What impact is this going to have on him and on his plans?

Well, it's pretty bad news.

I mean, there's a phrase going around the Bank of England that the UK bond market is a bit like someone chained to the tail of a drunken dragon.

And by that, I mean that essentially what's happening in the US with all the melodrama and uncertainty there is is very much impacting on the UK bond market too.

And the borrowing cost for 10-year bonds has now risen to 5.26%.

It's the highest level since the Great Financial Crisis.

And that eventually means that we're going to pay a lot more to service the national debt.

So when you look at the priorities that Andy Burnham has set out, which particular ones are going to be the most constrained by this, do you think?

How does this obfuscation look overseas, Jillian?

Well, it's another sign that the way the White House is being run these days is very different from past White Houses.

And in a sense, what we have today is something more akin to the court of King Henry VIII or Louis XIV in Versailles, where essentially, instead of having a clear-cut structure with clear rules and protocols and hierarchies, you've actually got a family-run firm that's all about who's in, who's out.

And so the very fact that people are sitting here speculating about Why were they on the plane? Why weren't they on the plane? It's part of this parlor game or criminology, if you like, about who's in, who's out in Trump's inner circle.

Does Europe see Donald Trump as strong still? Are they still intimidated by him or bullied by him?

There's been a really significant shift in the last few months.

I've been to dinners and conferences where people just got fed up even talking about what's happening in the midterms because it's feeling like, oh, just...

Americans, you know, just forget about it.

What stands out to you about this morning's report?

Well, the good news is that inflation rate has come down slightly.

That'll be welcomed by Kevin Warsh, the, um, chairman of the Federal Reserve.

And it's likely to mean that interest rates probably will stay on hold for a while, in my best guess, because although the rate of inflation is still way above the Fed's target, it is moving in the right direction.

And insofar as linked to energy prices, there is some improvement there.

The bad news is all the stuff that's not coming down yet.

And a lot of that is service sector inflation, which is very sticky.

Jillian, for people wondering, um, you know, where they should look to blame beyond just their politicians when they're looking at sort of global forces here, to what extent is the war and supply shock, um, you know, a part of the story here? Or, or is the reality is that this is all sort of combining with other forces going back years in this inflation fight?

So my question is, is it more the fact that there is an alternative and our tendency is to trust horizontally or, and therefore that's what's happening, or is it because of the degradation of trust as a result of a c- an entire shift in the communications ecosystem that is now driving us towards that trust?

The honest answer, I think it's a combination.

Um, I think there are several things going on.

One is the rise of options, as you said.

So people now have a vast array of content they can consume if they want.

Um, and so in some ways, this should be an absolute golden age of information.

Um, the problem is, of course, that people also have ADD and limited time, and so they gravitate towards the content that grabs their eye first and is the most dramatic and entertaining, which tends to be shock, horror, or scandal, whatever else.

... a- again, our, our, the aperture on what we're exposed to is more and more controlled in our lives, right? So how does that, I guess, impact our ability to really truly be agentic? Isn't that door closing more and more?

Can you believe this? Can you believe these tax revisions?" They're all kind of mum's the word because from their perspective, if the IRS isn't coming for Trump, he's not gonna come for them, and they're gonna dive through those loopholes as long as they can.

Absolutely, and two things going on.

One is the fact that everyone's getting rich, um, a bit like a banana republic where no one wants to rock the boat because [knocks] they don't wanna call out the corruption because they're benefiting from it.

Secondly, there's a concept called the normalization of deviance which came out during the Challenger shuttle crisis, which is that when you go from, say, white to Black, from safe to risky, you very rarely go in one sudden step.

What happens is you do tiny little incremental shifts where you test the boundaries, test the boundaries, test the boundaries, and our concept of normalization begins to change, and that's what's happened in recent years.

So if this had happened 10 years ago, people, or 15, 20 years ago, people would be absolutely outraged.

This is deviance.

But here's one they got.

What should Prime Minister Burnham do about his relationship with the United States? Uh, do the middle power strategy lean into Europe reduce your dependence? I mean, is this even the right way to ask the question? Is it a question that he has a choice over?

I think there's a huge level of misunderstanding on both sides of the Atlantic right now about the other side.

I think what's happening in America right now is that the political class and much of the leadership of America is so utterly inward-looking and myopic and consumed with the whole Trump phenomena and endlessly discussing things like the midterms and the rest of it.

They kind of assume the rest of the world cares.

Frankly, I've been at dinner parties recently in Europe where American guests started talking endlessly about the ins and outs of the midterms and or to what Trump is doing or not doing, and some of the other people just said, "Well, it's so boring.

Forget about it.

We just don't care anymore." It's like, "You just go and do your weird stuff over in America.

In the US and in the UK, and if I'm correct, I think you're also thinking about cultural change within Britain.

Yeah, well,

in fact, my PhD was in wedding rituals in Soviet Tajikistan, which is not obviously linked to the study of money.

Is anyone else in the room an anthropologist? No.

Okay.

So a minority of one.

How many of you are economists? Yeah.

Okay.

All right, Gillian,

Jillian, weigh in on this one.

Well, absolutely.

In fact, I've just been in Rome, and it's impossible to go around Rome as a tourist without looking at all this evidence of the fact that the Roman emperors thought they were gonna live forever.

They thought they had all the answers you could possibly want to creating the perfect empire, until it wasn't, and it imploded on itself.

And the problem right now is that to make a democracy work, you have to have people who think they have skin in the game.

They have to all feel that they actually both have a responsibility to keep the system working, and they stand to benefit from it if they actually do that.

And the more that you have power concentrated in the hands of a few, the, the harder it is to actually have that sense of real democratic skin in the game for everybody.

Yeah

What do you think is going on here, Gillian?

Well, essentially, when it comes to Anthropic, the administration is acting like the biggest bully in the playground, where it feels it needs to, you know, regularly clobber a small kid to prove that it's still in charge.

Um, I remember back when it was starting on the tariff war with Canada, one of the administration officials told me that they were going after Canada for sport just to show who's in charge, and I think they're doing the same thing with Anthropic right now with clobbering them over the recent Anthropic release.

Um, but what is really striking is that I trained as a cultural anthropologist before I became a journalist, so I care a lot about rituals and symbols.

In the inauguration, the big tech CEOs were sitting not just with Trump-

What was your takeaway? Because the market didn't love it.

Yeah.

I think what's very interesting is that Kevin Warsh, um, judging by what I've known of him over many years, is something of a natural hawk, and yet he's working for a president who wants to be a mega dove.

prospectors themselves.

Exactly.

A lot of what Elon Musk is doing is basically the equivalent of a shovel in terms of providing the infrastructure to enable this whole AI boom to occur.

But another parallel that people should be thinking about, not just with Elon Musk's SpaceX, but more broadly with AI, is the 19th century railway boom or even the dot-com bubble that we saw within living memory.

And the key point about those bubbles was that they were Dramatic, they helped to channel a lot of money, capital, to areas that supported innovation and growth.

They popped and actually very few people actually made money, but they left behind the infrastructure that enabled extraordinary growth subsequently.

So the question now is, will all this AI infrastructure or rocket infrastructure last, even if at some point the bubble pops?

Gillian, there is still competition in the AI sector at least, isn't there?

Gillian Tett is Provost at King's College Cambridge.

There's a lot of self-inflicted wounds in New Zealand, not least, for example, the nimbyism that prevents people from building enough houses to ensure that everyone could get access to a house cheaply and easily.

So you're creating in New Zealand a real intergenerational inequality problem in that people who are inheriting assets are doing well, others aren't.

So New Zealand's got a lot of problems, and that's one reason why you've got New Zealanders leaving at the moment.

But in terms of trying to attract smart people and smart talent, that really is the big new game in town.

Can it be something that could benefit both countries?

One of the biggest mistakes people make is to regard intellectual capital as a zero-sum game and to assume they have to hang on to their brilliant minds at all costs and stop them from going around the world.

That was a disastrous mistake because history shows very clearly that to get innovation, you ideally need to have one or two things happening, ideally both at the same time.

I, I, I, I couldn't agree more.

And the big problem right now is it's also if the American SWAT teams do go in and do this Rambo-esque type mission to get the uranium, what happens after that? Because one problem is, one tragedy about what's happening, is that by bombing Iran in this way, they've actually consolidated support for the regime, and they've killed off many of the leaders who are more moderate.

It's okay to send a car bomb into a Manchester synagogue because they're mad about what's happening, uh, in the Middle East.

Okay.

I, can I...

Listen, I agree with you.

Antisemitism is abhorrent.

[audience clapping] However, that is abhorrent.

So is this a- an economy that's fundamentally is doing well or one on the brink of disaster? Depending on how you wanna read this data.

Well, if you feel confused by President Trump's messages, try looking at the economy right now, because you have just as much contradiction and confusion there as well.

Um, the reality is we know that consumer sentiment has been plunging, or consumer confidence, in recent months on the back of the threat of homeless crisis.

And we also know that higher gas prices are gonna hurt a lot of low-income consumers, and yet retail sales are healthy.

That could be because higher income consumers are still spending, and you have this K-shaped recovery where the rich are doing well, the poor aren't.

It could be because people are thinking, "Actually, we're gonna try and front-load our spending and spend now before prices go up in the future," or it could be just that the data's wrong.

And one of the really concerning things right now is there's a lot of statistical series which are starting to be questioned, partly because the administration's been gutting the statistical office.

What's your take?

How do you make sense of this?

Well, I think the best way to make sense of it is to recognize that Iran and America have different definitions of winning and what losing is.

So for Pete Hegseth and the American government, it's all about destroying the military infrastructure inside Iran, lots and lots of bombs.

For Iran, it's been about showing that they can destroy the global economy and have a sense of power as a result of that.

So in some ways, they're almost talking past each other in terms of what's defined as victory, because clearly, yes, the Pentagon's right.

They have destroyed a lot of stuff.

Not enough to actually entirely render Iran's military capabilities, um, gone, but they have destroyed a lot of stuff, so he can claim victory.

Mm.

That's what I want to talk about.

And that's the crucial point because what has happened in the last few years as America has used the dollar as a weapon and used sanctions to basically go after its enemies, um, essentially America's using hegemonic power, dominance in finance, to try and control the global economy and financial system.

China's doing the same thing, I should say, in industry.

China has hegemonic power dominance by controlling key supply chain nodes like rare earth minerals.

So America's trying to exert its financial muscles.

Unsurprisingly, China and others, including Russia, are trying to find ways to challenge that.

That's been going on for a long time.

What's the law?

Gillian, can you tell me the link between the length of this war and the economies of the UK?

Well, um, a number of investment banks now are forecasting about a sixty to seventy percent chance of a global recession as a result of this war if it continues, and that's really down to three things.

Firstly, what we're seeing is potentially the biggest oil shock since 1978, and under some measures could be even bigger.

And that means we're seeing essentially the flow of not just oil, but also liquid nat-nat-natural gas being very severely disrupted because the Straits of Hormuz typically carries about twenty percent of the global oil and gas, um, market, um, but the im-impact is much bigger.

So that's the first question.

Are energy prices gonna jump? And already we've seen the main benchmark price of oil go up to about ninety dollars a barrel, up from about seventy very recently.

It could easily go a hundred, even to a hundred and fifty, some banks are saying, if that continues.

What brings this to an end, and what does the end look like? And with all the people you're speaking to from your newspaper and academia, do you have an answer for us, Gillian?

In a statement, Netflix said, quote, "This transaction was always a nice to have at the right price, not a must-have at any price." But it's almost impossible to imagine that politics did not play some role here, right?

Well, absolutely.

I mean, this is basically a story worthy of any kind of movie in itself, given all the plot tw- twists and last-me- minute dramas.

And we're not yet finished with those, because in fact, tonight, California has indicated that it's gonna scrutinize the antitrust component of this bid very, very closely.

So we can't assume the deal's even gonna go through at the moment.

But what's fascinating is that, yes, there was a price a- issue in all this, in that essentially Paramount raised its bid by about a dollar a share, which meant that as far as Netflix was concerned, it was no longer, quote, "economic" to pursue this.

And of course, they get a breakup fee as well, a nice, handy 2.6 billion because of all this.

... like they're throwing a lot of money at it.

I wanna know, are people, are, are leaders there in Davos talking about reacting to what's happening in Minnesota? They're far away, but they have seen the images.

Absolutely, and I was actually yesterday talking to both Senator Coons and Senator Murkowski, who are here in Davos desperately trying to present a normal, bipartisan, cooperative American face, and if you like, the grown-up side of American politics.

And they're going around talking to all the Europeans and others, saying, "Yes, we're still here.

We're trying to reach out to the world and be collaborative and constructive." But in fact, what the European leaders are seeing, and the Asian leaders, is an image of America which looks a bit like a Tudor royal court, where essentially you have this capricious monarch who is declaring orders based on his own personal whims.

You have the courtiers around him essentially s- rushing to appease him.

He's playing them off against each other and demanding that the rest of the world come to him, either brings tributes, or if they're strong enough, sends an armada, to use a Tudor royal court image again, um, and then he backs down.

But this feeling of dealing with a capricious king, and in fact, I should say some non-American leaders are gossiping about whether it's a king with entirely clear-cut mental plans and things like that or not.

What do you make of it?

What are some of those risks?

One is a potential rise in interest rates because increasingly, the AI capex is being funded by debt, not just free cash flow or anything else.

Another potential risk is that there could be a political backlash against the AI companies because although President Trump has been very supportive, um, in his own policymaking, what you're starting to see is a national populist, like Steve Bannon, increasingly angry with what might be called the brolegarchs, the elites who are shaping much of th- this discourse.

But the third, and biggest issue, in my mind, is whether we're going to see new technologies or new platforms or new approaches to AI emerge in a way that could leapfrog the current, um, framework that the Magnificent Seven are betting on.

And by that, I mean most of the Magnificent Seven are using proprietary technologies, but we're seeing in China open-source AI approaches.We're seeing all types of bootlegging approaches that are much cheaper and less energy-guzzling.

That's incredibly important because, um, America's critically short of the energy it will need, the electricity it will need to power these data centers.

So any of those factors could potentially create quite a jolt for investors about their assumptions over who's gonna win or lose.

Is there anything that could get all of the Mag 7 stocks riding high again like they were in 2024? Or are we just kinda past that point and not able to return to it?

How did the international community feel about his speech?

Well, George Bush said back after the first Trump inaugural speech, "That was some weird S blink bleep it out." Um, and I think that's kind of the reaction of much of the international community.

I mean, we have a column from the FT, in the FT right now pointing that out because it was a very, very weird speech under anyone's standards, even President Trump's standards.

I would actually echo what Luke just said about the fact that what we didn't hear i- today was a threat to pull the US out of the United Nations, to cut all its funding, to smash the whole operation apart.

And frankly, that's progress because he could have done that.

Um, instead what we had was this really weird scattergun speech.

It was going all over the map.

What do you think?

You write that this isn't about, this isn't just about the Fed cutting rates, this is about the president trying to change the mission of the Federal Reserve.

Well, it's very interesting if you look at what someone like Steve Mirin and Scott Bessent, the US Treasury Secretary, and some of the actual potential next Fed governors, like Kevin Warsh have said over the last year, and they all say that they want the Fed to be independent and it's important for the American economy, but they also say that the Fed has had mission creep and they don't like the quantitative easing that was unleashed and they think the Fed needs to go back to basics, which is basically a much narrower mandate.

So they're not exactly saying the Fed has to be stripped of all independence as some people have interpreted what the President Trump is saying, but they are saying the Fed needs to change.

So the fight goes much further than just the question about interest rates.

We'll see.

But here's the i- here's the ironic thing that's got completely lost in the debate until recently, which is that everyone describes it as a Chinese company.

Well, ByteDance, the owner of TikTok, actually has at least 60% of its economic value owned by American investors.

And that's been the case for a number of years.

April.Gillian, what do you think?

Well, I think that it's ve- important to be very clear about the difference between short-term rates, overnight rates, which are influenced by what the Federal Reserve does in terms of rate cuts or rates hikes, and longer-term ri- rates that are set by what market investors deem to be the price of borrowing money.

And it's quite important to make that distinction because the bitter, bitter irony in what Donald Trump is doing right- right now, President Trump, is that as he tries to bully the Federal Reserve to lower short-term rates, what's happening is that investors are panicking about the long-term implications of inflation, and they're actually pushing up longer-term rates.

And so the so-called spread or the gap between the short-term rates and long-term rates is expanding quite rapidly.

Why does that matter? Well, it matters for two reasons.

Firstly, that mortgages tend to be set on 10-year rates, not ultra, short-term rates.

Um, and so any American consumer or borrower really cares about what happens to 10-year yields.

What he's talking about is socialism.

What does that tell you about the health, the validity, the honesty of any of these deals?

Well, what it tells you is that we have these big dramatic trade announcements that are basically made for TV headlines, made for tweet, um, X, and grab attention.

But actually, whenever you have trade deals, normally you have pages and pages of detail thrashed out.... and none of that has emerged as of yet.

And what's become very clear is that Trump announced these trade deals, said that the U.S., the E.U. and Japan were going to invest in the U.S. as a kind of quid pro quo.

Both of the countries later said, "Uh, we don't quite think we agree to what Donald Trump has said," although not quite in those words.

And what you're now seeing, essentially, is the White House trying to increase pressure to stop them trying to argue about what or was or actually not agreed.

And the point about tariff wars being here to stay is absolutely true because, on the one hand, you have a president who believes, and his economic team believes, this is actually getting more revenue for the U.S. right now and helping it to deal with its mountain of debt, but at the same time, you also have a president who believes passionately that unpredictability and bullying and threats is the secret to him having weapons or leverage on the world stage.

Gillian, what is your thought on this? What is your reaction?

(laughs)

And I went, "Well, hang on a second.

You're supposed to have the data.

This is the wrong way around." And they said, "Yeah, the problem was we just don't know." Now, the good news is today, one, you can get CDS prices for most instruments that are traded, you know, even slightly, you know, in the markets.

You can get CDS prices relatively easily.

Two, we do have macro figures about what's going on.

And three, the very fact that you can get those prices in the chart form changes how people look at the financial sector.

Hm.

How does Scott Besson still make the argument this is all about Main Street's turn?

Well, traders are indeed like vultures.

When they see the, the bodies on the street, they start flapping and they start being able to find an advantage somehow.

Um, the reality is that Scott Besson's argument, which is echoed by a number of the ideologues around President Trump right now, is that they got to reorientate the economy away from excessive financialization, that means being pumped up by cheap money, and focus back onto old-fashioned manufacturing, Main Street, to create real jobs.

So that is their argument and that's a guiding mantra.

In terms of how it's actually playing out, well, the reality is that as the tariffs bite, over the next few months, Main Street is gonna feel more and more pain.

Um, uh, when it comes to finances, yes, M&A is dead right now, mergers and acquisitions activities on Wall Street is not happening, but certainly there are plenty of people out there in the financial world who are doing just fine.

Very good reason.