Wall Street Week | Britain’s Debt Problem, Poland’s Economic Boom

Ajouté : 2026-05-30

[00:00:14]David Westin: This is "Wall Street Week."

[00:00:16]I'm David Westin, bringing you stories of capitalism.

[00:00:19]The data center frenzy is in full bloom, but the neighbors are restless.

[00:00:24]Is there a way for the rest of us to get the benefits from AI without compromising the interests of those who will be living next door?

[00:00:32]Plus, earlier we brought you the story of the brain drain from New Zealand.

[00:00:36]People and talent are flowing the other way for Poland.

[00:00:39]It's one of the fastest growing economies around, driven in part by the best and brightest returning home.

[00:00:46]And we use it for everything from military equipment to packaged goods.

[00:00:50]Aluminum is ubiquitous, and now it's caught in between Trump tariffs and a war in Iran.

[00:00:58]But we start with the drama that is politics in the United Kingdom, as the fifth prime minister in 8 years is fighting to avoid yet another turnover at number 10.

[00:01:07]And the markets are keeping score.

[00:01:09]How much say does the gilt market have in who gets to run the country?

[00:01:13]John Authers is Bloomberg's senior editor for markets.

[00:01:18]So John, there's a lot of political upheaval drama playing out in the United Kingdom right now.

[00:01:23]At the same time, bonds are selling off, gilts, the yields have gone up.

[00:01:28]Is there a connection between the two, and if so, what?

[00:01:31]-Yes, there's certainly a connection, which is that Britain has even more than where we are here in the US.

[00:01:38]The rest of the Western world, it has a fiscal problem.

[00:01:40]We don't have much headroom left to spend money in the UK.

[00:01:46]Any sign of concern about political instability will, in its own right, worry bond markets.

[00:01:54]And specifically at the moment, because Keir Starmer is in a lot of political trouble.

[00:01:58]Any challenger, even those who you could argue are to his political right, will want to do something to show they've made a difference once they take over from him.

[00:02:08]And that's going to involve spending some more money on something.

[00:02:11]That's going to involve being more lenient on fiscal policy than labor has been so far.

[00:02:17]So plainly, the risks are towards more fiscal spending.

[00:02:22]That's plainly something the gilts market dislikes.

[00:02:26]There's a long history of friction between a labor government that has its origins in socialism, and the unions and bond markets, naturally.

[00:02:40]Westin: There is also a more recent history between the conservative government and the bond market, read Liz Truss.

[00:02:46]We remember that, but one of the things you pointed out in one of your columns is actually the yields on gilts right now are above where they got to under Liz Truss.

[00:02:54]-Exactly. I mean, there are, to be fair to the current labor government, there are reasons for that in that interest rates have risen across the world since then.

[00:03:02]And what really can endanger a financial accident is when yields rise very fast, which is absolutely what happened under Liz Truss.

[00:03:11]She took the market by surprise and thereby slipped on a banana skin, whereas what we've got at the moment is more of a slow-motion car wreck with labor.

[00:03:22]But yes, the ultimate fact is true.

[00:03:24]The higher the yields go, and they are now even higher than when they toppled Liz Truss, the less room for maneuver any government has.

[00:03:37]And to some extent, this is a systemic problem for the UK, because as we've just said, Liz Truss was and is conservative.

[00:03:47]This is universal across the parties, a certain lack of trust.

[00:03:51]And the British two-party system is breaking down at present, and both Greens, who are basically a British version of the AOC, Bernie Sanders left, and the Reform Party of Nigel Farage who are obviously very similar to the Donald Trump MAGA right.

[00:04:10]both of those are, on the face of it, more inclined to splash money around and do things that the bond market really dislikes than the incumbents.

[00:04:18]There's a very worrying dynamic about the entire British political situation, or at least it's very worrying if you're a, if you're a gilts investor.

[00:04:28]Westin: We know from your column that you are a student of popular music.

[00:04:33]And I don't know if you remember the Aretha Franklin song, "Who's Zoomin' Who?"

[00:04:36]-Yes, 1985, I remember that.

[00:04:39]That was actually my first time in America.

[00:04:41]But anyway, carry on.

[00:04:42]Westin: But if you take the bond market, the gilt market on the one hand, and the political system on the other, who's zoomin' who?

[00:04:47]I mean, you've explained how the political turmoil can affect the gilt market.

[00:04:51]Is the gilt market affecting what's going on in politics as well?

[00:04:54]-At the moment, I mean, certainly in the Liz Truss incident, yes, that was very much the case that it was the bond market that basically said, "No, you can't do this," and forced the expulsion of first the Chancellor and then the Prime Minister herself.

[00:05:08]This time around, that's less clear.

[00:05:13]You could certainly say that at this point, the bond market has become a kind of a sheet anchor or a straitjacket for whoever is in charge, but it will be more uncomfortable for a, you know, a party of the left that actually has fewer hang-ups about spending taxpayers' money.

[00:05:31]But, you know, the overall... the overall position is difficult either way.

[00:05:37]The other thing that's quite interesting compared to history is that it used to be the currency market.

[00:05:45]So Harold Wilson being forced to devalue in the pound and then going on television to say that the pound in your pocket, of course, isn't worth any less, which absolutely wasn't true.

[00:05:57]And then labor government of the 70s being forced by a run on the pound to go to borrow from the IMF.

[00:06:05]And John Major's government basically never recovered from the Black Wednesday attack on sterling by George Soros and others.

[00:06:12]So it used to be the currency market that really inflicted pain.

[00:06:18]And now that currencies do tend to float more gradually, more easily, and now that we've had many years of being used to extremely low bond yields, that, you know, cheap money is being treated as a fact of life or a birthright almost, it's the bond market that has now taken over as the anchor, the great limitation.

[00:06:40]Westin: The United Kingdom has a historically high ratio of debt to GDP, but they're not alone in that.

[00:06:46]They may be a little bit more than the rest of us, maybe a little less than some as well.

[00:06:50]Is what we're seeing in the UK simply what's going to happen in other parts of the world, including the United States, just sooner?

[00:06:57]-Yes.

[00:06:58]There's a reason that the UK has more of a problem, or more of an instant problem, which you can explain easily enough from geography and history.

[00:07:06]The UK is an island which got rich by trading with other people.

[00:07:10]The US is basically a continent that got rich by trading with itself.

[00:07:14]So exports have always been a much more important part of the UK equation.

[00:07:20]When you have pressure on the currency, when you have inflation elsewhere, it will affect the UK much more swiftly, much more dramatically.

[00:07:30]It is much more dependent on the generosity of others than the states.

[00:07:37]That said, America's share of GDP, public debt as a share of GDP, was, in round numbers, 20 years ago, before the global financial crisis, 60%.

[00:07:51]Causing...You know, occasioning great alarm, the Simpson-Bowles, if you remember that, attempts to cut the deficit.

[00:07:57]It's now 120.

[00:08:00]And whatever you think of the relative merits of Joe Biden and Donald Trump, both of them spent money, whether through tax cuts or fiscal largesse, or both, in a way that suggested that this just wasn't an issue.

[00:08:19]It will become an issue at a time.

[00:08:22]The US is a bigger, more closed economy than the UK.

[00:08:28]And it has the exorbitant privilege of the dollar.

[00:08:32]It doesn't... It's not as... It's not disciplined by potential runs on the currency like the UK is.

[00:08:40]But ultimately, if you're borrowing more than you have, and can't generate the money to repay it, you're either going to get very bad inflation or you're going to go bust.

[00:08:53]You're not going to go bust, you're going to get very bad inflation.

[00:08:55]And that is ultimately the risk that afflicts this country, too.

[00:09:00]Westin: You were a young lad, a young boy, during the Wilson time and the crisis, when there was really high inflation in the UK.

[00:09:09]And as you say, the pound was devaluing.

[00:09:12]And I think some would say that was a predicate for what happened with Margaret Thatcher and a fundamental revision of the economy.

[00:09:20]Is there any prospect that could happen again in the UK?

[00:09:24]Could we have a new Thatcher?

[00:09:26]-We certainly can't see her yet, although that being said, if you think back to 75, 76, Margaret Thatcher wins the leadership of the Conservative Party in ‘75 doesn't actually get to the general election where she becomes prime minister until ‘79.

[00:09:42]She certainly didn't seem to be quite the radical departure that she would turn out to be in ‘75.

[00:09:49]So maybe there is somebody out there who is hiding in plain sight already.

[00:09:54]I think the points I would make about the Thatcher regime, I was 12 when she got in, 24 when she left.

[00:10:02]My generation of Brits still basically think she's running the world.

[00:10:05]And you could also argue there's an analog to that in the States, which didn't get into anything like as much trouble in the 70s as Britain did, but did get into a lot of trouble.

[00:10:14]Paul Volcker is the key figure who changes America around.

[00:10:18]He is appointed by Jimmy Carter.

[00:10:20]Westin: As was Alfred Kahn, and deregulation.

[00:10:24]-Yes, and would the American economy have boomed the way it did in the 80s if you hadn't then had Ronald Reagan, who really believed this stuff, who was a really enthusiastic advocate for it?

[00:10:36]Almost certainly not.

[00:10:38]But it was much easier for him to do what he did because he actually had the building blocks in place.

[00:10:43]Again, the ancien regime had accepted that the game was up and shifted before you then had the really exciting free market politician, in fact, Ronald Reagan, to take things forward.

[00:11:00]So I think the key moment is when is the game up?

[00:11:04]When does the market, does the economy force a change?

[00:11:10]It's conceivable it could happen here that Donald Trump grasps that you just need to actually start cutting entitlements and cutting back on defense budgets or whatever.

[00:11:24]But I think it's more likely that circumstances force a change from the ancien regime, and that's the critical change, rather than that voters elect in the person who will make the change.

[00:11:40]Westin: Coming up, the money is pouring in, the construction is underway.

[00:11:44]Data centers are paving the way for our AI future, but some communities want to know why they have to be in their backyard.

[00:11:56]This is a story about good fences making good neighbors.

[00:12:00]The promise of artificial intelligence has brought a wave of data center building across the country, and in success, we hope that AI will benefit the economy, investors, and the vast majority of Americans.

[00:12:13]-A trillion dollars is an enormous amount of infrastructure.

[00:12:16]You have to have complete confidence that the trillion dollars you're putting down would be performant for as long as you could see.

[00:12:23]-If you're building a multi-billion dollar data center in the U.S. or around the world, and you have a 15-plus year contract with a company with a three-trillion-dollar market cap, that feels pretty good.

[00:12:34]-If we knew how to get a trillion dollars right now, which we don't, would we be able to deploy that profit within the next few years?

[00:12:42]And I'm not sure about that, but I feel confident we can make 500 billion of value back.

[00:12:47]Westin: But while we all wait for the full benefits of AI to be realized, what does construction of these massive AI data centers mean for the people living around them, and how much of a say do residents have in the type of fences keeping things in or out?

[00:13:02]-Not now, not ever.

[00:13:04]-A push back today to a proposed AI data center.

[00:13:08]-Amazon comes to town, starts emailing our town manager, and wants to build an enormous data center.

[00:13:17]And the citizens did not know about this, even though it was going to be a 500 million dollar investment.

[00:13:25]Westin: That sort of massive capital investment brings with it the prospect that data centers being built today will be with us for a long time to come.

[00:13:33]-Ultimately, to be paid for the risk that we're taking, we're looking to get a lease that's somewhere in the neighborhood, David, between 13 years and 17 years.

[00:13:42]Westin: Mark Ganzi is the CEO of Digital Bridge, an alternative asset investment firm specializing in data infrastructure.

[00:13:50]He's among the major players making long-term bets for AI, massive bets that are being distributed across a wide array of investors.

[00:13:58]-So on the equity side, you're seeing the traditional players, the big infrastructure players.

[00:14:03]And so what we're seeing today is we're seeing the large mega funds.

[00:14:06]These big, big infrastructure players really lean into the AI thematic.

[00:14:11]And as a part of that thematic, when they think about infrastructure, they think about putting billions of dollars of equity to work behind these large data center platforms and projects.

[00:14:20]On the debt side, it's actually really interesting today.

[00:14:23]Of course, we see bank syndicates, we see construction financing, club deals on the bank side.

[00:14:28]And now, David, you're beginning to see the emergence of private debt capital.

[00:14:32]So private debt capital financing projects that are a little tougher, perhaps less investment-grade exposure, or perhaps even more risk on the power side.

[00:14:40]Westin: Projected investments in data centers have climbed past $3 trillion.

[00:14:45]That's a $3 trillion long-term bet on the future, which requires a business plan with some pretty attractive returns.

[00:14:53]-That is the long-term nature of the cash lows.

[00:14:56]So that when we go to build that facility, we're getting an imputed yield.

[00:15:00]And today, most data center yields are somewhere between, David, on a cash on cash return basis, somewhere between 8% and 12%.

[00:15:08]It just depends on who the credit is.

[00:15:09]So if you're dealing with an investment-grade tenant like Amazon, you're going to be at the low end of that guidance.

[00:15:14]If you're dealing with a brand new startup, or perhaps you're dealing with a quantum compute player that's non-investment grade, you're looking at something more like an 11 to 12 cap rate, but you do need to be paid for the risk that you're taking.

[00:15:26]And that risk is measured in long-durated cash lows with some form of an escalator.

[00:15:31]Westin: But while investors anticipate that future payout over 15 or 20 years, in the communities where data centers are going up right now, there are immediate potential effects on the people who live near them.

[00:15:44]-To say that I have significant concerns is sort of an understatement.

[00:15:48]Westin: Dana Nessel is the Michigan Attorney General, whose job includes looking out for the interests of Michigan taxpayers, ratepayers, and citizens.

[00:15:57]She is appealing the state's expedited approval of a very large data center set to be built in Saline Township, just south of Ann Arbor.

[00:16:05]-Well, it appears as though the project is underway.

[00:16:09]The first that I learned about it was really on Halloween of last year, that this was going to be an enormous project, a project bigger than any of its kind we've seen.

[00:16:21]Westin: It's not that Attorney General Nessel denies the potential upside of data centers in Michigan, but she wants to test the projections and promises, weighing both the benefits and the burdens of things like changing electricity rates, land values, and water needs that her citizens will face, the sorts of things that may require some pretty good fences.

[00:16:41]-If you talk to Michigan residents, they don't want these in their backyard.

[00:16:46]Nobody knows yet what it's going to mean for that community.

[00:16:49]They don't know what it's going to mean for their water.

[00:16:52]They don't know what it's going to mean in regard to noise pollution or other types of pollutants.

[00:16:58]Until we have some of those questions that can be more fully answered and better policies put in place at the state level, most people don't want to see these massive data centers continue to be erected.

[00:17:12]Westin: Michigan residents aren't the only ones with concerns.

[00:17:15]Pew Research Center found that an overwhelming share of Americans think data centers are mostly bad for the environment, home energy costs, and their overall quality of life.

[00:17:26]But Ganzi says he's seen a version of this play before and that it can be handled in a way that satisfies the need for growth and the concerns of citizens.

[00:17:35]Do you need to take into account the reaction of the community?

[00:17:38]-100% is a factor.

[00:17:39]I've been doing this for 32 years, building digital infrastructure.

[00:17:43]And where I got my sort of humble start was building cell towers, David, in 1994.

[00:17:49]And at that point in time, nobody wanted a cell tower in their backyard.

[00:17:53]And that was the rise of NIMBYism, not in my backyard.

[00:17:55]Well, the sector got organized.

[00:17:57]We navigated through it.

[00:17:59]We explained the benefits of mobile communications, emergency services, and ultimately the fact that most Americans wanted ubiquitous mobile coverage.

[00:18:08]And so that carried through the early 2000s into 2010, 2020.

[00:18:13]And today you don't hear a lot of skirmishes around cell towers because largely the industry has made peace with the local community.

[00:18:20]Westin: State leaders like Nessel don't deny that things might work out for all concerned.

[00:18:24]But for that to happen, she believes we all need to know in advance the scope of data center construction, the effects it's likely to have on the community, and what commitments the developers and owners are making to address the possible local downsides.

[00:18:39]-The request was made before our utility regulator, the Michigan Public Service Commission, for this contract that was filed for an ex parte hearing, meaning a hearing that would place behind closed doors that we wouldn't be allowed to be part of.

[00:18:59]So the contract that was posted publicly was heavily redacted.

[00:19:04]And that included redactions to some incredibly important information, you know, involving things like exit fees, what would happen upon the termination of the contract, even, you know, basic terms and definitions had been redacted, customer credits, even the signatories to the contract had been redacted so that we can't even know who signed this contract or what company they're affiliated with.

[00:19:34]Which is pretty insane, when you think about it.

[00:19:37]How are we supposed to know whether or not rate payers are getting a fair deal if we're not even allowed to see the contract itself?

[00:19:45]Westin: All of this comes against the backdrop of a rapidly evolving technology that is growing at a rate we've never seen before, raising questions about what happens if things evolve in ways that fall short of the best case.

[00:19:58]As an infrastructure investor, Ganzi says they're ready for that.

[00:20:02]How do you anticipate the further growth, as well as the obsolescence of some of the technology you're putting in?

[00:20:10]-Well, I think the great part about being the owner of the railroad is you don't own the actual cars that run on the tracks.

[00:20:17]We own the land. We build the power plant.

[00:20:19]Sometimes, actually, we're building power adjacent to the data center.

[00:20:23]We build the physical real estate structure inside the 4 walls.

[00:20:26]We bring the fiber connectivity. We bring the cooling.

[00:20:28]We bring the backup power.

[00:20:30]We create the data hall conditions where the UPC units are in, and the cooling is in, and the cable trays.

[00:20:36]But eventually, David, our customers put in technology.

[00:20:40]So what makes our business great is we are, candidly, we're GPU and TPU agnostic.

[00:20:46]And what I mean by that is we're not involved in the active compute.

[00:20:50]That is a bet that we don't make at DigitalBridge.

[00:20:52]What we are in the business of doing is providing that mission critical real estate and infrastructure to the top technology providers in the world, and we let them make the decision what kind of server they're going to buy.

[00:21:02]Westin: That may take care of the investor risk, but what about community risk?

[00:21:07]In Michigan, abandoned auto plants still dot the landscape, a constant reminder of an earlier era of technological promise and the costs that followed.

[00:21:17]Who will bear the cost this time remains uncertain.

[00:21:21]-In the event that the bubble bursts and something happens and this hyperscale center in Saline Township is no longer needed, somebody is going to have to pay all of the extra costs of this new infrastructure, and who's going to pay it?

[00:21:39]Well, it's either going to be borne by the ratepayers in this state, and we already are subject to some of the highest rates and the worst reliability anywhere in the country, or it'll be the taxpayers.

[00:21:52]They'll have to bail out the utility companies who are making these, in some instances, terrible bets that AI is going to be around for a long time.

[00:22:01]If you look at these contracts, it's clear that the cost is supposed to be borne out not over the course of a few years, but over the course of really a few decades.

[00:22:13]You know? Up to something like 18 years, but we can't even see the exit fees in the next few years.

[00:22:21]Those that have encouraged these data centers to come here without any sort of guardrails at all, I think they've set us up for a very difficult future here.

[00:22:33]Westin: Which brings us back to those fences neighbors need.

[00:22:37]Ganzi sees a way to build what's needed in a way that accommodates everyone and doesn't stand in the way of progress.

[00:22:44]-You're seeing red states and blue states both look at the data center opportunity and quandary in the same way, which is it can't hurt consumers.

[00:22:52]So the industry has to get organized.

[00:22:55]It has to explain ultimately the benefits of why these data centers exist.

[00:22:59]Why are they creating jobs, not losing jobs?

[00:23:02]Why is it going to be good for them long term from a property value perspective?

[00:23:06]And why it ultimately isn't going to rise their utility bill and take away all their water?

[00:23:11]We got a pretty big uphill challenge.

[00:23:13]Westin: We need data centers to build the technology of tomorrow.

[00:23:17]The long-term promises are big, but so are short-term costs that may fall on the shoulders of local communities.

[00:23:24]That's why we need to construct some fences carefully to protect our neighbors.

[00:23:29]And to do that, we need to bring everyone to the table.

[00:23:34]Up next, Poland has gone from a laggard to a European economic leader, in large part by attracting back all those talented Poles working abroad.

[00:23:47]This is a story about going home again.

[00:23:50]The narrative of Europe in recent years has too often been about lack of growth.

[00:23:54]But there are exceptions.

[00:23:56]It turns out that Poland is one of the world's fastest growing economies.

[00:24:00]And although it's now attracting its best and brightest to come home to build their businesses, tough challenges still lie ahead.

[00:24:13]Born and raised in Warsaw, Aleksandra Pedraszewska followed a well-trodden path for young, ambitious Poles and went abroad.

[00:24:21]-I wanted to study abroad.

[00:24:22]And I started looking around, and my objective was getting the best education that I can get.

[00:24:28]So I left in 2013 to study at Cambridge.

[00:24:32]I didn't really make a choice after studies about which country I want to live in.

[00:24:38]It was very much driven by the opportunities, what could I do in different countries.

[00:24:44]And for me, it was natural to stay in the UK.

[00:24:49]Westin: But that was then.

[00:24:50]Now the well-trodden path is heading in the other direction.

[00:24:54]Poland is booming.

[00:24:55]Its economy topped one trillion dollars last year.

[00:24:58]And this year, it will be invited to the G20 summit.

[00:25:02]And its count of citizens living abroad, a figure that was steadily climbing after it joined the EU in 2004, peaked in 2017, and has been dropping ever since, although Poland's national statistics agency adjusted its methodology in 2022.

[00:25:18]Among those returning is Pedraszewska.

[00:25:20]-I think a lot has changed.

[00:25:22]And especially for people like me, with the backgrounds like I had, I wanted to work on the edge of new technologies.

[00:25:31]I really wanted to be exposed to the best R&D, the best teams that are building effectively the future of what the technology sector is.

[00:25:40]I don't think that these opportunities were as obvious 10 years ago and as available as they are now.

[00:25:47]-Actually, our performance started in 1989.

[00:25:52]Westin: Andrzej Domanski is Poland's Minister of Finance and Economy.

[00:25:56]-And in 1989, we had GDP of 67 billion US dollars.

[00:26:05]Last year, GDP of Poland reached one trillion.

[00:26:10]There was only one country in that period that had a higher pace of growth, and it was China.

[00:26:19]Westin: What were the things that drove that performance over that long period of time?

[00:26:22]-Well, first of all, the reforms of the early 90s, strong institutions that were established here at that time.

[00:26:34]Of course, the entrepreneurship spirit of Polish people who helped in this process.

[00:26:41]And of course, with no doubt, joining European Union in 2004.

[00:26:47]And frankly, we are often asked, "What is the most important sector "or most important company of Polish economy?"

[00:26:55]And it's very difficult to say.

[00:26:57]And I perceive it as a strength of Poland, because we are really well diversified.

[00:27:05]Polish economy is well integrated with other European Union economies.

[00:27:12]We are well integrated with global value chains.

[00:27:15]At the same time, we are quite an important market of 37 million people.

[00:27:21]So we have strong domestic markets.

[00:27:23]So there are many engines of Polish GDP growth.

[00:27:30]Westin: Drivers of Poland's economic growth include a range of services, as well as manufacturing.

[00:27:35]More recently, the Russian invasion of Ukraine has led to a sharp uptick in defense spending, projected to account for almost 5% of GDP in 2025, the highest in the EU.

[00:27:46]Its digital industry is also growing fast.

[00:27:49]McKinsey estimates the current $44 billion sector will grow to $123 billion in 2030, accounting for 9% of GDP.

[00:28:00]That's Pedraszewska's domain.

[00:28:02]She co-founded VividQ, a British company developing holographic display technology in 2017.

[00:28:08]But on her return to Poland, she started Vastpoint, a venture capital firm focused on tech startups in Central and Eastern Europe.

[00:28:16]-The startup scene is very vibrant.

[00:28:18]And when I think about this word, I think it really represents what's currently going on.

[00:28:22]I think that this ambition and this certainty that whatever is being built from here or by Polish teams has this potential of becoming a global solution.

[00:28:33]Westin: Yet for all the optimism around Poland, there are some warning signs ahead.

[00:28:38]Maciej Albinowski is an economist at the Institute for Structural Research in Warsaw.

[00:28:43]-The main short-term challenge for Poland is to consolidate public finances.

[00:28:48]Although public debt is still at moderate level of around 60% of GDP, and public debt is safe in Poland, we are running large deficits.

[00:28:59]Last year it was around 7 percent of GDP.

[00:29:04]So it is clearly not sustainable over the longer term.

[00:29:08]And we need to come up with a way to rationalize public spending, probably raise some taxes and probably we need to face the fact that elevated military spending requires some tax hikes.

[00:29:24]We don't want to start consolidating our public finances when we are under external pressure because then it's more painful.

[00:29:34]-We spent close to 5 percent of our GDP on defense.

[00:29:39]This is close to 50 billion euro per year.

[00:29:44]So, of course, we run high deficit.

[00:29:49]We take some steps to lower it gradually.

[00:29:53]We believe that we are not in the position to cut spending on defense.

[00:30:00]Westin: Another challenge lies in demographics for Poland as in much of the Western world.

[00:30:06]-By 2050, our labor force will shrink by about 20 percent.

[00:30:11]So this is one large factor.

[00:30:14]Secondly, the average age of an employee is increasing.

[00:30:19]And it also matters for the productivity.

[00:30:22]While older workers can certainly work with modern technologies, they may need some more support than younger workers.

[00:30:30]So we need to invest more in policies that allow upskilling, reskilling, adjusting skills to these new technologies.

[00:30:41]And currently we are not doing much in this direction.

[00:30:47]Westin: How do you address that economically?

[00:30:49]-So we are running many programs that are supporting Polish families with some additional income.

[00:30:56]We have also started an in vitro program.

[00:31:00]Already 13,000 children were born thanks to this program in Poland.

[00:31:08]And I want to say, personally, that we are really proud that after 8 years of very right wing government that stopped this program, our government reintroduced it.

[00:31:21]And we already have, as I said, 13,000 young Polish people because of that.

[00:31:29]But it's not enough.

[00:31:31]We need to create new incentives for people to be more willing to go to work.

[00:31:37]And our government is doing that.

[00:31:39]Westin: Foreign investment is both an opportunity and a challenge for Poland.

[00:31:43]Many foreign investors have become more confident in the sustainability of the Poland story.

[00:31:48]But Domáski says the war in Ukraine has made some wary.

[00:31:52]-We see that some investors, especially, from non-European investors are a little more reluctant to invest in especially eastern parts of Poland recently.

[00:32:04]That being said, Poland will be the biggest, of course, apart from Ukraine, beneficiary of peace in Ukraine.

[00:32:12]So we want just and lasting peace for Ukraine.

[00:32:18]First of all, of course, to... We need to end this brutal Russian aggression.

[00:32:25]It would be also very good for Polish economy.

[00:32:29]Foreign direct investments were absolutely crucial in building strength of Polish economy.

[00:32:36]And this is no... it's a matter of fact.

[00:32:38]It's not an opinion, because of the investments from other European countries.

[00:32:46]Of course, U.S. investors.

[00:32:48]Right now we see more and more interest from Asian investors investing in Poland.

[00:32:55]-We certainly need to invest more in research and development.

[00:33:00]We need to invest in our academic sector.

[00:33:03]We also need to rethink our educational policies both aimed at children and adults because this is what more successful Western economies are doing.

[00:33:16]And in Poland, so far we relied much on competitive labor supply, on cheap labor costs.

[00:33:26]But if we want to reach a higher level of wages, if we want to converge to, not to 50% of German wages, but to 80% or 90%, we certainly need to invest more in education, in research and development, and in other pro growth policies.

[00:33:47]We are quite satisfied with our present growth trajectory.

[00:33:52]So we may not be well-motivated to invest in research and development, to invest in new educational policies because so far it's good.

[00:34:04]But in future, current growth model of Polish economy may not be sufficient.

[00:34:09]Westin: As they say, getting to the top is one thing, staying there is another.

[00:34:14]Poland's growth is a success story.

[00:34:16]But its next test will be sustaining it.

[00:34:19]-A lot of the success of Poland so far has been, unfortunately, playing catch up.

[00:34:25]I think once you join, you know, 20 biggest economies in the world or 20 economies with the biggest GDP per capita, it really becomes about... what is the limit of your growth and where do you need to seek it if playing catch up isn't going to work out that well anymore.

[00:34:48]Westin: But in the end, for Poland, as it is for many countries, the key is making sure that the best of the brightest can go home again and stay there.

[00:34:58]-I could have stayed in London, raised a fund there.

[00:35:00]I could have thought about maybe moving to the U.S.

[00:35:03]and effectively starting over.

[00:35:06]But I decided to take a step, which I don't think is a step back, but step into something entirely new, but just in the place which I used to call home when I was a child.

[00:35:16]So it feels really special to be able to do that.

[00:35:18]It feels also really special because I don't feel like I have to give up on anything.

[00:35:23]Westin: Coming up, it's not just oil and fertilizer.

[00:35:26]Aluminum is another victim of the Iran war, which is making President Trump's plans to strengthen the U.S. industry that much harder.

[00:35:37]Westin: This is a story about trying to have it both ways.

[00:35:40]Since he first became president, Donald Trump has sought to protect the U.S. aluminum industry through tariffs.

[00:35:46]But the war in Iran may be taking us in a very different direction.

[00:35:50]Our colleague Chrystia Freeland tells us a story of a key metal that is caught in the middle.

[00:35:57]-Aluminum foil keeps foods from drying out while sealing in all their natural flavor.

[00:36:05]-When you think about aluminum, the first thing that comes to mind might be tinfoil or soda cans, but it's also an essential component of cars, planes, and machinery.

[00:36:15]It's the world's most abundant metal.

[00:36:17]But even that hasn't kept aluminum safe from the fallout of war.

[00:36:22]-The supply is now depleted by about half of the metal that used to be shipped from the Middle East because there's been some damage and there's been some curtailments to avoid further damage.

[00:36:35]-Jean Simard is the president and CEO of the Aluminium Association of Canada.

[00:36:40]-It's a very significant situation for the aluminum sector worldwide because the Middle East produces 20 percent of all the aluminum outside China and it ships to Asia but mostly to the U.S.

[00:36:55]and to Europe.

[00:36:57]-Of the top aluminum producing countries in the world two are in the Middle East.

[00:37:01]And Simard says the impact of the war in Iran could be long lasting.

[00:37:06]-Starting at the beginning of the crisis, the first curtailment happened in Qatar because of an energy supply situation and then damage was done in Bahrain and then to the Al Taweelah smelters in the Emirates.

[00:37:23]This is very significant because it will take a long time to bring it back.

[00:37:30]Smelters are very highly impacted by energy.

[00:37:37]And to restart a smelter, you have to do, like if there is a supply problem with electricity for your house, you have to unplug everything and then replug one at a time.

[00:37:49]So they can only start back two cells a day out of hundreds and hundreds of cells.

[00:37:54]-Production is just one part of the aluminum supply chain facing disruption.

[00:37:59]Distribution is another.

[00:38:00]Like so many of the world's exports, aluminum needs to be shipped often a long way and shipments are snarled by the blockade of the Strait of Hormuz.

[00:38:09]-The problem is what's in front of us.

[00:38:13]The last ship to leave the Middle East just before the beginning of the crisis has made it to the U.S.

[00:38:20]There's no other ship on its way.

[00:38:22]It took 60 days to get there.

[00:38:24]So the full shock is ahead of us.

[00:38:27]I'm not too sure that all downstream transformers processors, mom and pop shops that use aluminum are fully aware of what's ahead of them.

[00:38:37]-In the first two weeks of the war, the price of aluminum on the London Metal Exchange saw double digit gains shooting to record highs.

[00:38:44]But while the war added to rising prices around the world, some of the fallout in the U.S.

[00:38:49]is self-inflicted.

[00:38:51]Last year President Trump hiked tariffs on imports of aluminum to 50 percent with the intention of stimulating domestic production.

[00:38:59]As of 2025, the U.S. was dependent on imports to meet some 60 percent of internal aluminum consumption.

[00:39:07]And that was something that the Trump administration didn't like.

[00:39:10]-The U.S. is a short market on primary aluminum.

[00:39:13]So the U.S. need to import a lot of primary aluminum to fill demand.

[00:39:18]So to attract that metal that U.S. consumers or manufacturing using aluminum in effect how to pay the duty on aluminum into the U.S. market.

[00:39:31]-Trond Olaf Christophersen is the CFO of Norsk Hydro, a publicly traded aluminum producer based in Norway.

[00:39:38]The company is also in the unique position of having a production facility in Qatar.

[00:39:42]-Our joint venture in Qatar, Qatalum, has been impacted by the war and is currently operating around 60 percent production capacity because of the situation.

[00:39:55]And we continue to operate around that level.

[00:39:59]It is a challenging situation with the raw material access and also to get metal out from the region.

[00:40:06]But we are continuing to operate at that production level.

[00:40:10]-And so is the U.S. now facing more of an aluminum crisis than other parts of the world?

[00:40:16]-Well, the supply situation, I think, is... or the situation may impact the supply situation in all markets.

[00:40:26]Physically, when it comes to supply, I think the Asian markets is worse impacted because quite a lot of the metal from the Middle East is normally sold in Asia around two and a half million tons.

[00:40:38]But the price impact is global.

[00:40:41]-This isn't the first time the United States has imposed tariffs on Canadian aluminum.

[00:40:45]In 2018, when I was foreign minister, the trade spat between our two countries ended with the U.S. backing down.

[00:40:52]And although the U.S. is facing higher aluminum prices today, Simard says that's not a direct effect of the war in Iran.

[00:41:00]That's because the vast majority of aluminum the United States imports comes from Canada.

[00:41:06]-When the tariffs, the 50-percent tariff were implemented, it created a price shock in the market for exporters into the U.S.

[00:41:17]as Canada is one of them.

[00:41:19]And, basically, the reaction was to divert shipments to another market which covered the full logistical costs and the whole net back that would differentiate this destination from the U.S.

[00:41:33]One thing you're sure, if you want to get all the available supply from Canada, you have as a policymaker in the U.S.

[00:41:42]to do a carve out for Canada within the global tariff situation right now.

[00:41:48]If that doesn't happen, Canada will go where the market is.

[00:41:54]-Among the industries that are most affected by higher aluminum prices are packaging and transportation from trains and trucks to mopeds and bikes.

[00:42:03]And that's where Brendan Moore comes in.

[00:42:05]-Fundamentally, aluminum is one of the primary materials used on a bicycle.

[00:42:09]The reason is it's very light, very strong, reasonably priced.

[00:42:15]You know, it's not a super exotic metal.

[00:42:17]-Moore's company, Wolf Tooth Components, makes premium bike parts that are shipped all over the world.

[00:42:23]His manufacturing plant in the suburbs of Minneapolis is about 7000 miles from the Strait of Hormuz.

[00:42:29]But he's still feeling the consequences of the war in Iran.

[00:42:33]-We're a small company like us.

[00:42:34]We're not Boeing, so we don't get to say Kaiser send us 10 truckloads of aluminum.

[00:42:39]We buy our aluminum through suppliers locally and those suppliers will source that from various suppliers around the world.

[00:42:47]We don't get a lot of choice in where our aluminum comes from, but I can tell you that it's shifted and we do have a preference for U.S. aluminum.

[00:42:55]-Eventually, the only solution for a manufacturer like Moore might be to raise prices.

[00:43:00]But he says it's not so simple.

[00:43:02]-In consumer goods.

[00:43:04]I would say it's not like when you go to the restaurant and there's like lobster pricing and it's like market rate.

[00:43:09]That's not how consumer goods work.

[00:43:11]And when prices of aluminum or raw material go in, we can't necessarily just like raise our prices right away.

[00:43:19]Raising prices, remember, does three really bad things.

[00:43:22]One, it upsets your customers.

[00:43:25]Two, it puts you at a disadvantage to your competition.

[00:43:30]And three, it's actually a lot of work.

[00:43:32]And so when aluminum goes up effectively, initially, we just eat it, just comes right out of our bottom line.

[00:43:39]-Moore has seen peaks and valleys in the price of aluminum before.

[00:43:43]But he says this time is different.

[00:43:46]-If you look there was COVID, which aluminum prices started going up.

[00:43:50]But then, actually, the biggest peak was right when the Russian war started, just went crazy high.

[00:43:56]And then tariffs came in and then the Strait of Hormuz was closed.

[00:44:01]But the biggest thing people are talking about and you're seeing this broadly across commodities is the AI build out is actually one of the big impacts for aluminum prices going up right now.

[00:44:11]Those data centers that we all hear so much about they use a ton of raw material and a lot of it is aluminum.

[00:44:16]And so kind of we're seeing like a triple whammy now if you will.

[00:44:20]-Smaller manufacturers like Wolf Tooth Components not only have to contend with higher prices for the metal they need, but also have to compete against bigger more powerful players that also use aluminum.

[00:44:32]The squeeze could eventually raise prices across the board for consumers triggering another bout of inflation.

[00:44:39]-There's really no viable alternative to aluminum in our case.

[00:44:44]And you'd hear the same thing if you ask Boeing, like, they're still going to use tons of aluminum in the airplanes no matter what the prices and the price of those airplanes will just go up.

[00:44:53]Same with our bicycle parts.

[00:44:55]-As the war drags on, so does the timeline for prices to stabilize.

[00:44:59]Back in Norway.

[00:45:00]Christophersen says the outlook is far from certain.

[00:45:03]-So in the aluminum market, I think we see a bit the same situation as you see in the energy markets where you have quite high prices in the front then meaning metals to be delivered in the coming month.

[00:45:16]But then you have a declining price, a backwardation situation in the markets with lower prices falling down to 3,000 dollars per ton a couple of years out in time.

[00:45:27]-So it will take anywhere between 12 to 18 months for the Middle East supply that's been affected to come back into the market.

[00:45:37]And then you need 60 days to ship to North America that you add to this.

[00:45:42]So we're heading for a supply shock as we move through the summer period.

[00:45:49]And this will last, most likely, for about a year, a year and a half, until this supply starts to make its way back into the market.

[00:45:59]-For business owners like Brendan Moore the effects of domestic and foreign policy have become an unavoidable hazard of the job.

[00:46:07]-We control the processing.

[00:46:08]We control our efficiency.

[00:46:09]We control our yields.

[00:46:10]So we have to just focus on those.

[00:46:12]I think near term we're going to be able to mitigate most of the aluminum prices, longer term if it stays this high, there has to be some sort of increase.

[00:46:21]But a consumer, if aluminum goes up 20 percent again this year, our prices of our products aren't going to go 20 percent.

[00:46:28]They're going to go up, like, 3 or 5 percent.

[00:46:31]And I like Boeing.

[00:46:32]I mean, I'm trying to poopoo them at all, but like we don't have the negotiating power that, say, they have or an automaker has.

[00:46:38]And when these prices change or tariffs change, I see that almost the same day.

[00:46:44]I mean, not joking sometimes.

[00:46:46]Well, I didn't start this small business because I wanted to learn about tariffs or deal with massive supply chain issues or deal with geopolitics.

[00:46:56]Those are in fact some of my least favorite things.

[00:46:59]Bicycles are way more fun than that stuff.

[00:47:01]-With all the back and forth of tariffs and wars, it's hard to see how U.S. policy at the moment is helping American manufacturers or American consumers.

[00:47:11]And this is one problem that the marketplace can't fix on its own.

[00:47:17]Westin: Next, are we building too many data centers?

[00:47:24]Westin: Investing upwards of a trillion dollars in data centers seems like an awful lot and sometimes we've gotten carried away with new technology in the past like we did during the dotcom bubble.

[00:47:35]Marc Ganzi of DigitalBridge was in the middle of that boom and bust.

[00:47:39]And he says it turned out we needed a lot of that dotcom investment in the end.

[00:47:46]-And the same thing we did in the early 2000s in fiber, when we were building long haul fiber networks and signing 25 to 30 year long-term contracts with our customers then.

[00:47:55]The one thing investors really like about digital infrastructure, David, is they love the long term nature of the cash lows.

[00:48:01]And, by and large, greater than 60 percent of our customers tend to be investment grade.

[00:48:05]So that's set up between long duration cash lows and heavily concentrated towards investment grade, sets up for a really good investment thesis.

[00:48:13]-Do you have any concern about a sensitivity to the downside of overbuilding, of overinvestment and sort of retrenchment?

[00:48:21]-So here's the problem, in a normal situation like think about when we built, you know, the initial phase of digital communications or when we first built the Internet in the early 2000s, we did have this problem.

[00:48:34]We overbuilt, right?

[00:48:35]And in some cases the infrastructure was ahead of the opportunity.

[00:48:39]Here we actually have the converse effect and that is a function of power, David.

[00:48:44]So if you look at what's happened in the last three years, you see an alarming trend here in the United States.

[00:48:50]Let's turn the clocks back to 2024.

[00:48:53]In 2024, the data center sector, David, leased just a little over about 6 gigawatts of data center capacity, 5.7 gigawatts to be precise.

[00:49:04]The U.S. electrical grid in 2024 only turned on about 4.7 gigawatts of new power.

[00:49:12]So think of the national grid in the U.S. lighting up an additional 4 to 5 gigawatts per year.

[00:49:18]But the data center sector had at least 6.

[00:49:20]We were at a one gigawatt deficit in terms of what we had to build to fulfill the lease commitments that the sector made.

[00:49:27]Turn to 2025, and we have a record year.

[00:49:30]The sector leased over 13 gigawatts.

[00:49:33]The U.S. grid turned up another 5 gigawatts.

[00:49:37]So what you had there was a trade and supply imbalance of about 8 gigawatts, almost 9 gigawatts, to be precise.

[00:49:44]Fast forward to today, the sector is going to lease somewhere between 16 and 19 gigawatts, David.

[00:49:50]And at the same time the U.S. grid is going to continue to turn up another 5 gigawatts.

[00:49:55]So if you look in that 3-year period, and you look at the deficit, the supply and trade imbalance, you have effectively almost 23 to 25 gigawatts of leases, but you don't have enough power.

[00:50:08]We only turned on at that same time very little power.

[00:50:12]So you have a unique dynamic that's happening today in the data center space which is sites that actually have power, sites that have will-serve letters, sites that have a grid activation date with a positive baseload study.

[00:50:24]All 4 rating agencies are now rating data center deals.

[00:50:28]And just the depth of that market, David, is massive.

[00:50:31]The institutional appetite for either an ABS or CNBS securities today in data centers is probably the hottest asset class in esoterics today.

[00:50:42]When you think about, you know, private and public 144A securities.

[00:50:46]Westin: So, when you talk about things like CNBS, I think it's something that can be traded.

[00:50:50]Actually, people buy and sell CNBS.

[00:50:53]Is there a fairly liquid market for investors?

[00:50:57]-I mean, certainly, you can go buy tranches in the secondary market whether it's in the investment grade tranche or the triple B, or double B, or B minus credits.

[00:51:05]I mean, those securities can certainly trade secondhands with debt investors.

[00:51:10]But, ultimately, you know, when you're in... when you're in a CNBS structure, it's pretty permanent in that respect.

[00:51:17]So we do see a serious amount of secondhand trades and there's some fluidity to those bonds.

[00:51:23]But, by and large, it happens in a secondary capacity.

[00:51:26]I think, when you think about the equity, whether it's Digital Realty or Equinix, there is a certain amount of equity that trades publicly today.

[00:51:33]And, certainly, what we're going to see in the future is more IPOs coming in the data center market.

[00:51:39]There's a lot of grumblings of some of the new data center platforms coming to market.

[00:51:43]You see some of these crypto miners that are now trading publicly recasting themselves as data center operators.

[00:51:49]And, eventually, you're going to see AI factories trade as, you know, as a public equity story.

[00:51:54]So a lot of movement today in the capital markets, David, and data center land.

[00:51:59]Westin: So that's fascinating.

[00:52:00]You anticipate there will be IPOs.

[00:52:02]There'll be traded securities in data centers and projects either platform or individual projects.

[00:52:08]-I think platforms.

[00:52:10]There was something curious, you know, last week you saw Blackstone launched an IPO to go out and acquire mature assets.

[00:52:17]So think of it as a stabilized data center REIT, David.

[00:52:21]So this is where ultimately properties that are leased greater than 85 percent, 90 percent, 92 percent, you know, properties that are truly stabilized with long term leases creating a pooled set of economics, a pooled, equity pool, to go out and acquire these assets.

[00:52:36]So Blackstone has gone out and created its first publicly traded yield code just for stabilized data centers.

[00:52:42]Back in 2018, Vantage, one of the portfolio companies we own, created the first private data center REIT a yieldco REIT.

[00:52:50]We went on to go match that structure in Europe doing the same thing.

[00:52:53]And then of course real estate developer Capel, as I think you probably know out of Singapore, has gone on to do many of these what are called S REITs and Digital Realty did the same thing with a yieldco listed on the Singapore Stock Exchange.

[00:53:05]So you're going to see more public equity issued in the sector.

[00:53:09]The reality, David, is there's so much capital that's flown into the sector.

[00:53:13]Investors do need to materialize and actualize those investments creating DPI returning that original capital in their fund back to the LPs.

[00:53:22]And we have to create a virtuous cycle where we can recycle that capital.

[00:53:26]So ultimately public securities will be one way to go.

[00:53:30]Certainly recapitalization and continuation funds is another way to go.

[00:53:34]And then, ultimately, the selling of specific assets and platforms to other sponsors.

[00:53:39]Never before has there been a sharper focus with LPs today, David, in DPI, big checks have been written in AI in the last 5 to 7 years, as you know.

[00:53:46]And now it's time to return some of that capital.

[00:53:48]So you're going to see a lot of different forms and structures coming.

[00:53:51]Westin: You have a reasonably new relationship with SoftBank.

[00:53:53]How does that change your business?

[00:53:56]-Well, it's actually an old relationship.

[00:53:58]We've been providing infrastructure to SoftBank for over two decades now.

[00:54:01]So the relationship started where we were providing fiber connectivity for them.

[00:54:05]And through that relationship of getting to know SoftBank as a customer, we got to look at what they saw in the future.

[00:54:12]What was interesting is the relationship changed in the last year when they launched Project Stargate alongside of Oracle and OpenAI.

[00:54:20]And we're a large provider, a large landlord to Oracle and that consortium in building their infrastructure.

[00:54:26]And as we got closer to that consortium, you know, we got close to OpenAI, we got close to Oracle, we also got a lot closer to SoftBank, who'd we've been serving for a long time.

[00:54:35]And along that dialogue and along that sort of journey of talking to them, it was clear that we had an alignment of interest about what the future looks like.

[00:54:43]And through that alignment, we thought it would be great to create a new partnership, a partnership that is really focused on what I call digital infrastructure 2.0.

[00:54:51]And so I like to think of my job, David, every day is to look around corners.

[00:54:56]I think Masa looks around corners and looks around a second corner and a third corner.

[00:54:59]And what he sees in the future is very similar to what we see.

[00:55:03]We see AI infrastructure as being critical and the things that we're doing in terms of building power and building compute and providing that connectivity and the right set of circumstances for AI to flourish is where Masa and I have strong alignment.

[00:55:17]And looking at the future and thinking about the things that we're doing today at DigitalBridge and what they're doing in SoftBank is very much aligned.

[00:55:24]AI factories, robotics, true smart cities thinking around the future of industrial use cases of AI and ultimately the deployment of infrastructure in a world that will be autonomous.

[00:55:37]All of these thematics align very carefully with Masa's vision and SoftBank's vision.

[00:55:42]We found common ground and what the future looks like.

[00:55:44]And I think where we also found common ground is where to invest.

[00:55:47]And the power of the two platforms together is incredible.

[00:55:51]It's giving us a chance to go build infrastructure in more places around the world with more customers.

[00:55:56]And at the same time our asset-like platform is really attractive to Masa.

[00:55:59]Our ability to form capital at scale and go do big things is very much aligned with where they're going.

[00:56:06]So at the end of the day, an old customer that turned into a bigger relationship and certainly a partner who sees the world very similar to the way we see the world.

[00:56:17]Westin: That does it for us here at "Wall Street Week."

[00:56:19]I'm David Westin.

[00:56:21]See you next week for more stories of capitalism.