1 00:00:02,720 --> 00:00:10,559 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the 2 00:00:10,600 --> 00:00:14,560 Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 3 00:00:14,600 --> 00:00:17,840 Speaker 1: Eastern on Apple, Cocklay and Android Auto with the Bloomberg 4 00:00:17,920 --> 00:00:21,040 Speaker 1: Business App. Listen on demand wherever you get your podcasts, 5 00:00:21,360 --> 00:00:23,080 Speaker 1: or watch us live on YouTube. 6 00:00:23,840 --> 00:00:26,560 Speaker 2: All right, Neil Dona mentioned Home Depot, So let's get 7 00:00:26,600 --> 00:00:29,120 Speaker 2: a deeper read on what's going on there and check 8 00:00:29,120 --> 00:00:31,840 Speaker 2: in with Drew reading, our US home building analyst to 9 00:00:31,880 --> 00:00:35,880 Speaker 2: recap Home Depot's results. And I mean, Drew, this company 10 00:00:35,920 --> 00:00:39,640 Speaker 2: is just no matter what, tethered to rising bar and 11 00:00:39,720 --> 00:00:42,960 Speaker 2: costs and consumer sentiment and both of those are kind 12 00:00:42,960 --> 00:00:44,280 Speaker 2: of working against it right now. 13 00:00:46,120 --> 00:00:49,280 Speaker 3: Yeah, So it was a relatively neutral quarter for Home Depot. 14 00:00:49,640 --> 00:00:52,919 Speaker 3: I think the theme is really stability. You know. They 15 00:00:52,960 --> 00:00:56,040 Speaker 3: mentioned that during the call that demand is relatively in 16 00:00:56,080 --> 00:00:59,279 Speaker 3: line with where it was a year ago. They did 17 00:00:59,280 --> 00:01:02,240 Speaker 3: have a slightness on same store sales, but I think 18 00:01:02,240 --> 00:01:04,680 Speaker 3: what investors will latch onto and get a little bit 19 00:01:04,680 --> 00:01:07,319 Speaker 3: of comfort with is the fact that they maintained their 20 00:01:07,400 --> 00:01:10,640 Speaker 3: full year same store sales guide. Now, when they initially 21 00:01:10,680 --> 00:01:12,240 Speaker 3: came out with that, it was calling for growth of 22 00:01:12,360 --> 00:01:14,120 Speaker 3: zero to two percent, so I do think that they 23 00:01:14,200 --> 00:01:16,480 Speaker 3: left themselves with a little bit of will room to 24 00:01:16,520 --> 00:01:19,240 Speaker 3: see how the rest of the year plays out. But 25 00:01:19,319 --> 00:01:22,280 Speaker 3: to your point, you know, we mentioned stability, that is 26 00:01:22,319 --> 00:01:24,880 Speaker 3: the case, but what the company is missing is kind 27 00:01:24,880 --> 00:01:27,720 Speaker 3: of that next catalyst, and it's really housing that continues 28 00:01:27,760 --> 00:01:31,440 Speaker 3: to remain frozen due to elevated rates. We're back up 29 00:01:31,480 --> 00:01:34,840 Speaker 3: near six point seven percent, and that's after getting to 30 00:01:34,880 --> 00:01:37,360 Speaker 3: a five handle earlier in the year. And then, as 31 00:01:37,360 --> 00:01:41,080 Speaker 3: you mentioned consumer confidence. You know, we've heard this pretty 32 00:01:41,120 --> 00:01:44,959 Speaker 3: much across the housing ecosystem, and it's that consumers are 33 00:01:45,000 --> 00:01:47,720 Speaker 3: worried about the outlook for the economy, the outlook for employment, 34 00:01:47,800 --> 00:01:50,640 Speaker 3: and they're just hausing on these big purchasing decisions. 35 00:01:52,000 --> 00:01:54,680 Speaker 4: What's your world drew in your world of home building 36 00:01:54,720 --> 00:01:56,600 Speaker 4: and all that kind of adjacent stuff. 37 00:01:57,960 --> 00:02:00,160 Speaker 5: Let's assume rates are higher for longer. How does your 38 00:02:00,200 --> 00:02:00,840 Speaker 5: world adapt? 39 00:02:00,920 --> 00:02:03,160 Speaker 4: I mean, it just seems like if I'm a buyer, 40 00:02:03,160 --> 00:02:04,680 Speaker 4: i'm a seller, I got it. At some point I 41 00:02:04,680 --> 00:02:06,120 Speaker 4: gotta thrown in the town and say, hey, it's been 42 00:02:06,160 --> 00:02:07,600 Speaker 4: a number of years here. This seems to be the 43 00:02:07,640 --> 00:02:09,360 Speaker 4: new world here in real estate. 44 00:02:10,600 --> 00:02:13,240 Speaker 3: Yeah, it does seem like the level of demand that 45 00:02:13,280 --> 00:02:16,119 Speaker 3: we're at right now is kind of a floor. We've 46 00:02:16,120 --> 00:02:19,240 Speaker 3: been bouncing along a four million unit annualized rate in 47 00:02:19,240 --> 00:02:21,920 Speaker 3: the housing market for a couple of years now. The 48 00:02:21,960 --> 00:02:24,520 Speaker 3: new home market has been relatively stable for a couple 49 00:02:24,520 --> 00:02:26,680 Speaker 3: of years now, so you know, there is a certain 50 00:02:26,760 --> 00:02:29,040 Speaker 3: level of churn that's going to happen regardless of where 51 00:02:29,120 --> 00:02:31,480 Speaker 3: rates are. Things happen. You know, people get married, they 52 00:02:31,480 --> 00:02:34,800 Speaker 3: have kids, they need to move. But to your point, 53 00:02:34,840 --> 00:02:38,200 Speaker 3: I mean, there's still seventy percent of mortgage holders out 54 00:02:38,240 --> 00:02:41,560 Speaker 3: there with a rate at five percent or below, So 55 00:02:41,639 --> 00:02:44,120 Speaker 3: without any forced selling activity, there's not a lot of 56 00:02:44,320 --> 00:02:47,800 Speaker 3: urgency in the market now. From from the home builder's perspective, 57 00:02:47,880 --> 00:02:49,600 Speaker 3: what this means is that they're going to continue to 58 00:02:49,600 --> 00:02:52,519 Speaker 3: have to lean on incentives. That story has been well 59 00:02:52,600 --> 00:02:54,960 Speaker 3: documented now that they've been very aggressive in their use 60 00:02:55,000 --> 00:02:57,160 Speaker 3: of mortgage rate buydowns to kind of make the math 61 00:02:57,200 --> 00:03:00,639 Speaker 3: work a little bit better for their buyers. Coming into 62 00:03:00,639 --> 00:03:02,760 Speaker 3: the year, I think there was some hope that rates 63 00:03:02,760 --> 00:03:04,200 Speaker 3: were going to come down they'd be able to take 64 00:03:04,200 --> 00:03:06,320 Speaker 3: their foot off the gas pedal a little bit. But 65 00:03:06,360 --> 00:03:08,440 Speaker 3: it looks like at least over the next couple of quarters, 66 00:03:08,480 --> 00:03:10,680 Speaker 3: they're going to have to continue to offer those concessions 67 00:03:10,720 --> 00:03:11,840 Speaker 3: to move inventory. 68 00:03:13,000 --> 00:03:15,919 Speaker 6: Stay with us. More from Bloomberg Intelligence coming up after this. 69 00:03:19,560 --> 00:03:23,240 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 70 00:03:23,320 --> 00:03:26,400 Speaker 1: weekdays at ten am Eastern on Apple Coarclay and Android 71 00:03:26,440 --> 00:03:29,720 Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever 72 00:03:29,800 --> 00:03:32,919 Speaker 1: you get your podcasts, or watch us live on YouTube. 73 00:03:33,440 --> 00:03:35,120 Speaker 4: And let's talk a little technology. You can do that 74 00:03:35,160 --> 00:03:37,800 Speaker 4: with Caroline Hyde be Tech co anchor. She joins us 75 00:03:37,840 --> 00:03:42,240 Speaker 4: live here in our studio. Meta cutting some jobs. I'm 76 00:03:42,280 --> 00:03:45,760 Speaker 4: trying to read through the story here. My personal opinion 77 00:03:46,200 --> 00:03:48,720 Speaker 4: is AI is a job destroyer, not a job creator. 78 00:03:48,760 --> 00:03:50,480 Speaker 4: I'm going to stick with that one for until somebody 79 00:03:50,520 --> 00:03:52,640 Speaker 4: proves me wrong. What's going on in Meta. 80 00:03:53,080 --> 00:03:56,520 Speaker 7: Well interesting to prove to the point, the one optimistic 81 00:03:56,600 --> 00:03:59,720 Speaker 7: note I might on that last view of yours. I 82 00:04:00,840 --> 00:04:03,720 Speaker 7: recognized a few years ago that if you look back 83 00:04:04,320 --> 00:04:08,640 Speaker 7: over sixty years about I think it's even forty years, 84 00:04:08,760 --> 00:04:11,680 Speaker 7: only sixty percent of the jobs that currently are existing 85 00:04:11,680 --> 00:04:14,880 Speaker 7: today didn't exist there. Okay, so there is hope that 86 00:04:14,920 --> 00:04:19,040 Speaker 7: we find ingenuity in our lower value human capital. 87 00:04:19,120 --> 00:04:21,240 Speaker 8: Language matters, folks, Language matters. 88 00:04:21,240 --> 00:04:23,560 Speaker 7: I'm afraid of CEO who's going to talk out about 89 00:04:24,120 --> 00:04:26,320 Speaker 7: eradicating jobs up to eight thousand of them over a 90 00:04:26,360 --> 00:04:29,280 Speaker 7: standard charter and calling it lower value human capital. That's 91 00:04:29,320 --> 00:04:30,880 Speaker 7: going to hurt for the people out there, I've got 92 00:04:30,920 --> 00:04:31,240 Speaker 7: to say. 93 00:04:31,279 --> 00:04:34,680 Speaker 6: But by the by, I'm not a pr I'm in. 94 00:04:34,640 --> 00:04:37,720 Speaker 7: A different type of communications. But the communications that we're 95 00:04:37,720 --> 00:04:40,360 Speaker 7: getting from META is that tomorrow folks are staying home. 96 00:04:40,440 --> 00:04:42,360 Speaker 7: If you're working in North America, you sit at home 97 00:04:42,400 --> 00:04:43,920 Speaker 7: because you're going to learn as to whether you're one 98 00:04:43,920 --> 00:04:45,880 Speaker 7: of the ten percent who are losing your job. 99 00:04:45,880 --> 00:04:48,400 Speaker 8: That's about eight thousand people. But before ahead of that, 100 00:04:48,400 --> 00:04:49,279 Speaker 8: they're actually. 101 00:04:48,960 --> 00:04:53,560 Speaker 7: Reassigning seven thousand people to more AI focused work. So 102 00:04:53,560 --> 00:04:56,159 Speaker 7: it's sort of a reassignment of the resources that they've 103 00:04:56,160 --> 00:04:58,560 Speaker 7: got right now saying that new jobs are going to 104 00:04:58,560 --> 00:05:01,440 Speaker 7: be related to AI. Your new types of roles that 105 00:05:01,440 --> 00:05:04,480 Speaker 7: you're going to be seeing. More broadly, you're seeing people 106 00:05:04,480 --> 00:05:07,320 Speaker 7: perhaps moving from the area of social media where they've 107 00:05:07,360 --> 00:05:09,200 Speaker 7: lent into and of course we've known that they've been 108 00:05:09,520 --> 00:05:14,839 Speaker 7: moving the more hardware related and augmented virtual reality play 109 00:05:14,960 --> 00:05:18,360 Speaker 7: and it's going more into augmented reality glasses, but into 110 00:05:18,400 --> 00:05:22,880 Speaker 7: more apps and focused on artificial intelligence. Weaving itself throughout 111 00:05:22,960 --> 00:05:26,200 Speaker 7: Meta's business models. So the chief people officer is just saying, 112 00:05:26,200 --> 00:05:28,560 Speaker 7: this is going to be a flatter ecosystem, this is 113 00:05:28,560 --> 00:05:30,400 Speaker 7: going to be smaller teams. They think it's going to 114 00:05:30,400 --> 00:05:33,200 Speaker 7: be higher value, more enjoyable work. We'll see what the 115 00:05:33,240 --> 00:05:34,080 Speaker 7: talent think about that. 116 00:05:34,240 --> 00:05:34,440 Speaker 3: Yeah. 117 00:05:34,440 --> 00:05:37,000 Speaker 2: Absolutely, And I believe that there's this whole push towards 118 00:05:37,080 --> 00:05:40,960 Speaker 2: smaller teams anyway across tech land, everyone's seeing the praises 119 00:05:41,000 --> 00:05:43,839 Speaker 2: of this idea of keeping things really focused and can't base. 120 00:05:43,680 --> 00:05:45,839 Speaker 8: Said well that some teams will just be one person. 121 00:05:45,880 --> 00:05:46,800 Speaker 8: If you're an enginet, that's. 122 00:05:46,680 --> 00:05:48,719 Speaker 4: Not really a tea Speaking to a young fellow over 123 00:05:48,760 --> 00:05:50,440 Speaker 4: the weekend, twenty nine years old, works in a very 124 00:05:50,440 --> 00:05:51,360 Speaker 4: big tech company. 125 00:05:51,560 --> 00:05:53,240 Speaker 5: He manages I think a team of like five or 126 00:05:53,279 --> 00:05:55,960 Speaker 5: six people. He says. His people with AI, now this 127 00:05:56,000 --> 00:05:56,919 Speaker 5: is in the last six. 128 00:05:56,760 --> 00:06:00,160 Speaker 4: Months, are much more productive, not ten percent more, not 129 00:06:00,160 --> 00:06:04,120 Speaker 4: twenty percent more, three times five times, ten times. 130 00:06:04,320 --> 00:06:08,040 Speaker 5: More productive on some of their output metrics. It's just crazy. 131 00:06:08,080 --> 00:06:11,360 Speaker 5: It's amazing, he says. And I said, Okay, I get it. 132 00:06:11,400 --> 00:06:14,360 Speaker 7: I guess maybe if you're a solo, a solo engineer, 133 00:06:14,360 --> 00:06:15,240 Speaker 7: maybe your team is AI. 134 00:06:15,279 --> 00:06:17,479 Speaker 4: And I'm just saying, as a young investment banker, for 135 00:06:17,520 --> 00:06:19,800 Speaker 4: the first three or four years of my job, that 136 00:06:19,839 --> 00:06:21,040 Speaker 4: can all be done by AI. 137 00:06:21,279 --> 00:06:24,680 Speaker 8: Yeah, most high value human capitals do tell me that. 138 00:06:24,800 --> 00:06:27,920 Speaker 2: But having done that, you know how the process works too. 139 00:06:28,000 --> 00:06:30,160 Speaker 2: If you haven't done that before, Like you're not able 140 00:06:30,160 --> 00:06:30,960 Speaker 2: to go marry a. 141 00:06:31,000 --> 00:06:34,359 Speaker 4: Highield pitch book for company XYZ credit rating like book 142 00:06:35,080 --> 00:06:36,240 Speaker 4: two seconds later it's. 143 00:06:36,080 --> 00:06:37,600 Speaker 2: Out, Then how do you go through it in fact 144 00:06:37,680 --> 00:06:39,080 Speaker 2: check and knows act check? 145 00:06:39,120 --> 00:06:41,359 Speaker 4: If that make me a pitch book for a highyield 146 00:06:41,360 --> 00:06:42,760 Speaker 4: deal will take me two. 147 00:06:42,640 --> 00:06:44,520 Speaker 5: Or three days Now it's minutes. 148 00:06:44,680 --> 00:06:47,240 Speaker 2: Yeah, well, the formatting will certainly be taking care of 149 00:06:47,279 --> 00:06:47,680 Speaker 2: by AI. 150 00:06:47,800 --> 00:06:51,000 Speaker 6: That's that's the most painful part of those pitch books. Caroline. 151 00:06:51,000 --> 00:06:52,560 Speaker 2: While we have you, I got to ask you about 152 00:06:52,920 --> 00:06:56,440 Speaker 2: Google creating an AI cloud business with Blackstone. 153 00:06:56,480 --> 00:06:57,960 Speaker 6: Is this a joint venture of some sort? 154 00:06:58,040 --> 00:06:59,720 Speaker 7: It is, and actually Blackstone is putting in most of 155 00:06:59,720 --> 00:07:01,800 Speaker 7: them money five billion dollars in equity. You leverage that up, 156 00:07:01,800 --> 00:07:03,880 Speaker 7: it's going to be twenty five billion. Perhaps we're talking 157 00:07:04,040 --> 00:07:07,159 Speaker 7: five hundred megawatts of compute in the next few years. 158 00:07:07,160 --> 00:07:08,200 Speaker 8: That's what is it. 159 00:07:08,240 --> 00:07:11,080 Speaker 7: One Gigawa is about three quarters of a million homes 160 00:07:11,120 --> 00:07:12,920 Speaker 7: in terms of energy. So this is a lot of compute. 161 00:07:12,920 --> 00:07:15,120 Speaker 7: But this is as they really focus in on their TPUs. 162 00:07:15,200 --> 00:07:17,360 Speaker 7: This is their tensive processing unit. This is their chip 163 00:07:17,600 --> 00:07:20,160 Speaker 7: that has suddenly made their AI so much more powerful 164 00:07:20,200 --> 00:07:22,960 Speaker 7: and really impressed the market with vertical integration. Now Google 165 00:07:23,000 --> 00:07:26,360 Speaker 7: builds cloud, they build data centers, but that's expensive. It's 166 00:07:26,440 --> 00:07:28,440 Speaker 7: nice to get a partner on on side to be 167 00:07:28,480 --> 00:07:30,720 Speaker 7: able to do that heavy lifting for you, not to 168 00:07:30,760 --> 00:07:33,280 Speaker 7: put it on your balance sheet. As they're expanding out 169 00:07:33,440 --> 00:07:35,320 Speaker 7: their Google Cloud offering and they're. 170 00:07:35,120 --> 00:07:36,680 Speaker 8: Setting up basically a new neocloud. 171 00:07:36,760 --> 00:07:39,080 Speaker 7: So watch the shares the likes of core Weave, of 172 00:07:39,200 --> 00:07:42,160 Speaker 7: Nibius to these other clouds out there, because it's going 173 00:07:42,240 --> 00:07:43,560 Speaker 7: to competitive out there, folks. 174 00:07:43,680 --> 00:07:46,160 Speaker 4: But Alphabet, they are they turning the Blackstone because they 175 00:07:46,200 --> 00:07:47,840 Speaker 4: need Blackstone as a funding. 176 00:07:47,520 --> 00:07:51,640 Speaker 5: Source or what. It's a cool deal for Blackstone. I'm 177 00:07:51,680 --> 00:07:52,680 Speaker 5: wondering why Alphabet's doing it. 178 00:07:52,760 --> 00:07:54,320 Speaker 8: Yeah, I think it is the money side of things. 179 00:07:54,360 --> 00:07:56,800 Speaker 7: Like go Alphabet's already announced that they're going to be 180 00:07:56,880 --> 00:07:57,880 Speaker 7: what is it all told? 181 00:07:57,920 --> 00:07:59,320 Speaker 8: These four players, whether it's. 182 00:07:59,440 --> 00:08:04,239 Speaker 7: Amazon, Alphabet, Meta, Microsoft, are spending up to seven hundred 183 00:08:04,280 --> 00:08:06,360 Speaker 7: and fifty billion, seven hundred twenty five billion dollars three 184 00:08:06,360 --> 00:08:07,760 Speaker 7: of course, of a trillion, let's call it in twenty 185 00:08:07,800 --> 00:08:11,760 Speaker 7: twenty six. Yes, people have actually applauded so no Pitchow's 186 00:08:11,800 --> 00:08:15,160 Speaker 7: decision to up its capital expenditure plans. 187 00:08:15,360 --> 00:08:16,760 Speaker 8: But it's still a lot of money. 188 00:08:16,800 --> 00:08:18,320 Speaker 7: It's still a lot of debt that they've got an issue, 189 00:08:18,320 --> 00:08:20,600 Speaker 7: and so it's nice to know that perhaps a financing 190 00:08:20,800 --> 00:08:23,360 Speaker 7: of even greater expansion is being taken on by some 191 00:08:23,400 --> 00:08:26,760 Speaker 7: other players. This is just up, you know, managing to 192 00:08:26,800 --> 00:08:30,520 Speaker 7: scale even further, how much their TPUs and their chips 193 00:08:30,560 --> 00:08:32,240 Speaker 7: are doing the work. I mean, I have to say 194 00:08:32,280 --> 00:08:34,440 Speaker 7: it's a big move ahead of in videos numbers tomorrow 195 00:08:34,480 --> 00:08:37,160 Speaker 7: because we just think all these other neoclouds they use 196 00:08:37,200 --> 00:08:38,600 Speaker 7: in video GPUs. 197 00:08:39,000 --> 00:08:42,080 Speaker 5: Stay with us. More from Bloomberg Intelligence coming up areter this. 198 00:08:45,960 --> 00:08:49,680 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 199 00:08:49,760 --> 00:08:53,120 Speaker 1: weekdays at ten am Eastern on Applecarplay and Android Otto 200 00:08:53,240 --> 00:08:56,320 Speaker 1: with the Bloomberg Business app. Listen on demand wherever you 201 00:08:56,360 --> 00:08:59,360 Speaker 1: get your podcasts, or what us Live on YouTube. 202 00:09:00,120 --> 00:09:02,200 Speaker 4: All right, you know how much we love these big 203 00:09:02,240 --> 00:09:05,480 Speaker 4: take stories on the Bloomberg terminal, really really compelling stories. 204 00:09:06,040 --> 00:09:07,000 Speaker 5: The reporters take. 205 00:09:06,880 --> 00:09:09,760 Speaker 4: A ton of time, a ton of resources to get 206 00:09:09,800 --> 00:09:12,720 Speaker 4: to the really big details. And this one's a good one, 207 00:09:12,840 --> 00:09:14,920 Speaker 4: particularly if you're a fan of this AI story and 208 00:09:15,000 --> 00:09:17,840 Speaker 4: all the money that's being spent. Meta is doing a 209 00:09:17,920 --> 00:09:20,600 Speaker 4: data center down in Louisiana, like two hundred Oh, it's 210 00:09:20,600 --> 00:09:21,280 Speaker 4: just gonna be a big thing. 211 00:09:21,280 --> 00:09:22,680 Speaker 5: Two hundred million dollars something. 212 00:09:22,480 --> 00:09:25,880 Speaker 4: Crazy down there. And our next guest has an awesome 213 00:09:25,920 --> 00:09:28,439 Speaker 4: story on this, Riley Griffin, tech reporter for Bloomberg News. 214 00:09:28,640 --> 00:09:31,679 Speaker 4: Of course, you know she peaked when she graduated from 215 00:09:31,720 --> 00:09:32,440 Speaker 4: Duke University. 216 00:09:34,640 --> 00:09:36,400 Speaker 5: Riley, thanks so much for joining us here. Talk to 217 00:09:36,520 --> 00:09:38,800 Speaker 5: us about Mark Zuckerberg and Meta. 218 00:09:38,880 --> 00:09:42,440 Speaker 4: They're building this huge facility down in Louisiana. 219 00:09:42,480 --> 00:09:43,240 Speaker 5: Talk to us about that. 220 00:09:44,360 --> 00:09:48,080 Speaker 9: Yeah, I mean, the scale of this facility is truly unfathomable. 221 00:09:48,160 --> 00:09:51,960 Speaker 9: Pie I spent weeks going to and from Richland Parish, Louisiana. 222 00:09:52,040 --> 00:09:54,400 Speaker 9: That's in the northeast corner of the state. It's the 223 00:09:54,440 --> 00:09:59,600 Speaker 9: Delta region, and it's one that has long faced economic hardship. 224 00:09:59,679 --> 00:10:02,160 Speaker 9: Farming right now in the US is a difficult task, 225 00:10:02,520 --> 00:10:07,280 Speaker 9: particularly if you're farming cotton as this region does. And 226 00:10:07,760 --> 00:10:10,760 Speaker 9: Meta is planting a two hundred billion dollar data center there. 227 00:10:10,840 --> 00:10:14,680 Speaker 9: What that looks like is nearly four thousand acres. President 228 00:10:14,720 --> 00:10:17,920 Speaker 9: Donald Trump has said it will be Manhattan sized. They 229 00:10:17,920 --> 00:10:21,040 Speaker 9: are building ten new natural gas plants just for this 230 00:10:21,160 --> 00:10:24,000 Speaker 9: data center alone. That's about the energy consumption of New 231 00:10:24,080 --> 00:10:28,040 Speaker 9: York City on a winter day. And the one of 232 00:10:28,080 --> 00:10:32,080 Speaker 9: the largest private capital deals ever assembled is funding its development. 233 00:10:32,160 --> 00:10:32,840 Speaker 3: And that's all. 234 00:10:32,720 --> 00:10:36,120 Speaker 9: Before we get to the two hundred billion. So it's 235 00:10:36,200 --> 00:10:41,040 Speaker 9: just a massive, massive project in a very small farming community, 236 00:10:41,640 --> 00:10:48,120 Speaker 9: which makes for tensions and growing pains, but also, unlike 237 00:10:48,160 --> 00:10:51,720 Speaker 9: a lot of American cities and suburbs that are pushing 238 00:10:51,760 --> 00:10:54,800 Speaker 9: back against data centers, this is a community that is 239 00:10:55,520 --> 00:10:59,679 Speaker 9: cautiously optimistic that it will prove to be an economic lifeline. 240 00:11:00,080 --> 00:11:02,200 Speaker 2: So tell us a little bit more about what people 241 00:11:02,280 --> 00:11:05,280 Speaker 2: told you when you went down from Louisiana and checked 242 00:11:05,320 --> 00:11:06,080 Speaker 2: in with the locals. 243 00:11:06,120 --> 00:11:08,040 Speaker 6: There are those who would be directly affected by this. 244 00:11:09,280 --> 00:11:13,160 Speaker 9: Yeah, you know, before I went to Richland Parish, I 245 00:11:13,160 --> 00:11:16,079 Speaker 9: didn't realize how much of an agriculture story this would be. 246 00:11:16,240 --> 00:11:18,880 Speaker 9: I spent times with time with more than one hundred 247 00:11:18,880 --> 00:11:22,560 Speaker 9: people in the region, and again and again hearing just 248 00:11:22,679 --> 00:11:27,160 Speaker 9: how hard it has been to grow cotton, corn, soybean. 249 00:11:28,040 --> 00:11:30,079 Speaker 9: You know, it really landed with me. These are folks 250 00:11:30,080 --> 00:11:33,200 Speaker 9: who are losing hundreds of dollars on every acre that 251 00:11:33,240 --> 00:11:36,840 Speaker 9: they plant. Subsidies aren't making up half of that. There 252 00:11:36,840 --> 00:11:40,120 Speaker 9: are a lot of bankruptcies. Small farms don't even exist anymore. 253 00:11:40,800 --> 00:11:45,199 Speaker 9: And you know, as one person, Dustin Morris, who runs 254 00:11:45,240 --> 00:11:47,560 Speaker 9: a soybean and corn farm in the parish, told me, 255 00:11:47,760 --> 00:11:50,559 Speaker 9: you know, the promise of the land has been broken 256 00:11:51,120 --> 00:11:53,200 Speaker 9: for a lot of folks. They've held land in their 257 00:11:53,200 --> 00:11:56,679 Speaker 9: family for generations. They don't even know how long back 258 00:11:56,760 --> 00:12:01,160 Speaker 9: they've they've been in the parish and they're just unable 259 00:12:01,160 --> 00:12:04,760 Speaker 9: to break even right now. So enter Meta after years 260 00:12:04,760 --> 00:12:07,080 Speaker 9: of that, you know, a lot of people are trying 261 00:12:07,080 --> 00:12:11,800 Speaker 9: to get in on the land rush. For now, one 262 00:12:11,960 --> 00:12:15,120 Speaker 9: family has been the primary beneficiary, but it is a 263 00:12:15,120 --> 00:12:19,360 Speaker 9: textbook boomtown. Seventy five hundred workers have descended on a 264 00:12:19,400 --> 00:12:24,079 Speaker 9: community of just twenty thousand. That comes with its own challenges, 265 00:12:24,440 --> 00:12:29,040 Speaker 9: But folks are optimistic that Meta long term will provide 266 00:12:29,040 --> 00:12:31,959 Speaker 9: some of the economic opportunity that has been lost over 267 00:12:32,000 --> 00:12:32,760 Speaker 9: the last century. 268 00:12:33,600 --> 00:12:36,120 Speaker 4: And what I think we're all learning ralely about data 269 00:12:36,120 --> 00:12:38,720 Speaker 4: centers is what is one of the gating issues is 270 00:12:38,760 --> 00:12:42,520 Speaker 4: access to power. This yes, access to power down in 271 00:12:42,600 --> 00:12:43,480 Speaker 4: rural Louisiana. 272 00:12:44,400 --> 00:12:48,719 Speaker 9: Well, Louisiana is an oil and gas state, so Energy Louisiana, 273 00:12:48,760 --> 00:12:50,880 Speaker 9: the utility that is working with Meta on this, has 274 00:12:51,559 --> 00:12:54,640 Speaker 9: told Meta use all you want, will make more. They 275 00:12:54,760 --> 00:12:57,600 Speaker 9: are saying that energy won't be the constraint, and they're 276 00:12:57,600 --> 00:13:00,800 Speaker 9: going to build these ten new natural gas really to 277 00:13:00,920 --> 00:13:03,679 Speaker 9: serve this one data center. Six of those are going 278 00:13:03,720 --> 00:13:06,559 Speaker 9: to be in Richland Parish, just to put that in perspective. 279 00:13:07,679 --> 00:13:12,360 Speaker 9: So I think Meta has really benefited from picking a 280 00:13:12,400 --> 00:13:16,640 Speaker 9: place where regular Tory hurdles to getting that kind of 281 00:13:18,040 --> 00:13:23,120 Speaker 9: you know, fossil fuel generation has been a real boon 282 00:13:23,360 --> 00:13:25,480 Speaker 9: and we're seeing that across the board right with these 283 00:13:25,640 --> 00:13:31,040 Speaker 9: mega data centers, hyperscalers, companies like Meta, they're not looking 284 00:13:31,160 --> 00:13:34,719 Speaker 9: to northern Virginia anymore. They're looking to the south. They're 285 00:13:34,760 --> 00:13:37,679 Speaker 9: looking to rural regions where land is abundant, they can 286 00:13:37,720 --> 00:13:41,040 Speaker 9: get lots of energy, and there are politicians who are 287 00:13:41,080 --> 00:13:43,280 Speaker 9: willing to clear the red tape. And that's a big 288 00:13:43,320 --> 00:13:46,600 Speaker 9: part of this story is thinking about Louisiana politicians at 289 00:13:46,640 --> 00:13:48,720 Speaker 9: the national level, at the local level, at the state 290 00:13:48,800 --> 00:13:53,640 Speaker 9: level who really heard meta and its demands and said 291 00:13:54,080 --> 00:13:56,920 Speaker 9: we will do everything it takes, as one person said, 292 00:13:57,000 --> 00:13:59,760 Speaker 9: we will move heaven and earth to make this happen 293 00:13:59,800 --> 00:13:59,920 Speaker 9: for you. 294 00:14:01,240 --> 00:14:04,640 Speaker 2: Wow, that is some pretty strong a pretty strong stance there. 295 00:14:05,400 --> 00:14:07,760 Speaker 2: What surprised you the most, Riley as you were doing 296 00:14:07,760 --> 00:14:10,120 Speaker 2: the reporting for this in terms of I know the 297 00:14:10,160 --> 00:14:12,960 Speaker 2: scale was something that kind of blows all our minds, 298 00:14:12,960 --> 00:14:14,319 Speaker 2: but what took you by surprise? 299 00:14:16,120 --> 00:14:20,240 Speaker 9: Yeah, I again coming back to the state of American agriculture. 300 00:14:20,280 --> 00:14:23,760 Speaker 9: That's not a sector I've actually covered. I've spent many 301 00:14:23,840 --> 00:14:25,840 Speaker 9: years covering healthcare and now I cover tech, but to 302 00:14:26,760 --> 00:14:31,080 Speaker 9: learn more about ag it feels like you can't tell 303 00:14:31,120 --> 00:14:35,000 Speaker 9: this story about ural Louisiana without telling a story of agriculture. 304 00:14:35,000 --> 00:14:37,880 Speaker 9: So that really stuck with me and just thinking about 305 00:14:38,160 --> 00:14:40,560 Speaker 9: the long term questions. This is a story at its beginning. 306 00:14:40,560 --> 00:14:42,800 Speaker 9: The data center is an open thing till twenty twenty eight, 307 00:14:42,880 --> 00:14:43,640 Speaker 9: so more to come. 308 00:14:44,360 --> 00:14:47,480 Speaker 5: Stay with us. More from Bloomberg Intelligence coming up after this. 309 00:14:51,400 --> 00:14:55,080 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 310 00:14:55,160 --> 00:14:58,240 Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android 311 00:14:58,280 --> 00:15:01,720 Speaker 1: Otto with the Bloomberg Business Listen on demand wherever you 312 00:15:01,760 --> 00:15:04,960 Speaker 1: get your podcasts, or watch us live on YouTube. 313 00:15:05,520 --> 00:15:08,600 Speaker 2: We want to continue on with Bloomberg Intelligence, and we 314 00:15:08,680 --> 00:15:11,840 Speaker 2: have a great guest right now. Let's talk about currencies, 315 00:15:11,880 --> 00:15:15,000 Speaker 2: because people conflate a currency with the country that issues it, right, 316 00:15:15,040 --> 00:15:17,760 Speaker 2: like the US dollar equals the US and vice versa. 317 00:15:17,880 --> 00:15:19,640 Speaker 2: But if you look at the history of the dollar, 318 00:15:19,680 --> 00:15:22,200 Speaker 2: it tells us otherwise. Our friend Brendan G Really has 319 00:15:22,240 --> 00:15:25,960 Speaker 2: devoted years to studying this and based his PhD dissertation 320 00:15:26,480 --> 00:15:29,160 Speaker 2: on it as well. He joins US now and full disclosure, 321 00:15:29,240 --> 00:15:31,280 Speaker 2: Brendan used to work at Bloomberg as a reporter for 322 00:15:31,360 --> 00:15:34,240 Speaker 2: Business Week and as an anchor on Bloomberg Television, hosting 323 00:15:34,320 --> 00:15:36,320 Speaker 2: Surveillance with Tom Keen and myself. 324 00:15:36,360 --> 00:15:37,520 Speaker 6: So welcome back, Brendan. 325 00:15:37,680 --> 00:15:39,440 Speaker 10: Thank you so great to be here. I have one 326 00:15:39,480 --> 00:15:42,640 Speaker 10: correction to make. Unfortunately, when I arrived at school, they 327 00:15:42,680 --> 00:15:45,760 Speaker 10: told me your book, your popular trade press book about 328 00:15:45,760 --> 00:15:47,800 Speaker 10: the history of the dollar, cannot be your dissertation. 329 00:15:47,920 --> 00:15:49,080 Speaker 5: So I have a completely different. 330 00:15:48,960 --> 00:15:51,640 Speaker 10: Oh my gosh, it's too approachable. 331 00:15:52,240 --> 00:15:52,520 Speaker 9: Wow. 332 00:15:52,720 --> 00:15:54,320 Speaker 2: Okay, yeah, no, you didn't need it to be much 333 00:15:54,360 --> 00:15:57,160 Speaker 2: more obscure than dissertation. Well, let's talk about your book then, 334 00:15:57,240 --> 00:16:00,800 Speaker 2: It's called the Almighty Dollar and about five hundred years 335 00:16:00,800 --> 00:16:03,440 Speaker 2: of the world's most powerful money. The US is about 336 00:16:03,480 --> 00:16:06,080 Speaker 2: to celebrate its two hundred and fiftieth anniversary this July. 337 00:16:06,240 --> 00:16:08,200 Speaker 2: But how does the history of the dollar go back 338 00:16:08,240 --> 00:16:09,080 Speaker 2: five hundred years? 339 00:16:09,160 --> 00:16:10,800 Speaker 5: So I had to figure out how to write about 340 00:16:11,000 --> 00:16:12,440 Speaker 5: the dollar. I had to figure out where to start. 341 00:16:12,480 --> 00:16:14,000 Speaker 10: So I thought I would start in nineteen seventy one 342 00:16:14,080 --> 00:16:16,120 Speaker 10: Nixon closes the gold window, and then I sort of 343 00:16:16,160 --> 00:16:18,160 Speaker 10: like keep pulling that thread, and I end up in 344 00:16:18,200 --> 00:16:20,760 Speaker 10: nineteen thirteen with the FED. And then you end up 345 00:16:20,800 --> 00:16:22,920 Speaker 10: with what I've been thinking of as a seventeen seventy 346 00:16:22,920 --> 00:16:25,920 Speaker 10: six problem, which is that we learn in school to 347 00:16:26,040 --> 00:16:28,800 Speaker 10: assume that countries have monetary sovereignty, that they have control 348 00:16:28,840 --> 00:16:31,920 Speaker 10: over their own currencies. The problem with that is when 349 00:16:31,960 --> 00:16:36,200 Speaker 10: you get to seventeen seventy six, United States declares political sovereignty, 350 00:16:36,880 --> 00:16:40,400 Speaker 10: but it chooses as its currency a Spanish coin made 351 00:16:40,400 --> 00:16:43,480 Speaker 10: of Mexican silver with a German name. I know that, 352 00:16:44,000 --> 00:16:45,880 Speaker 10: and so we can talk through like where that came 353 00:16:45,920 --> 00:16:47,880 Speaker 10: from and how we got there. But for me, the 354 00:16:47,920 --> 00:16:50,800 Speaker 10: most important part of this story is that at its founding, 355 00:16:50,800 --> 00:16:52,680 Speaker 10: the United States did not have control over the dollar. 356 00:16:52,760 --> 00:16:54,320 Speaker 10: It was very clear when you look at the correspondence 357 00:16:54,320 --> 00:16:55,760 Speaker 10: from the founding fathers what they thought. 358 00:16:55,600 --> 00:16:57,920 Speaker 5: A dollar was. They saw it as a silver coin. 359 00:16:57,960 --> 00:17:01,920 Speaker 10: Alexander Hamilton called this coin the Ancient Dollar, and I 360 00:17:01,960 --> 00:17:04,000 Speaker 10: wanted to actually title the book the Ancient Dollar, and 361 00:17:04,080 --> 00:17:07,480 Speaker 10: my editor was like, do you intend to sell any books? So, 362 00:17:08,440 --> 00:17:10,760 Speaker 10: and you know, Thomas Jefferson said, it's important when we 363 00:17:10,800 --> 00:17:12,560 Speaker 10: choose a currency to choose one that the people are 364 00:17:12,560 --> 00:17:17,200 Speaker 10: already familiar with. So I think of monetary sovereignty now 365 00:17:17,359 --> 00:17:19,200 Speaker 10: sort of after doing the work on this book, as 366 00:17:19,240 --> 00:17:21,840 Speaker 10: something that has to be one with a lot of work, 367 00:17:22,200 --> 00:17:26,440 Speaker 10: very slowly over time, and it's constantly in danger of eroding. 368 00:17:26,560 --> 00:17:28,760 Speaker 10: So the story of the dollar is not the story 369 00:17:28,760 --> 00:17:30,720 Speaker 10: of America. It's not the story of the Federal Reserve. 370 00:17:30,840 --> 00:17:32,760 Speaker 10: It's not the story of the United States Treasury. It 371 00:17:32,800 --> 00:17:35,679 Speaker 10: has its own history. So I end up, you know, 372 00:17:35,800 --> 00:17:38,760 Speaker 10: literally at the bottom of a Czech silver mine, looking 373 00:17:38,800 --> 00:17:43,520 Speaker 10: at four five hundred year old chisel marks to understand 374 00:17:43,520 --> 00:17:45,840 Speaker 10: sort of the origins of this currency that is much 375 00:17:45,840 --> 00:17:48,840 Speaker 10: older and much powerful than much the dollar that we 376 00:17:48,960 --> 00:17:49,520 Speaker 10: know of. 377 00:17:49,840 --> 00:17:53,240 Speaker 5: When did that come into existence? Really define what we 378 00:17:53,320 --> 00:17:55,439 Speaker 5: know of Okay, I don't know when did what we 379 00:17:55,520 --> 00:17:55,840 Speaker 5: use now? 380 00:17:56,680 --> 00:17:58,959 Speaker 10: Well, okay, So so this silver coin, I'll give you 381 00:17:58,960 --> 00:18:00,679 Speaker 10: like a brief potted history. We can do this in 382 00:18:00,800 --> 00:18:03,480 Speaker 10: like one radio minute, which is that there was this 383 00:18:03,520 --> 00:18:06,720 Speaker 10: silver mine in a place called Yoachham's Tall in Bohemia. 384 00:18:07,080 --> 00:18:10,480 Speaker 10: They produced only very high quality, large silver coins. Those 385 00:18:10,480 --> 00:18:13,879 Speaker 10: were very useful for trade. Those coins became known as 386 00:18:13,960 --> 00:18:17,280 Speaker 10: Yoachham's Taller from Yoakham's Tall, and that got shortened to Taller, 387 00:18:17,359 --> 00:18:19,240 Speaker 10: and then in Dutch dollar and then in English it 388 00:18:19,280 --> 00:18:21,880 Speaker 10: became dollar. This is all in the sixteenth century, right, 389 00:18:21,920 --> 00:18:25,880 Speaker 10: So early in the sixteen hundreds, Shakespeare used the word 390 00:18:25,880 --> 00:18:26,800 Speaker 10: dollar in his plays. 391 00:18:27,520 --> 00:18:28,600 Speaker 5: In the Scottish Play. 392 00:18:28,400 --> 00:18:31,320 Speaker 10: And in the Tempest there mentions of the dollar, so 393 00:18:31,480 --> 00:18:32,840 Speaker 10: it was clear that that was a coin that was 394 00:18:32,880 --> 00:18:35,919 Speaker 10: familiar in English well before the founding of the United States. 395 00:18:36,200 --> 00:18:40,399 Speaker 10: So when you actually get to the Constitution and what 396 00:18:40,440 --> 00:18:42,480 Speaker 10: we think of as the actually United States, not just 397 00:18:42,560 --> 00:18:47,639 Speaker 10: the colonies, there was about a sixty year period to 398 00:18:47,720 --> 00:18:49,639 Speaker 10: take this silver coin and turn it into what we 399 00:18:49,680 --> 00:18:51,879 Speaker 10: think of now as a dollar, which is bank money. 400 00:18:52,040 --> 00:18:53,840 Speaker 10: So what we think of now as a dollar is 401 00:18:53,920 --> 00:18:56,240 Speaker 10: sits on the ledger of a bank, of a commercial bank. 402 00:18:56,320 --> 00:18:59,840 Speaker 10: It's a bank deposit or banknote that's printed by the FED. 403 00:18:59,840 --> 00:19:02,320 Speaker 10: But increasingly nobody uses cash, so we're really just talking 404 00:19:02,400 --> 00:19:06,000 Speaker 10: about bank deposits. So the United States had to win 405 00:19:06,119 --> 00:19:09,600 Speaker 10: sovereignty over that very slowly. And there's this long history 406 00:19:09,720 --> 00:19:12,280 Speaker 10: of panics in the nineteenth and early twentieth centuries, and 407 00:19:12,320 --> 00:19:15,280 Speaker 10: after each panic there's new regulation. So Panic of eighteen 408 00:19:15,280 --> 00:19:19,320 Speaker 10: thirty seven introduces comptrollers of the currency at the state level. 409 00:19:19,320 --> 00:19:21,760 Speaker 10: It introduces reserve requirements, you have to hold silver in 410 00:19:21,800 --> 00:19:22,240 Speaker 10: the bank. 411 00:19:23,800 --> 00:19:24,000 Speaker 5: You know. 412 00:19:24,040 --> 00:19:26,360 Speaker 10: Eighteen sixty one, there's oor in eighteen sixty two, there's 413 00:19:26,359 --> 00:19:30,919 Speaker 10: new legislation. During the Civil War introduces backing banknotes with treasuries. Right, 414 00:19:30,960 --> 00:19:33,639 Speaker 10: we had to figure that out. Nineteen oh seven, we 415 00:19:33,680 --> 00:19:36,119 Speaker 10: have the Federal Reserve, which provides cash in an emergency. 416 00:19:36,200 --> 00:19:38,479 Speaker 10: Nineteen thirty two, after that bank panic, we finally get 417 00:19:38,640 --> 00:19:40,240 Speaker 10: national deposit insurance. 418 00:19:40,359 --> 00:19:41,000 Speaker 5: That's huge. 419 00:19:41,080 --> 00:19:43,520 Speaker 10: No other country, no other currency zone, nearly the size 420 00:19:43,560 --> 00:19:47,080 Speaker 10: of ours has unified deposit insurance. Only America has that. 421 00:19:47,160 --> 00:19:50,080 Speaker 10: And so to answer your question, I think it was 422 00:19:50,080 --> 00:19:53,159 Speaker 10: by nineteen thirty two that we had stable regulated banks. 423 00:19:53,320 --> 00:19:56,040 Speaker 2: Gotcha, Okay, so regulation was key here and making a 424 00:19:56,080 --> 00:19:58,879 Speaker 2: lot of mistakes and kind of addressing those mistakes was 425 00:19:58,960 --> 00:20:03,200 Speaker 2: key in how the dollar system grew up. Where does 426 00:20:03,200 --> 00:20:05,760 Speaker 2: that leave us now when we talk about things like 427 00:20:06,359 --> 00:20:11,119 Speaker 2: stable coins or cryptocurrency, how do you think about the 428 00:20:11,200 --> 00:20:15,760 Speaker 2: dollar's role in a decentralized financial system where regulation is 429 00:20:16,320 --> 00:20:18,080 Speaker 2: less robust, if even there. 430 00:20:18,720 --> 00:20:20,679 Speaker 10: For me, the key to thinking about crypto is that 431 00:20:20,720 --> 00:20:22,879 Speaker 10: it's not new. It's not that novel. I think of 432 00:20:22,920 --> 00:20:26,879 Speaker 10: crypto as finances if the past never happened. When you 433 00:20:26,920 --> 00:20:29,440 Speaker 10: look at the various kinds of crypto, there's bitcoin that's 434 00:20:29,440 --> 00:20:31,240 Speaker 10: basically a commodity. We know how that fits into the 435 00:20:31,240 --> 00:20:35,880 Speaker 10: financial system. It's a commodity you think about most coins 436 00:20:35,880 --> 00:20:40,879 Speaker 10: are they're essentially equities. Stable Coins, to your point, are 437 00:20:40,960 --> 00:20:43,360 Speaker 10: really interesting case because, as you know, they're pegged one 438 00:20:43,359 --> 00:20:46,199 Speaker 10: to one to the dollar. But to me, it just 439 00:20:46,240 --> 00:20:49,240 Speaker 10: looks like a bank. So right now we have decentralized money. 440 00:20:49,320 --> 00:20:51,520 Speaker 10: Commercial banks when they make a loan, when you take 441 00:20:51,520 --> 00:20:53,639 Speaker 10: out a mortgage, they are not getting that money from 442 00:20:53,680 --> 00:20:56,080 Speaker 10: somewhere else. They're marking that up on their balance sheet, 443 00:20:56,119 --> 00:21:00,160 Speaker 10: brand new deposits for you. A stable coin provider, that's 444 00:21:00,200 --> 00:21:03,040 Speaker 10: the same fiduciary responsibility as a bank. They've got when 445 00:21:03,119 --> 00:21:05,679 Speaker 10: you deposit, they've got to buy assets. Those assets have 446 00:21:05,720 --> 00:21:07,720 Speaker 10: to have meaning, we have to know that they have 447 00:21:07,840 --> 00:21:10,000 Speaker 10: the assets they say they have. Every time I hear, 448 00:21:10,440 --> 00:21:12,960 Speaker 10: like somebody in crypto say, you know we've got the 449 00:21:13,000 --> 00:21:15,800 Speaker 10: first private decentralized money, my answer is, my dude, you 450 00:21:15,840 --> 00:21:16,760 Speaker 10: just invented a bank. 451 00:21:16,800 --> 00:21:17,600 Speaker 5: We know how those. 452 00:21:17,520 --> 00:21:19,240 Speaker 6: Work, except they're not regulated like a bank. 453 00:21:19,280 --> 00:21:20,000 Speaker 5: That's exactly right. 454 00:21:20,040 --> 00:21:21,840 Speaker 10: And so what I worry about, to my point earlier 455 00:21:21,840 --> 00:21:24,960 Speaker 10: about monetary sovereignty, it's one slowly and painfully over time, 456 00:21:25,000 --> 00:21:26,679 Speaker 10: and it's constantly in danger of being eroded. And what 457 00:21:26,720 --> 00:21:28,400 Speaker 10: I see when I look at stable coins is these 458 00:21:28,440 --> 00:21:31,159 Speaker 10: are bank dollars that are slowly slipping out of the 459 00:21:31,200 --> 00:21:33,760 Speaker 10: regulatory control that we built up over the course of 460 00:21:33,760 --> 00:21:36,080 Speaker 10: a century. Like we know how finance works, we know 461 00:21:36,160 --> 00:21:37,880 Speaker 10: how banks blow up, and I know that the Bloomberg 462 00:21:37,920 --> 00:21:39,520 Speaker 10: audience right now are shaking their fits and anger at 463 00:21:39,560 --> 00:21:42,480 Speaker 10: the radio. I do think that, like the basic bulwark 464 00:21:42,600 --> 00:21:47,159 Speaker 10: of FDIC Comptroller Federal Reserve that we built up to 465 00:21:47,200 --> 00:21:50,960 Speaker 10: protect banks needs to be extended full force two stable coins. 466 00:21:51,000 --> 00:21:52,440 Speaker 10: And I think if you did that they'd lose a 467 00:21:52,480 --> 00:21:55,280 Speaker 10: lot of their appeal because it's no fun running a 468 00:21:55,320 --> 00:21:57,880 Speaker 10: bank because it's very well regulated for obvious reasons. 469 00:21:58,640 --> 00:22:00,080 Speaker 5: Big money versus small money. 470 00:22:00,280 --> 00:22:00,760 Speaker 3: What is that? 471 00:22:01,520 --> 00:22:05,800 Speaker 10: Well, there's this sort of theory of coins, you know, 472 00:22:05,840 --> 00:22:09,760 Speaker 10: physical coins that points out that small coins are much 473 00:22:09,800 --> 00:22:12,000 Speaker 10: more no no actual coins jingle gingle. 474 00:22:12,280 --> 00:22:12,480 Speaker 9: Yeah. 475 00:22:13,000 --> 00:22:15,520 Speaker 10: That actually that points out that small coins are much 476 00:22:15,520 --> 00:22:18,240 Speaker 10: more expensive per unit of value to produce because each 477 00:22:18,280 --> 00:22:20,119 Speaker 10: coin had to be hammered out. It's an industrial process. 478 00:22:20,119 --> 00:22:20,560 Speaker 10: I've seen that. 479 00:22:20,560 --> 00:22:23,600 Speaker 2: That's what we're not printing or minting the penny anymore. Yes, absolutely, right, 480 00:22:23,640 --> 00:22:25,960 Speaker 2: Like money is a product, somebody's got to produce it. 481 00:22:26,000 --> 00:22:29,560 Speaker 2: Money doesn't happen by magic, and so the big coins 482 00:22:29,600 --> 00:22:31,639 Speaker 2: are cheaper per unit of cost to produce. And what 483 00:22:31,680 --> 00:22:35,040 Speaker 2: we found sort of historically is that mints, almost all 484 00:22:35,040 --> 00:22:37,480 Speaker 2: mints were privately run, would much rather make the big coins. 485 00:22:37,800 --> 00:22:41,480 Speaker 2: So you have this constant demand for small coins to 486 00:22:41,520 --> 00:22:44,720 Speaker 2: settle small retail transactions. Right, these are these are not 487 00:22:44,880 --> 00:22:47,240 Speaker 2: It's not as if the small coins are units of 488 00:22:47,240 --> 00:22:49,480 Speaker 2: the big coin. They're completely different economies. 489 00:22:49,720 --> 00:22:51,679 Speaker 10: So when we look at the economies of you know, 490 00:22:51,960 --> 00:22:56,879 Speaker 10: a Renaissance Italy, Florence, Genoa, Venice. They all had a 491 00:22:56,880 --> 00:22:59,639 Speaker 10: big silver coin for international trade and small coins, and 492 00:22:59,680 --> 00:23:02,440 Speaker 10: the change rate fluctuates between the two of them because 493 00:23:02,440 --> 00:23:04,359 Speaker 10: the small coins are for local purchases and you've got 494 00:23:04,400 --> 00:23:06,560 Speaker 10: to manage inflation in a slightly different way than you 495 00:23:06,600 --> 00:23:08,760 Speaker 10: do with a big coin. So I think that's still true. 496 00:23:08,760 --> 00:23:09,000 Speaker 9: Now. 497 00:23:09,920 --> 00:23:12,359 Speaker 10: Banks are like mints. They produce our money. Banks for 498 00:23:12,400 --> 00:23:15,640 Speaker 10: the exact same reasons, would rather produce, would rather deal 499 00:23:15,640 --> 00:23:18,560 Speaker 10: with big loans, big deposits, big transfers, than small loans, 500 00:23:18,560 --> 00:23:22,280 Speaker 10: small deposits, small transfers, And so I think we've replicated 501 00:23:22,320 --> 00:23:24,600 Speaker 10: that system with banks. And when you look at the 502 00:23:24,600 --> 00:23:26,960 Speaker 10: problems with banking in America, rather the challenges of getting 503 00:23:26,960 --> 00:23:29,439 Speaker 10: people into the financial system, it's the exact same problem. 504 00:23:29,600 --> 00:23:32,280 Speaker 10: Banks don't want to handle small depositors, they don't want 505 00:23:32,280 --> 00:23:35,240 Speaker 10: to make small business loans because the back office costs 506 00:23:35,240 --> 00:23:36,840 Speaker 10: are higher. This is a problem that would be very 507 00:23:36,840 --> 00:23:37,720 Speaker 10: familiar to a mint. 508 00:23:38,560 --> 00:23:40,199 Speaker 2: I want to switch gears and talk a little bit 509 00:23:40,200 --> 00:23:43,640 Speaker 2: about currencies used in commodities and international systems. We talk 510 00:23:43,680 --> 00:23:46,280 Speaker 2: a lot about this petro dollar because will, which we 511 00:23:46,280 --> 00:23:48,800 Speaker 2: talk about constantly given how much it's risen is priced 512 00:23:48,800 --> 00:23:51,200 Speaker 2: in US dollars, and how other central banks are kind 513 00:23:51,200 --> 00:23:53,919 Speaker 2: of beholding to the US because everything is priced in dollars, 514 00:23:53,920 --> 00:23:56,560 Speaker 2: and how they want commodities to be priced in other 515 00:23:56,600 --> 00:23:59,720 Speaker 2: currencies for instance. Is that doable given where we sit. 516 00:23:59,800 --> 00:24:01,679 Speaker 2: Is this something that the US controls or is it 517 00:24:01,720 --> 00:24:03,240 Speaker 2: all way beyond our control? 518 00:24:03,640 --> 00:24:04,439 Speaker 5: I think so. 519 00:24:04,480 --> 00:24:06,879 Speaker 10: I've been splitting hairs on this one. I think it 520 00:24:06,920 --> 00:24:09,280 Speaker 10: is within our control, but beyond our regulation. And what 521 00:24:09,320 --> 00:24:11,400 Speaker 10: I mean by that is when we think of the 522 00:24:11,400 --> 00:24:13,520 Speaker 10: the offshore dollar system the year, what we think of 523 00:24:13,560 --> 00:24:17,480 Speaker 10: is the euro dollar system. This is just foreign banks 524 00:24:17,840 --> 00:24:20,520 Speaker 10: producing their own dollars, manufacturing their own dollars using new 525 00:24:20,520 --> 00:24:24,199 Speaker 10: loans nominated in dollars. Okay, So the FED doesn't have 526 00:24:24,240 --> 00:24:28,000 Speaker 10: any oversight, the Treasury the control or nobody. We can't 527 00:24:28,000 --> 00:24:30,679 Speaker 10: look at what's happening. But the FED does step in 528 00:24:30,720 --> 00:24:33,159 Speaker 10: as we know. And eight twenty twenty with these swap 529 00:24:33,160 --> 00:24:36,000 Speaker 10: lines with foreign central banks. To me, that says the 530 00:24:36,680 --> 00:24:39,280 Speaker 10: US dollar is unique in that since the sixties, we've 531 00:24:39,320 --> 00:24:41,960 Speaker 10: been willing to tolerate in the United States some level 532 00:24:41,960 --> 00:24:44,160 Speaker 10: of offshore activity. It's very useful to the United States 533 00:24:44,240 --> 00:24:49,000 Speaker 10: to have these offshore dollars, and in return, we provide 534 00:24:49,040 --> 00:24:53,520 Speaker 10: this service, Is it sustainable? It seems to be so far. 535 00:24:53,720 --> 00:24:56,639 Speaker 10: When we look at measures of euro dollar growth of 536 00:24:56,640 --> 00:24:58,520 Speaker 10: offshore dollar growth, that. 537 00:24:58,400 --> 00:24:59,880 Speaker 5: Line is still going up into the right. 538 00:25:00,119 --> 00:25:03,160 Speaker 10: There are fourteen trillion euro dollars off show dollars. There 539 00:25:03,200 --> 00:25:06,280 Speaker 10: are nineteen trillion domestic dollars. They're comparable in scale and 540 00:25:06,280 --> 00:25:09,919 Speaker 10: they're still growing. So offshore banks seem to think it's sustainable. 541 00:25:10,960 --> 00:25:15,679 Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, 542 00:25:15,840 --> 00:25:19,840 Speaker 1: and anywhere else you get your podcasts. 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