Alan Greenspan’s Legacy: Mohamed El-Erian & Walter Isaacson 6/22/26

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1:25and economics and the mark he left on American business. He was the Fed at its best because he had that command of details and was willing to look forward and say, you know what, I'm going to let this economy run. And he unleashed an enormous productivity gain. Then Walter Isaacson on Elon Musk over a week out from SpaceX's IPO. What's next for the world's first trillionaire? I think there will be a Tesla-SpaceX merger buyer because it makes sense. They're both basically companies making real-world things that are driven by AI. Plus, Toy Story 5 has notched the biggest box office weekend of the year.

2:07UK Prime Minister Keir Starmer is stepping down, and more talks between the US and Iran, led by Vice President Vance in Switzerland. It's just tough to sift through all the rhetoric from both sides to find out where things really are. There's an old saying in diplomacy, Joe, that talking is better than shooting. It is Monday, June 22nd. Squawk Pod begins right now. Stand Becky by in three, two, one. Cue, please. Good morning, everybody. Welcome to Squawk Box right here on CNBC. We are live from the NASDAQ market site in Times Square. I'm Becky Quick, along with Joe Kernan. Andrew is off today.

2:44And yes, it was a beautiful sunrise this morning on the way in. And all I could think about is the days are getting shorter from here. Back to the dreary, dreary, dark days of winter already on my mind. Because this is what you think when you get up early in the morning, right? All of you who are up early with us in this part of the world know exactly what we're talking about. Yep. It is a beautiful hour. It was beautiful all weekend. It was a good Father's Day. Yeah, it was. Oh, happy Father's Day. Thank you. You too. Happy Father's Day. Well, Matt. Yeah, to Matt. Yeah, it's beautiful, beautiful days of summer.

3:19And for those of us who've been doing it for a while, you think, please let this last. Blake got home. Blake got home. Yeah, it's really nice. Good. I'm glad you got to see all of your children. Blake's corgi. And your grandpuppies. Yeah, and the grandpuppie. That's right. Some signs of progress at U.S.-Iran at the talks in Switzerland, though President Trump threatened the country again over the long weekend and said that the U.S. might impose its own tolls on the ships in the Strait of Hormuz. And CBC's Eamon Javers joins us now with the latest. Good morning, Eamon. Yeah, good morning to you, Joe.

3:53It was a tense weekend of negotiations between the United States and Iran over the weekend, along with delegations from Qatar and Pakistan in Lucerne, Switzerland this weekend. Vice President Vance led the U.S. delegation on site as President Trump huddled with advisers at Camp David through the weekend. And President Trump at various points Sunday threatened to relaunch hostilities against the Iranians, telling Fox News that if the Iranians don't cut a deal, he will blow the S out of them, and also threatening to take over the Strait of Hormuz by military force and charge tolls on that waterway, which is something that the U.S.

4:33military was unable to do during the war. Now, on social media, the president said Sunday, Iran must immediately stop their highly paid proxies in Lebanon from causing trouble. If they don't, we'll hit Iran very hard again, just like we did last week, only harder. Now, it was unclear if any progress was made on the diplomatic front in the weekend. A senior U.S. diplomat engaged in the negotiations said, we had robust discussions on all elements of the nuclear deal. And as of 1 a.m. Swiss time, negotiations were still ongoing last night. And at that time, officials said they expected them to go through the nighttime hours and conclude at some point today.

5:17Now, we just within the past hour or so, guys have gotten a statement now from the prime minister of Pakistan on social media. And he says the discussions have concluded. They were held in a positive and constructive atmosphere and yielded encouraging progress, including agreement on a roadmap toward a final deal within 60 days, the establishment of a high-level committee to provide political oversight, and the commencement of what he's calling further technical talks. So talks have concluded, but talks are ongoing. The threats continue. The tension is very high, and we'll see where all of can lead.

5:54Guys, back over to you. Stay tuned, which is probably the operative term for the last, I don't know, at least month as we've tried to find a way out of this, obviously, an off ramp. Looks like it's progressing, though, Eamon. I don't know what the chances are for a renewed round of you know, of shooting on both sides of things. Hopefully that's not in the cards at this point. And it's just tough to sift through all the rhetoric from both sides to find out where things really are. It is. You know, there's an old saying in diplomacy, Joe, that talking is better than shooting. And even if the talking is, you know, extremely tedious and progress seems like it's not being made, At least you're around a table somewhere in the world hashing it over and not fighting.

6:46That said, the president was in a pretty bellicose mood over the weekend. I mean, he was continuing to threaten the Iranians time and time again. And it seemed as if at one point, to me, the Iranians were really trying to drive a wedge between the U.S. and Israel here, leveraging the continued strikes in Lebanon as their vector to control the Strait of Hormuz and to control the tenor of these negotiations. And that's something that the president has been willing to do, is to signal that there is a divide between the United States and Israel. He's not happy with Bibi Netanyahu, and he is willing to cut a deal that maybe the Israelis don't want to cut yet.

7:26And I think that gives the Iranians a little bit of leverage in terms of exploiting that gap in the relationship. I think that's what we were seeing play out over the weekend, but we're just going to have to wait and see, because as you say, it's a lot of rhetoric from a lot of sides here, and it's often difficult to piece through what's actually happening behind the scenes. Amen, there is a, you look at the schism in this country on how we, on what our foreign policy concerning Israel should really be, and it's a divided country. In the journal today, you know, their op-ed writers are totally with Israel.

8:04What are we We're going to you know, we're going to threaten to cut off arms like Biden, the Biden administration. It's our it's our best ally in the Middle East. What are we doing? We're now we're criticizing Israel instead of Iran. Then you've got other people, you know, on different sides of the aisle that are like, Israel is controlling. This is the only reason we got involved. You know, Netanyahu's in charge. And, you know, he's leading Trump around by the it's just it's like this, how wide the schism is on public opinion, on what we should be doing. I guess, once again, somewhere in the middle is where we're going to end up.

8:40Well, look, Trump did push back over the weekend. I'm sorry, Becky, go ahead. Go ahead, answer that first, Adam. Well, I was just going to say, I mean, you look at the shaky political footing, as Joe points out, to be launching a war in the first place. And then you see, you know, this division here where J.D. Vance is out there criticizing members of the Israeli cabinet who've been criticizing Trump and saying, hey, look, we're basically your only ally in the world left. And so you shouldn't be criticizing us at all. I mean, there's some real bristling on the U.S. side from complaints from the Israeli side about U.S.

9:15willingness to cut a deal here. But all of that was knowable at the time that we launched the war, right? I mean, the political foundation in the United States, the strategic value of the Strait of Hormuz and the difficulty of opening that, all of that had been war-gamed. for years, if not decades. All of the factors we're seeing playing out now were available and visible at the beginning of the war, the day before the war. So this is a situation that the president has gotten himself into. It's going to be really difficult to extract himself. And I think it's going to come with a political cost.

9:52And we'll just have to see how much that political cost ends up being. Look, you pointed out that Iran is trying to play on that schism between the United States and Israel. The president said over the weekend, President Trump, that he would bomb Iran if they didn't get a hold of their proxies, particularly Hezbollah, and rein them back in. And I think that's the big question. Is Iran going to continue to say one thing and then use Hezbollah to kind of irritate and go after the Israelis on their flank? I mean, that's how you can see the potential for any of this working or not working is through that access.

10:33Yeah, I mean, and look, the solution of bombing Iran, you know, the president said himself that, you know, you can't just continue to bomb. You're not going to ultimately affect the outcome here. And history has shown that air power alone is just not enough to win wars when you're fighting against a culturally and politically cohesive group, right? I mean, think of the Battle of Britain and the Nazi bombing of London. That was not enough to bring Britain to its knees, even though the Nazis were convinced that it would be. The U.S. bombing campaign in Vietnam didn't bring the Viet Cong to their knees, even though we dropped more bombs in Vietnam than we did in all of World War II.

11:12I mean, there is a history of bombing campaigns that the people doing the bombing think are going to change the minds of those people receiving the bombing and actually having the opposite effect tends to create a rally around the flag effect and brings that population tighter together. And that might be what we're seeing play out in Iran as well. I don't know that this population supports that regime. Well, that's a good question, right? And we don't entirely know. I mean, this war began with an effort by the United States and Israel to create a popular uprising in Iran against the regime. And either there wasn't the political will there for that, or there wasn't the capacity among people who don't support the regime to do it given lack of access to weapons, lack of ability to coordinate, all those things.

11:58I was going to say, they don't have the ability to, I mean, they were slaughtered when they rose up. They don't have the ability to push back against it. Right. So, I mean, President Trump has said at different times, you know, more bombing is not going to help, or I'm going to, you know, resort to more bombing. And so you can kind of see how that's going to play out. All right, Eamon, thank you. Obviously, we'll be talking to you a lot as these talks continue. In the meantime, internationally, United Kingdom Prime Minister Keir Starmer is stepping down. He made that announcement earlier this morning.

12:31Every decision I've taken has been about putting the country I love first. That is why I will resign as leader of the Labour Party. I have spoken to His Majesty the King this morning to inform him of my decision. I will ask the National Executive Committee of the Labour Party to set out a timetable with nominations opening on the 9th of July and completed by the summer recess. Starmer said that he will stay on as prime minister until his successor is in place. That could be mid-July if there's only one candidate in the leadership contest, or September if it turns out to be a contested race. Traders on Calci give Andy Burnham a 95 % chance of becoming the next prime minister.

13:19Burnham served as a member of parliament for a decade and a half before becoming mayor of Manchester in 2017. He won a seat in parliament last Thursday in a special election, And just moments ago, he announced that he is putting himself forward, in his words, for prime minister. Toy Story 5 scoring the biggest box office opening of the year. The fifth installment, hence Toy Story 5, in Pixar's series, earned$160 million in domestic weekend receipts. We'd never say anything unnecessary. It added another$152 million overseas. This was the best debut for a Toy Story film ever. The previous record was held by Toy Story 4, which was the fourth release.

14:06And that was released seven years ago and earned$120 million in its opening weekend. Citing industry data, the Wall Street Journal says domestic box office receipts are at their highest level for this time of year since 2019. And that story made the front page of the Wall Street Journal. Big deal. Yeah. I love movies. I love rocket ships. That's exactly what I thought. As soon as you said that, we've been sitting together for too long. David Faber wrote a blog 20 years ago. 20 years ago. Because they were making us write blogs at that point. I like Rockets. He can't live that down. I know. He wishes he hadn't, I think, at this point.

14:42He just wishes he hadn't shown you. Good to me. This just breaking now, Alan Greenspan has died. He steered monetary policy in the U.S. for five terms as Federal Reserve Chairman. He survived by his wife of 29 years. NBC News correspondent Andrea Mitchell in a statement. She said, Alan passed away at our home this morning at the age of 100, 100, from complications of Parkinson's disease. She went on to say he was a giant of a man. And we can we can confirm that who who helped shape the U.S. economy for decades under presidents of both parties. He was always honest and acknowledging his mistakes.

15:23She said, to me, though, he was my husband who shaped my life from our very first date in 1984. He had a rational exuberance for baseball, the Washington commanders, tennis, golf and music, especially jazz. And he will be remembered for his brilliance and his kindness. And being his life partner was the joy of my life. we could spend the next three hours talking about everything involving Alan Greenspan from, you know, when he was appointed, he worked under Arthur Burns. He was a sort of a colleague of Ayn Rand and paid a tribute to her. We're going to talk more obviously about this, but Alan Greenspan at the ripe old age of 100, finally passing today and he will be missed.

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17:17or find Schwab Market Update wherever you get your podcasts. The wrongs we must right. The fights we must win. The future we must secure together for our nation. This is what's in front of us. This determines what's next for all of us. We are Marines. We were made for this.

17:53Welcome back to Squawk Pod from CNBC. Today with Joe Kernan and Becky Quick. Here's Joe. Joining us now, Mohamed El-Erian, Allianz Chief Economic Advisor and Wharton Professor, who you've coined some terms too, Mohamed. You like to look around corners and you like new normals and you like multi-speed economies. I remember them all over the years. I've never heard you say this, but there's times when I think you should have. This is a famous Greenspan quote. Everyone knows this or writing that. I know you believe you understand what you think I said, but I'm not sure that you realize that what you heard is not what I meant.

18:32You remember that one? I remember that one. It was in Congress. It was epic Alan Greenspan, epic Alan Greenspan. And it shows you how much Fed communication has evolved. Look, I don't think anybody comes close to him when it comes to his dedication to public service. His incredible command of details. I've sat with him over the years. Incredible command of details. And this ability to pivot the Fed from defense to offense. Never underestimate how difficult that is. And that was him. And he did all that with enormous intellectual curiosity. And his stature was, I guess Volcker had stature. But I think Greenspan almost eclipsed Volcker just in terms of, I mean, he lived to be 100 as well.

19:18But he was a true institution. He was. I mean, think of it. He served 20 years, five terms, four administration. Four administration. I mean, it was incredible. And now, you know, as he admitted himself in front of Congress, there's things he underestimated, including excessive risk taking. but he will be remembered for taking a massive productivity bet. And he was the Fed at its best because he had that command of details and was willing to look forward and say, you know what, I'm going to let this economy run. And he unleashed an enormous productivity gain. And here we are. And here we are. I mean, the Fed has changed quite a bit since.

19:59But the whole product, this whole thing that you just mentioned is back in focus with the new Fed chair and whether he's going to try to orchestrate the same thing or at least thinks the same way about productivity running hot. And, you know, I was very much hoping that he would get this appointment. And I love the fact that at his very first press conference, he said, here are five things we need to reform about the Fed. And I'm putting in place not just a working group to look at them, but I'm going to use outside experts, something that the Bank of England does all the time and something that this insular Fed has refused to do.

20:37And I love this breath of fresh air that has come into an institution that needs reform. What were your main complaints about Fed for the last, how far back would you say your complaints go? To who? The last six or seven years. Six or seven years. Yes. I mean, first, no one can ignore the fact that they've missed their inflation target for 63 straight months. And we're going to get the PCE on this week on Wednesday. And again, we may well get a 4 % handle on the PCE. Wait a second. That's an argument for raising rates, and I don't think Kevin Warsh is going to do that. I'll come back to that, OK?

21:16Because there's a real question, how stale is that data, given what has happened to oil prices? The second issue is communication. It has been confused. It has been confusing. The third issue is forecasting. And the fourth issue is the internal compliance culture. Five Fed officials, senior Fed officials, having to resign due to unproven allegations of financial irregularities. If you look at this Fed and just abstract away from the important issue of independence, this is a Fed that needs reforms. And on day one, his first press conference, the new chair came in and said, here are the five areas and they are the five areas that need reforms.

21:51So when you heard, I mean, focus, not a focus group, but task force. So you think that's a good idea. I guess he just can't, you know, slash and burn. You need to set these things up and move forward with changes in an orderly manner? Is that the reason? Because a lot of times you hear governments setting up, and it's like, oh, God, not this again, right? No, I think you need it for two reasons. One is there are really tricky analytical issues that need to be looked at. You need to know how to measure inflation. You need to know how to measure inflation. You need to understand the sources and uses of funds.

22:28I mean, the five areas are complex. And they've been brushed aside by this awful phrase, we're data dependent, as if the data is going to determine where we are in 12 to 18 months. And then the second issue is you need to get buy-in. You know, a new Fed chair comes in, he or she needs time to assert themselves on a committee. He's got 18 other people. You know, it was incredibly brave to come in and say, I'm not submitting the dots, because I believe that this exercise has outlived its usefulness. And I agree with that. What do you think is going to be the end result, given where oil prices are now, the way the economy is acting right now?

23:14Are you confident that the next move is not a hike? So, and this comes to you, Becky. I'm confident that based on what we know today, the Fed will leave rates unchanged for this year. That's what I'm confident. They won't lower, they won't hike. They won't lower, they won't hike. They won't lower because the economy is doing well. They won't hike because part of this inflation is going to pass through the system. Just back to that idea of being critical because the inflation's missed its target for 63 months running. When's the time where you have to say, hey, enough is enough and go Volcker, where you just drive inflation out by raising rates?

23:55So I think the new Fed chair tried to make that very clear. The last also the last sentence of this incredibly shortened and and refreshing statement that came out was that commitment to bring back inflation. You know, for what to get rid of inflation, to to bring it down, bring down inflation. You know, there's going to be a lot of debate. When I said Volcker, Volcker had a horrific inflationary picture to deal with. This is not the same. I mean, he came in with 16 percent inflation. And I think a very interesting comment that he kept on saying that the press didn't catch on to is I'm looking at the left hand of the decimal point.

24:32He kept on saying that. I think in general, Becky, what I found disappointing but not surprising is that the market mostly tried to interpret what happened last Wednesday using a Powell era playbook. They don't understand as yet. It's going to take one or two FOMC meetings to realize this is a fundamentally different fit. Yeah.

24:59Elon Musk said something recently. I'm trying to see exactly what he said about the prediction about the size of the economy in the next 10 years. Oh, enormous. He said like a factor of 10 or 100. I can't remember. I don't know what kind of GDP it would imply. But let's say that just in terms of the direction he's right, maybe not the magnitude. It seemed Tom Lee say we're going to have the best two and a half years of stock market performance in recent memory. Are you bullish right now? I am bullish on the economy. If we don't trip ourselves up, if we don't trip ourselves up, we've got a massive productivity gain in our immediate future.

25:40We are outshining other economies. We will attract a tremendous amount of capital from the rest of the world. and we can have an enormously beneficial run on the economic front. By the way, when you looked at your phone, I thought you were going to look at the Mets. I got really worried, so thank you for not doing that. I'm not looking at the Mets or the Reds anymore. Well, you destroyed us last week. But you should congratulate me. Egypt had its first World Cup win ever. And if it wasn't for this show, I would have been able to watch it till the end. So that you can't win 0-0. So they scored a goal.

26:173-1. Oh, my God. Congratulations. Yes, it's the first win in four years. That's a bonanza. So you didn't say anything about the stock market. You said you like the economy. The stock market's tougher. The stock market is tougher because we've had such a great run. We have. And it's been a concentrated run. So it's tougher than the economy. I think the economy is very clear to me if we don't trip ourselves up. OK. Mohamed, thank you. Thanks for having me. All right. Up next on Squawk Pod, newest trillionaire Elon Musk's biographer, Walter Isaacson, on the massive SpaceX IPO. Yep, we're still talking about it.