Kelsen's Pure Theory of Law: Validity and Normativity #358

Time to try and put the world into a little perspective. The war is over. Sort of oil is returning to what it was against that backdrop. We've seen global markets explode with the heavy mix of AI, chip, space, type, exuberance so much so that the Bank of International settlements, the other day said, this can't end well. Perspective with one of our favourite people in best brains, Richard Quest of CNN is back with us. Good morning. Good morning, all good afternoon. I should say we're out of sweltering in the heat of Southern Spain, but delightfully it is. I mean, you've been around a long time. We live in the most interesting of times where literally anything could happen on any day. Do you feel that? I do. And I think that one of the aspects of that interesting times is that the underlying economics are not that bad. It is when they are overlaid by geopolitics and strategic issues in the US. And yes, the Trump administration there, I've said it. And the Trump policies, once you put them into the mix, suddenly things become much more complicated. And a very good example is, of course, the war on Iran and the consequent closure of the Straits of Humours and the rise in oil prices and the consequent inflation that's hitting everybody around the world. Now, all of this happened at a reasonably good time for economics. Consumers were okay. Things weren't fun, but they were okay. The scenario changed dramatically. Inflation has changed the outlook. Will it come down fast? Donald Trump said that the price of oil will come down and fall like a stone. We've not really fully seen that. And certainly, as indeed, the Reserve Bank, Australia and the New Zealand both know on interest rates, the next moves could well be high. So inflation is still a very serious problem. Do you think there's a premium on oil for the foreseeable because of what's happened? Yes, yes, absolutely. No question. That's a very shrewd way of putting it. I think that the premium is the disruption A that has already been seen, but also B, the power that's now been handed to Iran through the Straits of Humours, through the question about what will Oman do about this fee. We know we're going to need fossil fuels for the foreseeable future, however undesirable. That is for some people. And what Donald Trump did was both give and confirm to Iran that they have a strategic weapon that they can deploy. Now, he's held them up bay. We've got this agreement. We've got, but we've now got this question of whether there's going to be a thing. What sort of arrangement will it be? It's the level of uncertainty. So yes, a premium on oil and gas for that matter is being baked in. What about the secondary pipelines and the alternative markets and all of those opportunities that present themselves long term, not to mention the UAE out of OPEC and the IEA said the other day that we're going to have 110 million barrels a day, produce better demand of 105 million. I mean, at some point the price has got to come down materially, doesn't it? It comes down when there's a glut. It comes down when not only does demand, as I'm sorry, supply, dramatically, overwhelm demand, but also uncertainty abate. Yes, you can have, and remember, let's not forget, we had a glut of oil when this crisis began. So it's not as if we were starved of oil then. We had a glut of energy. The event raised the price as a famous British politician, Prime Minister Haram Millen said, when asked what he was worried about, event dear boy, events, and famously said, and that's what it is. You talk about the oil price, it's the event. So yes, the UAE, I mean, let's look at the UAE coming out of OPEC. They did it for their strategic reasons because they want to pump more. So that's a positive in terms of bringing down the price, but are they able to do so? It's a very, very murky picture at the moment, where I know because I've been talking to them, trade as I'm broke as I'm watching, literally counting might, which nine tankers went through the straight yesterday, seven went through overnight, two of them. So that's how balanced it is at the moment. All right. Now, Richard, you've been looking for the years of these things, but these markets, particularly the American market this year, against the backdrop of this war, you know, this AI, this chip, the SpaceX things, they've just taken off. Is this a bubble, do you think? If I say yes, does it matter? If I say no, does it matter? Of course, it's a bubble of sorts. If you look at the technical definitions of when people talk about bubbles, absolutely, you only got to look at the way in which SpaceX traded in its first few days, rocketing back up, pulling back down. That is classic IPO amateur territory, where the amateur gets burned badly, but it's all about the promise of the future. And the Mag 7 is still driving the demand, even though a couple of trillion has been, one of trillion has been wiped off, mag seven demand or mag seven prices. But it's the only game in town because it is the one that is possibly going to produce the productivity gains that we will see at the same time as we're going to see higher unemployment. It's a very difficult environment, but yes, I would agree that let's not be emotive, like and call it bubbles. Let's say frothy. Have you got for your own personal satisfaction your head around AI and formed an opinion as to what it actually is and what it will actually do as opposed to what it may do? Yes and no, because it would be sheer hubris and arrogance to say that I understood it. Not a time of bitter guess against a bit of hubris and arrogance, of course, as you're well aware, but not on this occasion. I think what we're saying is, look, I was at a conference, I was at a conference in Cannes, in the South of France, where we really were shifting last week. But it was a conference, it's called Cannes Lions, it's the marketing conference, very, very big. And I got to talk to the chief marketing officers of all the major companies about how they are using AI, when they use it, how they're using it commercially. For instance, give you a minor example. I do a Google search, and the search optimization brings up certain numbers of results because it looks in a certain way. I do a chat GPT search, and it's looking at a much wider range of sources, it's looking at reviews, etc., etc. So this is a minor example of how AI is being affecting major corporations in the way, in the science of selling. But I was then at Airbus the previous week, how are they using AI? What is clear is that the tsunami of AI advantage is coming our way. But can we manage it now? Kevin Worsh, this is where, back to you and me, Kevin Worsh, they've fed, believes like Greenspan, the late Alan Greenspan, great on worldwide, where there will be such productivity gains that it will offset inflationary expectations. Is he right? Yeah. This is the, you know, let's get our deep and wonks hat on. This is the massive debate at the moment in economics. How much can we rely on AI to, if you will, save the day? I don't think anybody knows. But to save the day to what extent, because it was the Bank of International settlements, this week that said there's a mania around this, and it could wipe out the middle class. So do we enhance productivity, but we're all at home because none of us have jobs anymore. These are the big issues. This is it. I mean, Lloyd, you know, if you look at the various, if you look at the various CEO, CEO, Goalman, Saxon, it's all going to be fine. Other CEOs say it's all going to be a disaster. We don't know. We're in the middle of the sausages and the laws being made, which is exactly what Winston Churchill said you don't want to witness. We're in this mailstrom. So anybody who says it's going to be this, so it's going to be that, I think is probably going to be wrong. What we can do is make an educated guess, but the likelihood is, so yes, blue collar jobs went in the fourth industrial revolution. Now some white collar jobs are going to go in large numbers, secretary, legal, all those sorts of things, but we're at the same time we're seeing companies trying to adapt, you know, we've seen law firms in the US bringing in the big AI companies to tailor make their AI solutions. So we don't know, is it frightening? Yes, is it exciting? Yes, but I guess that depends on, you know, pardon the phrase, where the spike is sitting on you at the moment. Exactly. All right, Mike, go well. I appreciate it very much. Good to catch up, Richard Quest, who by the way was interrupting his holiday in the aforementioned Spain to talk to us this morning, and I'm very appreciative of it. Good piece, CNBC this morning on the subject broadly of AI. companies nice, prefued this, not the article, but the general thought at the moment that AI is seeing some regret in the workplace already yesterday. It was forward as they're re-employing people they laid off because they thought by laying them off and having AI do the job would improve things, but it hasn't. So they're re-employing these people. So changing their minds rapidly on the idea that artificial intelligence can do it all. So Ford started this, but the Commonwealth Bank of Australia, they cite has been re-hiring people. IBM have been re-hiring people. So they lay them off then they re-hire them once they work out that the AI they thought was going to do the job. And that really is the tech story each and every time. Isn't it? I mean, it varies individually each time, but basically it's the same thing. Tech never quite achieves what you thought it would. For more from the Mike Horsking Breakfast, listen live to NewsTalksetB from 6 AM weekdays or follow the podcast on iHardRadio.