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Mark: There’s a lot of threat and fright and worry about what does this mean for my job or the future of my kids’ jobs? We’ve seen what technology can do and usually, it creates new jobs, different jobs.

Stephanie Kelton: Welcome to the Best New Ideas in Money, a podcast from MarketWatch. I’m Stephanie Kelton. I’m an economist and a professor of economics and public policy at Stony Brook University.

James Rogers: And I’m James Rogers, a financial columnist at MarketWatch.

Stephanie Kelton: Each week we explore innovations and economics, finance, technology, and policy that rethink the way we live, work, spend, save, and invest.

James Rogers: Stephanie, can you believe we’re over halfway through the year?

Stephanie Kelton: I can’t. It flies by and then I go into the store and I see Thanksgiving and sometimes Christmas stuff out and I can’t.

James Rogers: Well, today we’re bringing you an episode focused on the big ideas that are going to shape money for the rest of the year, where we’ve been so far, and what to expect as the second half of 2023 gets underway.

Stephanie Kelton: This is a follow-up to an episode we did at the end of last year where we took a look at the year in review with MarketWatch’s Editor in Chief Mark DeCambre. We talked about a lot of different ideas, but here are a couple of highlights. Student debt cancellation, big companies like Amazon expanding into the health space with primary care offerings like One Medical, and of course inflation. That’s where we picked up again this week. Mark, last year when we talked, inflation was really top of mind. Here’s a clip from that conversation. So Mark, we’ve talked about student loan relief and these tectonic ships in healthcare, but as 2022 comes to an end, what else is on your mind?

Mark: I’m thinking about tightening and inflation as the new ideas or I should say old ideas that have become new again. And I think this is the year, the period even that case studies are going to be made of and historians really they dream about this sort of setup that we’re seeing now from an experiential standpoint and an experimental standpoint. What happens after a decade-long period of economic expansion engineered by hyper-low interest rates? And if the best new idea, in my view of the past 10 years was zero interest rate policy, the battle against inflation is going to be the story of the next decade.

Stephanie Kelton: So Mark, what do you make of that?

Mark: I think the idea of inflation certainly became a pretty closely washed issue for investors and for the average person. We have tried to certainly in MarketWatch track it pretty closely with focuses on food inflation and housing inflation, all those concerns that would be relevant to the average person. But I think for the most part we were on point in terms of expecting that this would be a centerpiece of many of the challenges in 2023. So I guess kudos to us.

Stephanie Kelton: Yeah. Definitely kudos to us. Inflation was a huge story. And since we spoke last, the Fed has raised interest rates a lot.

Speaker 4: The Federal Reserve has raised its key interest rate for the 11th time in 17 months.

Stephanie Kelton: Took a brief pause, but they’ve got the interest rate in the range of five and a quarter to 5.5%. That’s the highest it’s been since 2001. We’ve heard Jerome Powell reiterate that the goal is to get inflation all the way back down to 2%.

Jerome Powell: We at the Fed remain squarely focused on our dual mandate to promote maximum employment and stable prices for the American people. My colleagues and I understand the hardship that high inflation is causing, and we remain strongly committed to bringing inflation back down to our 2% goal.

Stephanie Kelton: We’re close, but there’s still some distance there. So the Fed is saying we may have to raise further. Some economists think maybe the last rate hike was the last rate hike. And so Mark, where are you on this? Do you think we’re at or very close to the end of the tightening cycle?

Mark: Yeah. These are very complicated issues, right? So the whole notion of how you navigate inflation and whether or not the Fed is doing the right job and on the right track, all respect to Jerome Powell and the folks trying to manage that situation because it is not an easy one, but have they mightily battled against inflation? The vote that it is, I would say yes. I think by many measures that we’ve looked at so far, CPI, consumer price index being one of them, were around 3%, certain measures. So it would seem that we’re close to the 2%. Will the Fed be satisfied? I don’t know because right now it seems we could perhaps declare victory or should we be saying not enough, you got to get to 2%, and risk also pushing us into recession. By the way, that’s also something we talked about last year, right? The belief that the Fed would have to push us into recession. And I think there’s really robust debate about where we are now. Recession hasn’t come in 2023 and now there’s a greater expectation that it will come in 2024.

James Rogers: I mean, we dedicated an episode to it around this time last year, but obviously, these conversations are still ongoing. Stephanie, what’s the latest thinking on this?

Stephanie Kelton: Well, a lot of people are revising their expectations based largely on the fact that we got a lot of additional support coming in through fiscal policy. We’ve talked about this on the show before, things like the CHIPS and Science Act.

Speaker 6: President Biden just signed a bill into law today, boosting domestic semiconductor production and research in the United States.

Stephanie Kelton: The Inflation Reduction Act, which includes lots of spending on climate-related investments.

Speaker 7: Climate scientists say the recently signed Inflation Reduction Act could help reduce global warming. The historic climate bill, which was signed into law Tuesday, commits nearly 400 billion to help fight climate change.

Stephanie Kelton: So because there’s been so much support coming from fiscal policy, you’re hearing a lot of the big banks say, “We’re going to push that recession forecast out into the future. We’re going to downgrade the likelihood that the US goes into recession this year.” And you are starting to hear a lot of people talk about this sort of Goldilocks economy. Unemployment ticks down a little bit, productivity growth picks up, inflation continues to decelerate. It’s looking pretty good. I think that this is why people are taking another look at this economy and saying, “I just don’t think it’s going to falter this year.”

James Rogers: Powell has said that the Fed expects a noticeable slowdown instead of recession, which might, as you say, point to resiliency and economic data. Just wonder if any of you had interesting conversations with people around issues of consumer spending, because I’ll talk to people working in certain industries and the sense I get is that people are being careful with their spending, but it hasn’t stopped, it hasn’t ended. It does seem to be slowing down rather than falling off a cliff. That’s the sense that I’m getting.

Stephanie Kelton: Well, I think that’s what we’re seeing in the data. I think Mark probably would agree the consumer is slowing down a bit and that’s the engine of growth, right? So it depends on the extent to which consumers start to close up their wallets, whether we provide enough drag to actually slow the economy down. But for the moment, the consumer remains pretty resilient.

Mark: I would in fact agree with you, Stephanie, on those pieces. I will say that a lot of the fiscal measures, those policies have in fact helped to bolster, buffer some of these recessionary or near recessionary hits. So we are doing better perhaps because of some of those policies. The consumer built up a boatload of savings during the pandemic because they had nowhere to go, and you also had the stimulus checks coming in. So that has created a buffer, and perhaps that hasn’t always been factored into how things would play out from a recessionary standpoint. So the question becomes, what happens as we go closer to zero on that? What happens to the consumer? That is, I think, a big question mark that people are looking at. And it’s also why I think that the predictions for a recession, again, the consumer has been able to defy a lot of these predictions of softening, but I do worry about whether or not that starts to take hold in the coming months.
We’re already seeing some fragility around also not just savings, but companies laying off people and we at MarketWatch are closely following how much that impacts the overall labor dynamic. Maybe Jerome Powell is right on this notion that we don’t quite hit a recession, though a recession will feel like a recession if somebody loses a job. But we’ll see how deep and broad it feels, and that could really come down to how resilient the consumer ends up being, depending on how much savings they have and how we bounce back from any sort of hiccups that we see on a corporate side.
The other thing that doesn’t get talked about a lot, but certainly is worth paying attention to, AI can have a economic impact that can be perhaps underappreciated on the productivity side. It can also have an inflationary impact, cooling inflation depending on how things play out and how companies utilize this. But we’re watching that closely too, and I think others should also be watching that and how it is absorbed, digested, integrated within companies because it will be something that has a macroeconomic impact.

James Rogers: Now, with regards to this absolute expansion of AI that we’ve been seeing at the end of last year, ChatGPT and AI chatbot from Research Lab. OpenAI made its debut and it really took off.

Speaker 8: ChatGPT, maybe you’ve heard of it. If you haven’t, then get ready because this promises to be the viral sensation that could completely reset how we do things.

James Rogers: So by January, this had more than a hundred million users. Since then we’ve seen Google and Meta release their own chatbots offerings. Microsoft is an investor in OpenAI. Apple’s reportedly working on a so-called Apple GPT. So Mark, first off, what do you make of how quickly this has all happened?

Mark: I want to say we called it. We totally called it. Just kidding. I mean, it was the one thing we overlooked, and there’s no way I would have anticipated that this would have exploded in the way that it did, especially since AI is something that has existed for quite some time. This ChatGPT element, generative AI, I just wouldn’t have predicted that this would have exploded in the way that it has, but I think that has been based on the ability for the average person, and also public access to this technology has been the thing I think that’s underappreciated. People can actually start to think about and see that this is something that they could perhaps use within their company, help to plan their business, write up a business model, help with their resume, do some of the things ancillary or otherwise that they would have to hire someone else to do. Those things are actually happening right now. We’ve gotten an idea of what this could do, and that’s the interesting thing about AI thus far.

Stephanie Kelton: Mark, one of the things that everybody always talks about when we get into these conversations about AI are the impacts on not just our lives, but our jobs. There’s tons of anxiety out there. Who’s going to lose their job? How many people are going to lose their job? Is it going to actually result in a net increase in job creation because it’s going to spawn all sorts of new jobs that we can’t even imagine yet? But how do you think about all of that?

Mark: It must remind folks who’ve been around the industry, not just the technology industry, but just to the emergence of new technologies, of personal computers, of the web, the internet, every time we come across a technology that seems to have the potential to take jobs away, there’s a lot of fret and fright and worry about what does this mean for my job or the future of my kids’ jobs? I don’t know. I mean, I harbor some of the same concerns, and a lot of our listeners have some concerns and questions about that too. What should I be studying now? Does an English degree still matter? Again, all legit questions, but we’ve gone through these periods before.
We’ve seen what technology can do, and usually, it creates new jobs, different jobs, right? So it’s hard to say. I think the big questions are if I’m going to school now, where should I put my money in terms of new jobs? And I think that’s the open question. I think we’ll be exploring that in the future in terms of where are the areas which will prosper the most. You would think software and tech. But I think there’s a lot of other areas that will grow too that maybe get left behind. But I’m hard-pressed to conceive of a world in which all these jobs are lost because of AI. I think it’s different jobs. I think it’s a different approach and people need to figure out also ways to use AI to their benefit.

James Rogers: Coming up, how will different industries adopt AI? Plus, which of the big ideas will continue to shape the year in money? That’s after the break.

Stephanie Kelton: Welcome back to the Best New Ideas in Money. Before the break, MarketWatch’s Editor in Chief Mark DeCambre joined us for a conversation about this year’s biggest money story so far. We talked about one big story we got right, inflation, and one we didn’t see coming AI. Let’s dive back into that topic.

James Rogers: For me, one of the interesting things about this last year with AI is that it’s taken, as you say a technology that’s been around for a long time, and the emergence of ChatGPT, it is to a great extent, I think, demystified this technology, which was known but seemed extremely sophisticated, complex, almost unknowable, and yet at least now we are, and investors are also talking about the use cases of this. So rather than this being sorted, the domain specifically of the tech companies, which obviously it is, a lot of big tech is involved in this, but is the future going to be more around the actual business cases for this? Do you think that that’s where we’re maybe going with this now? It’s really going to be about the use cases.

Mark: I’ll say I don’t know, but I’ll also say I agree with you. Steve Jobs used to talk about a concept called the killer app, right? So a killer application. And the killer application is in my view of it, my interpretation of it is something that allowed the person, the use of a technology that otherwise seemed super sophisticated on the backend, but on the front end, on the user interface component, they had no knowledge of what was happening. They could just use it. It just worked, right? And that’s the inflection point for AI.
The point at which a technology just works is the point at which you get that explosion, that parabolic move in adoption or parabolic move in, “Hey, I could use this. What do I do with it?” And everyone’s scrambling to figure out ways to integrate it. So I think that’s the important thing. I think you’ll see little pieces of it. So I just think it’s a matter of different industries, either looking at the ChatGPT model and figuring out their own spin on that or figuring out an AI model that works for them. But everyone is experimenting with this thing. Ultimately, the spark for it all is a technology that reduces that tech friction point, right? The point at which you’re like, “Oh, what do I type in?” No, it’s just you type in a question, it gives you an answer. That’s as simple as it could be. That’s usually when you get those big moves and we’ll see how things continue to play out. But there’s a lot of potential and more questions for us than answers.

Stephanie Kelton: Okay. Mark, we have just a little more time left in the episode. Are there any other money stories you want to mention that will continue to be important in the second half of the year?

Mark: Yeah, let me run through two that come to mind. I’ll run through the first one, which is housing supply continues to be an ongoing issue, certainly something, I’ve talked to a experts who cover the real estate space about particularly residential housing. We’re already seeing some creative solutions in terms of rezoning that’s going to continue to come to a head, and we need to watch that space, particularly as we recognize that there are shortages. And we also recognize that there are some challenges that are coming up on the commercial real estate side where people are thinking about repurposing malls, mall space for residential use, and how that plays out. That will be a very interesting space to watch. So that’s one area.
The next area, the second big thing, and I think this is the thing that people should really be paying attention to is extreme weather. And not just here, but across the globe. And I think one of our journalists that covers this space, Rachel Beals put it really eloquently, this is perhaps the first year in which changes in climate have felt personal. And I think that is going to continue to be an issue, not just around the heat and how the heat will impact a host of other issues, including changing hurricane intensities and cycles, population dynamics, this air quality issue, which if we’re talking about heat and we’re talking about also wildfires, and we’ve seen that play out.

Speaker 9: Firefighters are battling a devastating forest fire near Yosemite National Park in California. It has turned into one of the state’s largest fires this year and forced thousands from their homes.

Speaker 10: 115 million Americans across 16 states tonight under hazardous air warnings and alerts. All of this from the Canadian wildfires.

Speaker 11: And good evening from here in Maui where we have just learned that this is now the deadliest wildfire in modern US history.

Mark: We’re seeing more focus on air quality and air quality issues could create a very dystopic future in some ways, and I don’t want to be gloomy, but I think there’s also an opportunity for innovation around these areas. Certainly, we will try mightily to address these issues from a collective global standpoint. There’s also, perhaps if we’ve reached the precipice on certain pieces of this, there might have to be innovations around this for solutions to come to bear. So that’s a space that will become a focal point for us.

Stephanie Kelton: We’re actually going to have a podcast episode on exactly that topic next week.

James Rogers: Mark, thank you for joining us today. It’s been great to have you here with us to talk about all these topics. Look forward to having you back to talk about them a bit more in the future.

Mark: Thanks so much, James. It was great to be here with you and Stephanie. I’m a big fan.

Stephanie Kelton: Thanks for listening to the Best New Ideas in Money. You can subscribe to the show wherever you listen to podcasts. If you like what you heard, please leave us a rating or review. And if you have ideas for future episodes, drop us a line at bestnewideasinmoney@marketwatch.com. Thanks to Mark DeCambre. To learn more about new ideas in money, head to marketwatch.com. I’m Stephanie Kelton.

James Rogers: And I’m James Rogers. The Best New Ideas in Money is a podcast from MarketWatch. The producers are Mette Lutzhoft and Katie Ferguson, who also mixed this episode. Melissa Haggerty is the executive producer. Mark DeCambre was our newsroom editor for this episode. The Best New Ideas in Money theme was composed by Sam Retzer. Stephanie Kelton is an economist and a professor of economics and public policy at Stony Brook University and not part of the MarketWatch newsroom. We’ll be back next week with another new idea.