like that?
[01:22:15] Geeta Gopinath: I absolutely think about, and since also, by the way, because I get asked by, I find people like you, what could happen to the world in 20 years? I do think about that, but I don't want to be the person who is like, I'm going to be able to stitch together a story that hangs together and therefore sounds plausible. Like the whole Roman Empire did that and so on, some other Empire did this. I don't care for that.
[01:22:42] Speaker 2: Fair. Give me one five year prediction sort. Like what do you think? What's one story which is playing out in your head?
[01:22:50] Geeta Gopinath: I think we all have to take very seriously what could be the consequence of the current path of AI development on labor markets and jobs and on prosperity and, you know, say five years from now, which path are we going to be on and where we end up? I don't think we know it at this point at all. Even the AI labs themselves are only learning about how their own creations are working. So I think what I would rather say is that this is a useful moment to think about these big transformations, be it AI, be it geopolitics, what's going to happen, debt. And there's of course the longer standing ones, which is climate change and demographics. I mean, I think these are the five ones I would. Which one scares you the most? Well, I, you know, I always, the near term is when it's scarier than what happens in five years. And I think the near term is AI and geopolitics.
[01:23:51] Speaker 2: Yeah. Like, and to me, one thing is also a little scary, which you covered in one of your talks, which was about cognitive surrender. Yes. Like, and I fully buy into that. I feel like even before AI becomes super powerful and maybe have this enormous, can cause enormous amount of damage and before world leaders can just mess up the entire thing. I think a lot of young people have stopped thinking and they are only quitting on themselves even before anything could happen. So I think that's, that's a big scare, which is like an immediate scare because people are losing their ability to think.
[01:24:30] Geeta Gopinath: It's, it's real actually. For me, this feels a bit like 2020 pandemic when the kids who were in school really had a huge disruption to their learning.
[01:24:43] Speaker ?: Yeah.
[01:24:43] Geeta Gopinath: Right. Because they couldn't go to classes were suspended and, and also, by the way, there's huge amounts of inequality here, right? If you went to a more expensive school and you had much more opportunities or you belong to a family that had many more devices than you could do things, as opposed to if you were from a less, lower income family, right? So for me now feels, has that bit of the 2020 feel because it is the case that we're all trying to move very quickly and trying to figure out how to prevent this cognitive surrender from happening. And also not to be like all pessimistic, but to say what skills will be particularly valuable for you in the age of AI, like what is it that's less valuable? What is more valuable? But none of us have it sorted out. So there's going to be experimentation over a couple of years. And we've already seen, I mean, even at Harvard, there is a big difference between when you test them with what they have done at home versus what you tell when you test them in class. So actually performances have dropped off because of this cognitive surrender. So that's a real thing that's happening right now. And while, you know, maybe places like Harvard and MIT have the luxury, we're having these conversations with thinking actively about how to change our teaching. I mean, that's not true for children everywhere in the world.
[01:26:05] Speaker 2: True. In fact, recently, MIT said this, that they are not well equipped to teach students who are coming and using AI labs and like AI, you know, a lot of AI tools. Yes. It's difficult for them to actually keep up with that kind of pace.
[01:26:22] Geeta Gopinath: No, it is. It's a real thing. That is an absolutely a real thing that I worry about, you know, like we had those lost years of the pandemic when those kids who weren't, they didn't really learn as much as they should have. I am worried that there's, we are going through a similar period right now. Right now. Yes.
[01:26:37] Speaker 2: So if you were 25 again. Yes. If someone was 25 watching this, they're ambitious, they want to move to America, they want to move wherever in the world, and they're confused at this point, what would you learn today?
[01:26:52] Geeta Gopinath: Well, so firstly, I do think learning is important. Right. So this is this part that besides the what to learn part, just the fact that you're going to have to force yourself not to rely on, you know, Claude or ChatGPT to, to do your work for you. And to not have this fake sense of learning, which is by the way, very easy because you're like, oh, I'm not going to, I'm going to do it myself, but I'm going to take a hint from Claude. And then you get this as a, well, I learned right now. The way we learned growing up was you kind of made the mistake over and over again. You made it in different ways. And that process, you know, wires your brain such that you can then know things in a way that you wouldn't have known. So it's going to the first, I would tell, I would tell a 25 year old to make sure that you are not surrendering. Your cognitive surrender is not happening, that you are actually learning something yourself. You are building expertise, right? AI is wonderful when you have expertise. I mean, in my case, I love it. I use it. It compliments me. It's great. But if you have no expertise, then you're completely substituted out. So I would say do that. Second, we're definitely now in this, I think the kinds of questions that are much more complex involve human interactions. A little less well-defined. I think the, frankly, the whole social sciences, I think is more AI proof than math or physics or one of those areas where it's a little more well-defined. And so that's going to be, that I think is also very valuable to build that. Also, make sure that you are not, you're interacting with your fellow classmates and so on. Because one of the reasons that we used to work in groups, remember, was because, I mean, you're way younger than me, but I'm sure you also worked in study groups, right? Was because you were like, okay, we're going to try and get to solve this homework together. Yes. So we can all do this together. Now you have like a brilliant classmate on a phone or in your machine and you're, and that's what's happening is that students are saying, well, I can, I don't need people to be surrounded by people, but I can just use Claude or one of these other ones to do it. And I think that is a mistake too. So you're going to have to make a conscious effort to say, no, no, no, we all meet. We're going to work on this together. We're going to force ourselves to learn. That is important.
[01:29:28] Speaker 2: So you, you specified three, you, you told me three things. First is learn. Like, what do you mean by learning? What do I do? Like not use, pick up a problem and just come up with my own things and not use any AI. Is that what you're suggesting? What is a daily habit that somebody can do?
[01:29:45] Geeta Gopinath: Yeah. So I would, so a few things. If you use AI, you use AI to, to challenge you on the same problem in many different ways. Right. Remember we used to get, well, I used to get at least, you know, multiple, exact same kind of multiplication problem with different numbers and so on. Get AI to kind of be imaginative and give you new kinds of problems to solve and to work with. It's going to be very important for the teacher to make it very clear. So one of the things, for instance, we're doing at Harvard is to say, like I give an assignment and I'm like, okay, this is an assignment. Learn it. You can use your AI if you want to, to learn it. But I'm going to test you on this in an in-class exam where you're not going to have AI. So you have every incentive to actually learn it in the way that you don't have to rely on machines for it. So what's good about AI is that you can learn on many other topics. You can learn more widely. You can try many more examples. You can tailor it to how you learn. You can start it, you know, depending upon your level of preparation, you can make it start at a lower level versus a higher level. So there's all this kind of tailoring you can do. Use it for that, but then don't use it for, for, for just, you know, don't outsource it entirely to it. That'll take, that'll take effort, actually. Yeah. That'll take effort.
[01:31:11] Speaker 2: But that's what we need.
[01:31:12] Geeta Gopinath: Yes. Yes. No, it has to be that you sit, you, that you are going to have to tell yourself that I want to write this. Like, for example, if I'm going to write an essay, I'm going to write the essay from start to finish, even though I know that I could like press a button and get it out in two seconds, but you're going to have to do it. Otherwise there's what is, you have no value added.
[01:31:34] Speaker 2: Mm-hmm. So that's first. Second was social sciences. You think it's, it'll be beneficial for a lot of people to study social science today, no matter what they're doing?
[01:31:45] Geeta Gopinath: The fact that it's not just science and there's a social aspect to it, which is that you need to know about complex human thinking and much more unpredictable behavior is absolutely, I think, yes, you want to know that. There's not very clear that, I mean, I use AI and I see it's great for when I write up a model and then I ask you to code it and simulate things. It's phenomenal at that. But everything before that, in terms of what is the question I'm trying to answer, what are the ingredients I want to put in? So far, AI has been pretty bad at any of all of that stuff. I mean, it's kind of annoying actually. True. Yes. It's got an attitude, but so it's kind of annoying.
[01:32:33] Speaker 2: And the third thing is have social groups and like do a lot of things together in groups, because that's how you build your abilities to, that's how you build your human skills.
[01:32:44] Geeta Gopinath: That will build your skills and also use that as an opportunity truly to, you know, do the old fashion things when they used to be these salons where you were like, you're debating ideas, right? Use it as an opportunity to be not just in your narrow lane of subject lane,
[01:33:01] Speaker 2: but to broaden your scope. You've seen that in your classes as well. Like, do you see that, that people are becoming very isolated?
[01:33:07] Geeta Gopinath: So that's it. So the MIT report in fact documents that, that previously when these people used to work in study groups are no longer working in study groups. So there is actually documentation that there are a few of it, because it is the case that you, the incentive, one of the incentives, which is that always might have a smarter friend who knows the answer. Now you have a very smart machine that knows the answer.
[01:33:30] Speaker 2: True. You gave a word, a great lockdown. If you have to give a word, what we're going through today, what would it be?
[01:33:38] Geeta Gopinath: A great gamble.
[01:33:39] Speaker 2: You gave that already.
[01:33:42] Geeta Gopinath: It's a great one. I like it. That is what, but it is what I feel it is, which is that, oh, we are playing with fire in many areas and there's no trust across nations. And so, you know, we could be lucky. The thing with the gamble is that you could do really well. You could win.
[01:34:03] Speaker 2: Yeah. We could just roll dice and figure it out.
[01:34:05] Geeta Gopinath: Yes. And you could get very good outcomes, but may not either. And again, you know, I think we're getting, we're buying time. We still have, we'll see what happens on the political front. We'll see what develops.
[01:34:20] Speaker 2: Are you an optimist or a pessimist person in general?
[01:34:27] Geeta Gopinath: So this is an interesting question because in my own personal day-to-day existence, I guess I would say I am an optimist because I wake up and I'm like pushing myself to make things happen. As an economist itself, I don't know if the word is pessimist or optimistic, but I am somebody who probably spends too much time thinking about things that could go wrong. I do that, right? But that, for me at no point is any of this like, oh my God, that means this is all dreary and bad. It kind of energizes me to say, okay, what can you do to help fix these problems? Like, it's never about, here's a problem. And oh God, this is all going terribly, but it's more of, okay, this is in a way, this is exciting. It's an opportunity, something for you to do.
[01:35:17] Speaker 2: But does that ever become part of your personality in your personal life as well? Because 24/7, you're just thinking about, okay, what could not 24/7, but during the entire work, you're just thinking about what could go wrong? What are the things which are causing problems? This is, we're playing with fire. There's a gamble going on. World is going this way, that way. You're constantly just thinking about negative outcomes. Do you find yourself thinking like that in personal life?
[01:35:42] Geeta Gopinath: I absolutely think about positive outcomes too. It's not like I focus only on the negative outcomes. I mean, my life, like even on AI, I use AI and I'm like super excited about it. And so, and no, and sometimes I watch the show and I'm laughing my head off. So don't picture me as somebody sitting there in some dark cave trying to stress about world going bad.
[01:36:03] Speaker 2: I'm not, I'm just asking, does that become your personality when you do this for so long?
[01:36:08] Geeta Gopinath: No. I see if the first thing is, like I said, if you're the person who says, okay, you worry about everything that's going to go wrong. And therefore that kind of, you know, you get, you feel like, okay, well, what's the point? And that's one way. But if by thinking about what needs to be fixed, you're like, I want to be part of the solution, then that's very exciting.
[01:36:29] Speaker 2: Yeah. That's a good way to look at it.
[01:36:31] Geeta Gopinath: Yes. Yes.
[01:36:32] Speaker 2: Interesting. Okay. Here's the last two questions that I asked almost all my guests. Yes. One is, what is one advice that nobody should follow?
[01:36:43] Geeta Gopinath: What is one advice that nobody should follow? Oh, be like me. The advice of, you know, try to be that you should try to do things in a particular way because that's how it's been done. Or that's how famous people have done it. I hate that stuff. Like, I don't like, I know that people like to ask, but somehow think that, okay, if I do what person X has done, I might end up in where they do. It's crap.
[01:37:21] Speaker 2: It's crap. It's crap. Yeah. Okay. And the last question, what is the personal cost that you've paid to become Deetha Gopinath of today?
[01:37:30] Geeta Gopinath: The personal cost. So this is the beautiful thing, right? Which is I, people get to where they are because they made choices consistent with what they want. So what may look like a cost to you is not a cost to me, right? And so a different way of saying this is that people will ask a woman always, a woman can't have it all. And there are trade-offs, you know, whether you can have enough time for your family versus enough time for your work and so on. And it's true. You cannot absolutely have enough time for you to do everything for the family and everything for your work. And it's, and the more senior and the kinds of jobs you take, the more challenging they get that even less. Right. And so the fact that I did less of the family side does, it's not, is true factually correct, but I don't see that as a cost to me cost. Right. I don't think, I don't see it as that. I see it as, you know, we, as a whole family unit, my husband, it's not just me, it's my husband, my son and me. I think we relied on whoever was better at doing what to get things done. And, and it's been, and then I am a workaholic. I work 24/7. So maybe the questions, questions for my husband and for my son, which is like, what is it that, what is the price that you paid because of what, what Gita did? Right. I, so again, I think, um, yeah, I don't know what to say, whether this is a cost or not. I mean, I think this is, these are choices you make, which again, comes back to, you know, your previous question about how to live your lives, right? This is, that's a very personal choice about how you live your life, what you do. And this has always been me. My mother always complained about that. I was a rebel as a young girl too, growing up, which is, I hated being told that because you're a girl, you do this and you don't do that. And so I, so more generally, I think that expectations of society puts on you in terms of here, you know, do it this way and done it that way. Yeah. But do you feel like you've sacrificed anything? Have I sacrificed anything? Um, I mean, I guess, I don't know if I will not use the word sacrifice, but I would say, well, in theory, I would like to have had much more time for friends and family and, you know, but it's not, I am honestly not, I would never use the word sacrifice. It was a choice that I made and it is, uh, and I'm not, I wouldn't say I would do it any other way. I guess
[01:40:23] Speaker 2: that's a statement. No. So you're happy about it. No regrets. I'm happy. Perfect. Thank you so much. It was pleasure having you. Thank you for answering so many things and answering some childish questions as well. No, no. Thank you. Thank you. This was fun. Thank you. Thank you. Thank you so much. Thank you for watching this episode till the end. We would love to know what you liked or disliked about this episode and which guests you would like to see on the show. Let us know in the comments, your feedback help us improve and make every episode a little better. I'll see you next time. Until then, keep figuring out.