>> OIL PRICES IN THE U. S. ARE AT THEIR HIGHEST LEVEL SINCE JULY.

RECENTLY SURPASSING $100 A BARREL WHILE GAS AT THE PUMP HAS REACHED AN AVERAGE PRICE OF $4.

33 PER GALLON.

AND WHILE THE U. S. WAR WITH IRAN CONTINUES TO CHOKE KEY SHIPPING ROUTES, IT'S NOT JUST AMERICANS FEELING THE PINCH.

THE FALLOUT IS RIPPLING THROUGH THE GLOBAL ECONOMY.

SO WHAT DOES THIS MEAN FOR THE AVERAGE PERSON?

AUTHOR OF THE NEW BOOK "SEA CHANGE: AMERICA'S NEW GREAT GAME AND THE ARCTIC CIRCLE," RANA FOROOHAR JOINS WALTER ISAACSON TO DISCUSS WHETHER WE COULD BE HEADING TOWARDS A RECESSION, AND WHY AN AI BUBBLE MIGHT BE MAKING THINGS WORSE.

>> THANK YOU, BIANNA, AND RANA FOROOHAR, WELCOME BACK TO THE SHOW.

>> THANK YOU FOR HAVING ME.

>> IT'S ALREADY BEEN A TUMULTUOUS WEEK SO FAR IN THE ECONOMY.

LET'S START WITH BOND PRICES, HITTING 5% WITH A TEN-YEAR TREASURIES.

WHY IS THAT HAPPENING?

AND WHAT DOES THAT MEAN FOR PEOPLE LIKE ME?

>> WELL, IT'S A GREAT QUESTION, WALTER.

5% IS THE AMOUNT THAT STARTS TO GET INVESTORS WORRIED.

IT MEANS THAT THE COST OF DEBT IS RISING.

THAT'S BAD NOT JUST FOR THE NATION'S ECONOMY, BUT FOR PEOPLE'S PERSONAL FINANCES.

WHEN THOSE RATES START TO RISE, YOU KNOW, YOUR HOME LOAN GOES UP.

YOUR CAR LOAN GOES UP.

THE COST OF ANY KIND OF DEBT THAT YOU MIGHT BE HOLDING GETS MORE EXPENSIVE.

THAT'S WHY THE PRESIDENT AND FED CHAIR KEVIN WARSH ARE SO CONCERNED ABOUT THIS.

THERE IS A LOT OF WORRY THAT THERE COULD BE A MARKET REACTION.

YOU'VE ALREADY SEEN STOCKS VERY VOLATILE IN THE LAST FEW MONTHS, BUT FALLING OFF THE BACK OF THIS NEWS.

AND THE BIG WORRY IS THAT IF DEBT IS PERCEIVED AS BEING TOO HIGH AND WITH PUBLIC FINANCES THE WAY THEY ARE, THERE COULD BE A REAL MARKET CORRECTION, LASTING MARKET CORRECTION THAT WOULD BE A SERIOUS EVENT.

>> IT'S A 20-YEAR HIGH, THESE YIELDS.

AND IT DOES MEAN EVEN THINGS LIKE MORTGAGES, THE AFFORDABILITY OF PEOPLE TO GET HOMES, IS THAT GOING TO BE HIT?

>> IT IS.

AND IT'S COMING AT A TIME WHEN, AS YOU KNOW, HOME AFFORDABILITY HAS ALREADY BEEN AN ISSUE.

YOU KNOW, A LOT OF PEOPLE CANNOT AFFORD HOMES IN THE PLACES WHERE THERE ARE JOBS.

IF YOU LOOK AT THE KIND OF TOP 12 MARKETS IN THE U. S. , HOME PRICES WERE ALREADY SKY-HIGH.

AND THEN WHEN YOU ADD TO THAT, A HIGHER LOAN RATE, THAT MAKES IT EVEN LESS AFFORDABLE FOR A LOT OF PEOPLE.

NOW EVENTUALLY, GOOD NEWS/BAD NEWS HERE, IF RATES GET HIGH ENOUGH, THEN HOME PRICES START TO FALL BECAUSE THERE AREN'T AS MANY BUYERS.

BUT THAT WOULD ALSO SIGNIFY A MAJOR DOWNTURN, WHICH WOULD HAVE ITS OWN IMPACT ON THE LARGER ECONOMY.

>> AND YOU'D ALSO HAVE A COST OF BORROWING FOR THE FEDERAL DEBT TO BE HIGHER IN THE LONG-TERM.

AND THIS IS ADDING --IS THIS ALL BEING CAUSED BY THE HUGE DEFICITS AND DEBT WE HAVE?

AND IT'S GOING MAKE IT WORSE?

>> YEAH, I WOULD SAY THERE ARE THREE REASONS WHY WE ARE SEEING THESE HIGHER YIELDS.

THE FIRST WOULD BE THE WAR IN IRAN, THE INFLATION THAT'S COME OFF THE BACK OF THAT, OIL PRICES, A SENSE THAT THIS PRESIDENT IS CREATING A LOT OF GEOPOLITICAL TURMOIL THAT COMES AT A COST, FRANKLY.

THE SECOND REASON, IS AS YOU POINT OUT THE FACT THAT THE FEDERAL DEBT LEVELS ARE HIGHER THAN THEY HAVE BEEN, AND THEY'RE GETTING HIGHER.

AND THERE DOESN'T SEEM TO BE ANY SERIOUS CONVERSATION ABOUT CUTTING THEM.

EVENTUALLY, WHEN PUBLIC DEBT BECOMES TOO HIGH, INVESTORS SAY GOSH, THIS IS RISKY.

I WANT TO BE PAID A HIGHER PREMIUM FOR LENDING TO THIS COUNTRY.

AND THEN THE THIRD ISSUE IS THE AI BUBBLE.

AND I SAY BUBBLE SOMEWHAT LIGHTLY.

I DO THINK THAT THERE WILL BE A CORRECTION.

THERE HAS BEEN A LOT OF BORROWING, A LOT OF BOND ISSUANCE ON THE PART OF AI COMPANIES.

AI IS A REAL THING.

IT WILL OVER TIME CREATE JOBS AND PRODUCTIVITY.

BUT IN THE SHORT-TERM, THERE IS A LOT OF DEBT AND LEVERAGE OUT THERE.

ALL OF IT MAKES RATES GO UP IMPLEMENT WHEN YOU TALK ABOUT A LOT OF DEBT AND LEVERAGE, THERE IS $2 TRILLION OF DEFICIT THIS YEAR, WHICH IS HUGE COMPARED TO NORMAL TIMES.

I CAN REMEMBER, ESPECIALLY WHEN REPUBLICANS WERE VERY MUCH AGAINST DEFICITS, WHY HAVE WE GIVEN UP ON TRYING TO STOP DEFICITS?

>> YOU KNOW, THAT IS SUCH A GREAT QUESTION, WALTER.

YOU'RE ABSOLUTELY RIGHT.

REPUBLICANS OFTEN TALK ABOUT CUTTING DEBT AND DEFICITS, BUT TO BE HONEST, THE WALK IS OFTEN TO LOWER TAXES AND NOT END UP CUTTING DEFICITS BECAUSE THERE'S LESS MONEY COMING INTO THE COFFERS.

RIGHT NOW, THOUGH, WHAT THE PRESIDENT IS DOING WITH THE WAR IN IRAN, TRADE AND TARIFF ISSUES, JUST A GENERAL SENSE OF INSTABILITY CREATES KIND OF A PERFECT STORM.

THERE IS A CONCERN THAT THE DOLLAR IS NOT AS SAFE AS IT USED TO BE.

THAT MAKES RATES GO UP.

WHEN YOU ADD THE SENSE THAT THERE IS NO CONVERSATION ABOUT CURBING PUBLIC BUDGETS ON EITHER SIDE OF THE AISLE MAKES FOREIGN INVESTORS VERY WORRIED.

AND YOU CAN SEE EVERY TIME THERE IS A NEW ISSUANCE OF TREASURY BILLS, WHICH IS HOW AMERICA GETS MONEY.

WE ISSUE TREASURY BILLS.

PEOPLE BUY THEM, THERE ARE FEWER AND FEWER FOREIGN BUYERS COMING INTO THOSE AUCTIONS.

THAT SAYS THE REST OF THE WORLD IS WORRIED ABOUT OUR DEBT AND DEFICIT PICTURE.

>> WELL, WHEN IT COMES TO AFFORDABILITY, THE OTHER THING THAT YOU'VE MENTIONED BRIEFLY WAS GAS PRICE.

I MEAN, IT'S $4.

30 AT THE PUMP FOR REGULAR GAS.

AND I THINK EVEN WORSE, DIESEL HAS GONE WAY UP TO $6.

30, WHICH MEANS EVERYTHING BEING BROUGHT TO YOUR MARKETS AND ALL OF OUR GOODS AND SERVICES, ALL OF OUR GOODS ARE GOING TO COST A LOT MORE.

TELL ME WHAT THAT'S GOING TO DO TO INFLATION AND HOW THAT PLAYS IN.

>> WELL, OIL AND FOOD ARE REALLY THE MOST IMPORTANT THINGS WHEN IT COMES TO INFLATION.

FOR STARTERS, IF YOU THINK ABOUT GAS PRICES, AS YOU MENTIONED, WHAT IS THE ONE NUMBER THAT MOST AMERICANS SEE EVERY DAY?

IT'S THE PRICE AT THE PUMP.

>> $4.

30.

>> THAT'S RIGHT.

>> A SHOCK.

>> THAT IS -- THAT IS ABOUT THE MOST BROAD-BASED NATIONAL METRIC OF GOSH, INFLATION IS RISING.

I'M NERVOUS.

IT'S COSTING MORE TO NOT JUST FILL MY CAR, BUT FUEL MY HOME.

AND THEN AS YOU MENTIONED, THE ENERGY FOR LOGISTICS, FOR TRANSPORTING EVERYTHING.

THE ENERGY TO PUT --FOR FERTILIZER, TO GROW CROPS.

OIL IS AT THE HEART OF THE ECONOMY.

AND SO IT'S VERY BAD ECONOMICALLY.

IT'S VERY BAD POLITICALLY, FRANKLY, THERE THE RUN UP TO THE MIDTERMS FOR REPUBLICANS AND FOR THE PRESIDENT BECAUSE, YOU KNOW, PEOPLE ASSOCIATE THE ACTIONS OF THE LAST FEW MONTHS WITH RISING OIL PRICES.

>> WELL, OIL IS NOW MORE THAN $100 A BARREL THIS WEEK.

BUT I'VE GOT A SORT OF COUNTERINTUITIVE QUESTION.

WHY IS IT SO LOW?

WITH THE TWO DIFFERENT STRAITS BEING HIT, THE PIPELINES AND SAUDI ARABIA, PEOPLE A FEW MONTHS AGO SAID IT COULD HIT 150, 200.

>> YOU KNOW, THAT'S A GREAT QUESTION.

I'M SO PLEASED YOU ASKED THAT.

SOME PEOPLE IN MY WONKY INVESTMENT WORLD HAVE EVEN PREDICTED $300, $400 BARREL OIL.

FOR SURE IT COULD GO HIGHER.

THERE ARE STRATEGIC PETROLEUM RESERVES.

RY SAY THE AMERICAN STRATEGIC PETROLEUM RESERVES ARE AT THEIR LOWEST LEVEL IN SOME TIME.

THE CHINESE HAVE BEEN HOARDING OIL.

THERE ARE A LOT OF COUNTRIES SAYING GOSH, WE NEED TO KEEP MORE ON HAND.

AND THAT GOES TO A LARGER ISSUE, WHICH IS ALSO AFFECTING INFLATION.

SINCE COVID, SINCE THE WAR IN UKRAINE, SINCE IRAN, THERE IS A SENSE THAT THERE IS A GEOPOLITICAL ISSUE COMING EVERY YEAR, EVERY TWO YEARS.

AND COUNTRIES ARE MOVING MUCH MORE INTO A DEFENSIVE POSTURE.

THEY'RE SAYING WE NEED TO HOLD MORE SUPPLY ON OUR --JUST IN RESERVES.

I THINK YOU'RE GOING TO SEE THAT NOT JUST WITH FUEL, BUT POSSIBLY EVEN WITH FOOD, WITH GRAIN, WITH THINGS LIKE THAT GOING FORWARD.

ALL OF THAT CONTRIBUTES TO INFLATION.

BUT IT ALSO CREATES BUFFERS THAT MAY BE ONE OF THE REASONS THAT YOU'RE NOT SEEING THE KIND OF SPIKE YOU TALKED ABOUT.

>> AND WHAT ABOUT THE STOCK MARKET?

IT DOESN'T -- I MEAN, IT'S BEEN VOLATILE RECENTLY.

BUT WHY HASN'T IT GONE DOWN MORE, GIVEN ALL THE DIRE THINGS YOU'VE TALKED ABOUT?

>> YOU KNOW, THE WALL STREET MAIN STREET DIVIDE, IT'S THE ENDLESS QUESTION.

THE SIMPLEST ANSWER IS THAT CORPORATE PROFITS ARE STILL HIGH.

AND IN SOME WAYS, YOU COULD SAY THAT THE STOCK MARKET AND ASSET PRICES ARE SIMPLY A MEASURE OF CORPORATE PROFITS.

IF INVESTORS BELIEVE THAT COMPANIES WILL BE ABLE THE STAY IN THE BLACK AND KEEP MAKING MONEY, THEN STOCK PRICES WILL KEEP GOING UP.

NOW AT SOME POINT, THAT SENSE OF WHAT'S HAPPENING IN THE ASSET MARKET STARTS TO DOVETAIL WITH WHAT'S HAPPENING IN THE REAL WORLD.

AND THAT 5%, GOING BACK TO THE BEGINNING OF OUR CONVERSATION, THAT 5% RATE IS THE BIG FLASHING SIGN THAT MARKETS ARE STARTING TO SAY HMM, WE DON'T LIKE THE FUNDAMENTALS, EVEN THOUGH CORPORATE PROFITS ARE HIGH.

AND THE BIG QUESTION IS WHEN THOSE TWO THINGS COLLIDE AND WHAT HAPPENS.

>> AND IF THOSE COLLISIONS HAPPEN, IS THERE A CHANCE WE COULD GO INTO A RECESSION AND MAYBE EVEN A GLOBAL RECESSION SINCE THIS HAS S HAPPENING ALL OVER?

>> I WOULD SAY 100% YES.

AND I DON'T SAY THAT TO BE FEARMONGERING.

IT'S REALLY A HISTORICAL NORM.

I MEAN, WE ARE OVERDUE, FRANKLY.

IF YOU LOOK AT HISTORICAL BOOM AND BUST CYCLES, WE'RE OVERDUE FOR A BIG RECESSION.

YOU KNOW, WE'VE HAD A FEW INSTANCES, IN COVID, FOR EXAMPLE, WHERE YOU SAW A BRIEF DOWNTURN AND THE MARKETS CAME BACK UP.

THAT WAS BECAUSE OF A LOT OF GOVERNMENT SPENDING.

WELL DID COMING OUT OF COVID HAVE THE STRONGEST RECOVERY.

BUT THE TRUMP ADMINISTRATION CAME IN AND ADDED GEOPOLITICAL CONFLICT, ADDED THE TARIFF AND TRADE WARS, ADDED IRAN.

SO GIVEN THE POSITION THAT WE'RE IN RIGHT NOW GIO POLITICALLY, AND GIVEN HOW TIGHT THE ROOM FOR MANEUVER IS THAT THE FED HAS NOW, IT'S NOT WHAT IT WAS 5, 10, 20 YEARS AGO, I THINK A GLOBAL SLOWDOWN IS PROBABLY IN THE CARDS AT SOME POINT.

>> THE OTHER BIG NEWS, AND ESPECIALLY IN THE PAST FOUR OR FIVE DAYS SINCE THIS WEEKEND IS THE FEAR THAT AI GETS TOTALLY OUT OF CONTROL.

BEFORE WE TALK ABOUT AI AND HOW IT MIGHT AFFECT THE JOB MARKET, WHAT DO YOU THINK THAT MEANS WHEN SUDDENLY THE BIG AI COMPANIES THAT ARE DRIVING MOST OF THE INVESTMENT SPENDING RIGHT NOW ARE SAYING WE'VE GOT TO PAUSE FOR A SECOND MAYBE?

>> IT'S A HUGE ISSUE.

BECAUSE IF YOU LOOK AT WHAT'S REALLY DRIVING THE U. S. STOCK MARKET, IT'S A HANDFUL OF COMPANIES.

IT'S BEEN THAT WAY FOR SOME TIME.

THE MARKET IS MORE CONCENTRATED THAN IT'S EVER BEEN IN TECH AND IN AI SPECIFICALLY.

OVER THE LAST COUPLE OF YEARS, THE ENTIRE NET SPENDING AND INVESTMENT OF CORPORATE AMERICA HAS BEEN INTO AI.

AND SO AI IS THE MARKET STORY.

AND IF THERE IS A RIPPLE, A BUMP, YOU KNOW, A DOWNTURN IN SOME OF THESE COMPANIES, IT WILL 100% HAVE A BROADER MARKET EFFECT.

>> BUT YOU MENTIONED THE WORD "BUBBLE," WHICH IS A FRIGHTENING WORD ALREADY.

DO YOU THINK THERE IS A BUBBLE IN AI?

>> I DO.

I'VE THOUGHT THERE WAS FOR SOME TIME.

LET ME CAVEAT THAT, BECAUSE, AGAIN, I DON'T WANT TO BE FEAR MONGERING.

WHEN YOU LOOK AT A BIG WHAT THEY CALL GENERAL PURPOSE TECHNOLOGY, SOMETHING THAT IS GOING CHANGE OUR WORLD OVER THE NEXT SEVERAL DECADES, NEXT 100 YEARS, SOMETHING LIKE THE INDUSTRIAL REVOLUTION, THAT'S WHAT MOST PEOPLE BELIEVE AI IS.

SO OVER THE LONG-TERM, IT IS GOING TO NET CREATE JOBS.

IT IS GOING TO INCREASE PRODUCTIVITY.

BUT THAT'S THE LONG-TERM.

WHAT TENDS TO HAPPEN AT THE BEGINNING OF A BIG INVESTMENT CYCLE LIKE WE'RE SEEING IN AI, LIKE WE SAW IN THE REAL ROADS, FOR EXAMPLE, YOU GET A LOT OF MONEY FLOWING INTO THE SECTOR.

YOU GET A LOT OF SPECULATION, AND THEN EVENTUALLY THE MARKETS CORRECT, SOMETIMES IN A BIG WAY, AND THEN, YOU KNOW, THE CHAFE GETS WEEDED OUT.

YOU GET THE GOOD BETS AND THE BAD BETS BEING SORTED THROUGH AND EVENTUALLY THINGS COME BACK.

BUT BOY, IF YOU'RE IN THAT FIVE OR TEN-YEAR PERIOD WHEN THAT'S HAPPENING AND YOU'RE LOOKING TO TRY AND RETIRE, THAT DOESN'T FEEL GOOD.

>> AND YOU TALK ABOUT AI IN THE LONG-TERM, PROBABLY CREATING JOBS.

I THINK IT WAS KEYNES WHO SAID IN THE LONG-TERM WE'RE ALL DEAD.

AND I'M LOOKING AT MY COLLEGE KIDS COMING OUT OF TULANE AND STUFF, IT SEEMS PARTICULARLY COLLEGE KIDS ARE HAVING A HARDER TIME GETTING JOBS.

THAT TRUE?

>> IT IS TRUE.

MANY OF US THOUGHT, I THOUGHT THAT YOUNG PEOPLE, THEY'RE MORE TECH SAVVY.

MAYBE THEY'RE GOING DO BETTER IN THE AI REVOLUTION.

BUT ACTUALLY, WHAT WE'RE FINDING IS THAT OLDER PEOPLE ARE DOING PRETTY WELL.

AND ONE OF THE REASONS FOR THAT IS IF YOU ARE SKILLED, IF YOU'VE BEEN IN YOUR JOB FOR A COUPLE OF DECADES AND YOU KNOW HOW TO USE AND REALLY HARNESS THE PRODUCTIVITY OF THESE AI TOOLS WITH THE RIGHT QUESTIONS, THE RIGHT PARADIGMS, YOU'RE ACTUALLY DOING PRETTY WELL.

WHEREAS IF YOU'RE JUST COMING IN AND YOU'RE LEARNING, MAYBE YOU'RE A LITTLE BIT OF A DISADVANTAGE.

AND ALSO, THE JOBS THAT ARE BEING REPLACED MOST QUICKLY TEND TO BE AT THAT LOWER LEVEL.

I'LL GIVE YOU A PERFECT EXAMPLE.

I HAVE A NEW BOOK COMING OUT IN OCTOBER.

I USED AI AS A RESEARCH ASSISTANT.

I WOULD SAY IT CUT 50% OF MY RESEARCH TIME OFF.

DID THE SAME JOB THAT I MIGHT HAVE PAID A YOUNG PERSON $50,000 TO DO IN THE PAST.

THAT'S THE KIND OF THING THAT WE'RE SEEING.

>> WELL, WE USED TO SAY YOU REALLY GOT TO GET A COLLEGE DEGREE AND THAT'S GOING HELP YOU IN THE ECONOMY.

NOW WE'RE NOT SEEING THAT.

THAT IN SOME WAYS, IF YOU DON'T HAVE A COLLEGE DEGREE, YOUR EARNING POWER MAY BE GREATER, ESPECIALLY WHEN IT COMES TO PEOPLE DOING THINGS LIKE WELDING AND PLUMBING AND OTHER THINGS LIKE THAT.

ARE THOSE PEOPLE ARE GOING TO BE ADVANTAGED IN THE NEARER TERM?

>> I THINK IN THE NEARER TERM, YES.

AND THERE IS A FEW REASONS FOR THAT.

ONE, AI DISPLACEMENT AT THE WHITE COLLAR LEVEL, WHICH WE JUST TALKED ABOUT.

ALSO, WE ARE SEEING A LOT OF INFRASTRUCTURE BUILD.

YOU'VE SEEN THAT SINCE THE BIDEN ADMINISTRATION.

YOU'RE SEEING IT IN DIFFERENT WAYS IN THE TRUMP ADMINISTRATION.

YOU KNOW, AS WE MOVE INTO A DIFFERENT GEOPOLITICAL PARADIGM WHERE IT'S GOING TO BE MUCH MORE ABOUT SPHERES OF INFLUENCE, GREAT POWER CONFLICT.

YOU ARE SEEING THE U. S. , EUROPE, CHINA ALL BEGINNING TO REINDUSTRIALIZE AND KEEP MORE MANUFACTURING AT HOME, KEEP MORE OF THOSE BRICKS AND MORTAR JOBS AT HOME, THAT'S PART OF A BIG SWING THAT I THINK WILL HAVE LEGS.

>> WE'VE TALKED A LOT IN THIS CONVERSATION ABOUT THINGS THAT SHOULD CAUSE PRICES TO GO UP.

OIL PRICES GOING UP, GAS AT THE PUMP GOING UP, TARIFFS CAUSING A LOT OF GOODS AND SERVICES TO BE MORE EXPENSIVE.

AND ONCE AGAIN, I HAVE A COUNTERINTUITIVE QUESTION.

WHY ISN'T INFLATION HIGHER?

>> YOU KNOW, THAT'S A GREAT QUESTION.

MY OWN FEELING IS THAT THE FED, DESPITE ALL THE CRITICISMS WE HEAR OF THE FED, THE FED HAS ACTUALLY DONE A PRETTY DARN GOOD JOB SINCE THE FINANCIAL CRISIS AT KEEPING INFLATION UNDER CHECK.

BUT IT HAS DONE THAT BY POURING A LOT OF MONEY INTO THE ECONOMY.

MANY PEOPLE, MYSELF INCLUDED BELIEVE WE ARE NOW AT A PIVOT POINT WHERE IT'S NOT GOING TO BE SO EASY TO DO THAT ANYMORE.

AND KEVIN WARSH, THE NEW FED CHAIR, WHO I ACTUALLY HAVE A LOT OF RESPECT FOR, HAS COME IN AND SAID I THINK THAT THE ERA OF EASY MONEY NEEDS TO END.

WE NEED TO HAVE MORE FISCAL DISCIPLINE.

IT'S GOING TO BE VERY INTERESTING NOW, WALTER, TO SEE IF HE GOING TO SQUARE OFF WITH THE PRESIDENT, WHO IS GOING TO WANT TO KEEP RATES LOWER FOR POLITICAL REASONS, ALTHOUGH WE MAY NEED THEM TO STAY A LITTLE HIGHER SO THAT WE CAN MAKE SURE THAT INFLATION PICTURE STAYS UNDER CONTROL.

>> WHEN WE TALKED ABOUT WHY OIL PRICES HAVEN'T GONE WAY UP, TO LIKE 150 OR 200, YOU SAID ONE REASON THE U. S. IS DRAWING DOWN ITS STRATEGIC RESERVE, IN OTHER WORDS, THE OIL IT KEEPS IN RESERVE IN CASE OF PRICE PROBLEM.

BUT NOW OUR STRATEGIC RESERVE I THINK IS AT THE LOWEST LEVEL IN MORE THAN 40 YEARS.

>> RIGHT.

>> IT'S THE IRAN STRUGGLE OR WHATEVER IT IS, WAR KEEPS HAPPENING, IS THAT A REAL PROBLEM?

>> IT'S A HUGE PROBLEM.

I WOULD SAY THAT IN SOME WAYS, IRAN HAS WON THIS WAR BECAUSE THEY HAVE SHOWN THAT IT IS NOT GOING TO BE BUSINESS AS USUAL IN THE STRAIT OF HORMUZ ANYMORE.

IT DOESN'T REALLY MATTER WHAT HAPPENS MILITARILY.

THEY HAVE THE HIGH GROUND LITERALLY IN THE WORLD'S MOST --WHAT I WOULD SAY IS THE WORLD'S MOST IMPORTANT CHOKE POINT.

AND THAT'S A BIG DEAL.

AND IT'S INTERESTING THAT OTHER COUNTRIES ARE NOW LOOKING FOR WAYS AROUND THE STRAIT OF HORMUZ.

YOU'RE SEEING CHINA JUST ACTUALLY LAUNCHED A TRANSARCTIC SHIPPING ROUTE, SOMETHING I COVER IN MY LATEST BOOK.

I THINK THE CHOKE POINTS AND RESILIENCY AND FINDING WAYS TO COPE IN A WORLD WHERE GEOPOLITICAL STRIFE IS GOING WITH US FOR YEARS, IF NOT DECADES IS GOING TO SEPARATE THE WINNERS FROM THE LOSERS.

>> AND WHEN IT COMES TO THESE TARIFF WARS, WE'VE JUST SEEN THAT PRIME MINISTER MARK CARNEY OF CANADA IS HAVING DISCUSSIONS WITH THE EU PERHAPS OF HAVING A TARIFF AGREEMENT WITH THEM SINCE HE'S IN A DISPUTE WITH THE U. S. AND HASN'T BACKED DOWN.

LIKEWISE, IT SEEMS LIKE HE'S PROBABLY HAVING SOME CONVERSATIONS WITH CHINA.

DO YOU FEEL THAT ALL OF THIS COULD TAKE THE U. S. OUT OF THE CENTRAL ROLE IN THE GLOBAL ECONOMY?

>> BOY, THAT IS THE $64 BILLION QUESTION.

YEAH, I THINK WE'RE MOVING TO A WORLD WHERE IT WILL NOT BE U. S. CENTRIC ONLY.

YOU KNOW, GEOPOLITICAL PENDULUMS KIND OF SHIFT ABOUT EVERY 50, 75, 100 YEARS.

WE ARE AT ONE OF THOSE PIVOT POINTS.

MOST OF US HAVE GROWN UP AND LIVED AND WORKED IN AN ERA OF U. S. DOMINANCE.

WE ARE NOW SEEING A FUNDAMENTAL SHIFT TOWARDS REGIONALIZATION, NEW KINDS OF ALLIANCES, MIDDLE POWERS LIKE CANADA, CERTAIN EUROPEAN COUNTRIES, CERTAIN ASIAN COUNTRIES ARE SAYING WAIT A MINUTE, WE CAN'T TRUST THE U. S. ANYMORE.

MAYBE WE DON'T TRUST CHINA EITHER.

SEE WHAT KIND OF HORSE TRADING WE CAN DO TOGETHER.

AND THE WHOLE MAP HAS BEEN THROWN UP IN THE AIR.

AND IT'S GOING TO BE YEARS BEFORE WE UNDERSTAND REALLY WHERE THINGS ARE GOING TO LAND.

>> RANA FOROOHAR, THANK YOU SO MUCH FOR BEING WITH US.

>> THANK YOU, WALTER.