“A Huge Problem for Everybody” | Paul Krugman on Currency Devaluation, Artificial Intelligence, Kevin Warsh Nomination, & More

The conversation centers on the U.S. dollar's persistent strength despite large current account deficits, with Nobel laureate Paul Krugman offering insights. Krugman suggests the dollar's global role as the "money of moneys" and a safe haven contributes to its resilience, while domestic uncertainties and potential weaponization may erode its dominance. He dismisses the idea of the renminbi replacing the dollar soon, pointing to the lack of viable alternatives. Krugman also addresses the unsustainability of China's export-driven economy and the potential for protectionist backlash. Additionally, he explores the puzzling rise in the natural interest rate (r-star) and the economic impacts of tariffs, concluding that they have mildly contributed to inflation.