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Speaker 1: Hey, Odd Loots listeners, We're coming to DC.

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Speaker 2: We're finally doing it, Joe. It's going to be our

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Speaker 2: first live show in Washington, DC, our nation's capital. It's

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Speaker 2: also finally going to be the time where we actually

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Speaker 2: talk about the Jones Act.

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Speaker 1: Listen talk about doing the Jones Act episode of Odd

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Speaker 1: Lots for a long time, and it's become this recurring

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Speaker 1: joke that we've never done on But we're going to

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Speaker 1: do it in grand style because we're going to be

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Speaker 1: doing it live in DC and it's actually going to

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Speaker 1: be a debate.

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Speaker 2: Yeah. So we have Sarah Fuentes from the Transportation Institute.

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Speaker 2: She's going to be taking the pro side, and we

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Speaker 2: also have Colin graybou of the Cato Institute. He'll be

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Speaker 2: taking the against side. It's going to be really interesting

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Speaker 2: to see how all of that shakes out.

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Speaker 1: In addition to that, we're going to be speaking with

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Speaker 1: Blair Levin, who was around during the telecom bubble, and

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Speaker 1: we have Andrew Ferguson, the new head of the FTC,

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Speaker 1: the one who's replaced Lina Kong. We're going to be

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Speaker 1: talking about mergers and acquisitions and all that stuff. So

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Speaker 1: it should be a really fun night.

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Speaker 2: If you want to come and join us for that evening,

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Speaker 2: it's going to be on March twelfth at the Miracle Theater.

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Speaker 2: Go to Bloomberg dot com forward slash odd Lots and

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Speaker 2: you can find the link to purchase tickets. We hope

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Speaker 2: to see you there.

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Speaker 3: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: Hello and welcome to another episode of the Odd Lots podcast.

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Speaker 2: I'm Tracy Alloway and I'm Joe wysent Thal. Joe, do

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Speaker 2: me a favor and pull up a chart of the

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Speaker 2: ten year German Bund.

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Speaker 1: Oh yeah, okay, let's see German generic ten year bond.

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Speaker 2: You don't know the ticker, you haven't memorized.

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Speaker 1: Oh, but we have the beautiful auto of it. Wow,

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Speaker 1: that is a chart. So you know, back in the

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Speaker 1: beginning of December, the yield was about two percent. It's

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Speaker 1: been climbing. It was about two point four percent at

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Speaker 1: end of February, and in the last two days it's

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Speaker 1: rocketed up. It's close to two point nine percent. And

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Speaker 1: I saw a headline yesterday. We're recording this March sixth.

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Speaker 1: Yesterday's move was the largest one day move since basically

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Speaker 1: around the time the Berlin will.

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Speaker 2: Yeah, it's a line that goes straight up. Yes, it's

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Speaker 2: a pretty big move. As you mentioned, the euro is

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Speaker 2: also up against the dollar. European defense stocks have been soaring.

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Speaker 2: There are lots of lines going straight up charts out

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Speaker 2: there relating to Europe.

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Speaker 1: European financials doing really well too. It's like, you know,

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Speaker 1: everyone was so down on everything Europe and then Trump

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Speaker 1: was expected to make those lines go down further and

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Speaker 1: they've just been rocketing up.

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Speaker 2: Yeah. And the argument that seems to be happening here

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Speaker 2: is the idea that the possibility of tariffs from the

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Speaker 2: Trump administration and the loss of the US security umbrella, yeah,

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Speaker 2: are so bad for Europe that they could turn out

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Speaker 2: to be good in the sense that Europe has to

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Speaker 2: spend lots of money to interact them. Maybe they integrate

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Speaker 2: some more and maybe that'll boost growth. And if you

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Speaker 2: think about all the military equipment that they'll need to buy,

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Speaker 2: or maybe the possibility that long suffering German carmakers are

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Speaker 2: going to pivot into defense or something like that, it

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Speaker 2: kind of makes sense.

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Speaker 1: Well, I'm gonna say what I'm about to say. You

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Speaker 1: just pull up a chart of the decks.

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Speaker 2: Oh yeah, it's pretty another line going straight up.

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Speaker 1: You know, there's two elements here. I mean, I joked

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Speaker 1: yesterday that the history of finance Twitter is essentially fifteen

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Speaker 1: years of waiting for Germany to pull out the fiscal bazooka,

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Speaker 1: to sort of pull back from its obsession with balanced budgets.

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Speaker 1: The Schwartz, the schwartznul. Did I say that, Okay, Schwartznul,

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Speaker 1: Schwartz snul. Yeah. So there's two things though. There's one,

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Speaker 1: there's the realization that perhaps more money should be spent,

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Speaker 1: and then two there can you get the political stars

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Speaker 1: to align to act on that realization. And one thing

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Speaker 1: people seem to be thinking is and this is a

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Speaker 1: very complicated problem for all kinds of structure architectural reasons

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Speaker 1: within the EU or the Eurozone. And there seems to

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Speaker 1: be a belief and more than a belief that the

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Speaker 1: sort of actions of the Trump administration over the last

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Speaker 1: several weeks may be solving both of these problems at once.

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Speaker 2: Right in the sense that maybe you need a common

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Speaker 2: enemy to galvanize some action. And I will just say

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Speaker 2: specifically what we've seen this week. So we saw talk

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Speaker 2: of a five hundred billion euro infrastructure fund. We saw

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Speaker 2: Germany saying that defense above one percent of GDP could

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Speaker 2: be exempt from the debt break. This is the famous

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Speaker 2: schulden Blenza. And they also said German states can now

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Speaker 2: borrow up to zero point three five percent of GDP,

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Speaker 2: that is up from zero. So change there. And so

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Speaker 2: I guess in conclusion, there is a lot going on

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Speaker 2: in Europe and we should definitely talk about it. And

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Speaker 2: I do, in fact have the perfect guest for you.

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Speaker 2: It's someone who I used to talk to you all

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Speaker 2: the time time about European developments, specifically when we had

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Speaker 2: the euro crisis back in sort of twenty eleven to

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Speaker 2: twenty thirteen. We're going to be speaking with George Sarah Valos.

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Speaker 2: Here's the head of FX research at Deutsche Bank. George,

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Speaker 2: thank you so much for coming on the show.

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Speaker 4: Thank you very much for having me. It's a great pleasure.

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Speaker 2: All right. So I've seen a few people call this

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Speaker 2: a watershed moment. I've seen people call it whatever it

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Speaker 2: takes two point zero. Barclays is calling it whatever it costs.

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Speaker 2: Ralph Preuser over at Bank of America is calling it

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Speaker 2: a paradigm shift in the sense that Europe is no

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Speaker 2: longer funding the US fiscal expansion. Instead, it's funding its

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Speaker 2: own and you yourself have called it history in the making.

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Speaker 2: Walk us through how significant this is and why sure.

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Speaker 5: I would tend to agree with all of these characterizations.

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Speaker 5: I would say it's not just the size, and I

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Speaker 5: can help walk through the size and provide some context,

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Speaker 5: but also the speed that is remarkable. You have to remember,

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Speaker 5: just a few weeks ago we're having the German election.

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Speaker 5: The centrist parties lost the two thirds majorities, and the

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Speaker 5: centrist parties as well, especially the leading centrist part of

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Speaker 5: the CDU, was not campaigning on any sort of fiscal

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Speaker 5: expansion compared to what we're seeing now. So I'd say

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Speaker 5: it's both the size and the speed that's taken markets

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Speaker 5: by surprise. But just to go back to the size,

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Speaker 5: and you went through the changes infrastructure, we think will

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Speaker 5: be at least one a bit more than one percent

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Speaker 5: of GDP a year the state level, easing the reform

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Speaker 5: to the debt break that's another point three to five.

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Speaker 5: There's gaps that are being freed up on defense because

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Speaker 5: now anything above one percent of GDP can be excluded,

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Speaker 5: but Germany's already spending one and a half, so you

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Speaker 5: have a half a percentage gap that's released immediately, and

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Speaker 5: then any extra defense you want to do on top,

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Speaker 5: and we think Germany would potentially target between three to

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Speaker 5: three and a half percent of GDP defense spending. If

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Speaker 5: you add all of these things up, we're talking about

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Speaker 5: a swing in the deficit of somewhere between three to

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Speaker 5: three and a half percent. Now, to contextualize that, the

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Speaker 5: current German deficit is two and a half So if

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Speaker 5: you add that on top, we're somewhere between five and

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Speaker 5: a half and six percent fiscal deficit. Now that is

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Speaker 5: extremely high.

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Speaker 4: It's approaching US levels, and we know how wide the

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Speaker 4: US deficit is.

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Speaker 2: Oh, we know how the US feels about its deficit

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Speaker 2: as well.

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Speaker 4: Exactly, and critically, I would say this is not a

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Speaker 4: one off in the sense that the COVID support was

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Speaker 4: a one off. We are talking about a sustained increase

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Speaker 4: in deficits of this order for multiple years, at least

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Speaker 4: three four five. But for context, the Infrastructure Fund is

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Speaker 4: a ten year fund. The closest proxy I think is

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Speaker 4: German reunification. But even if you go back then and

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Speaker 4: you look at the numbers, these are actually even bigger wow.

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Speaker 4: So if you try and contextualize it, there were two

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Speaker 4: big rounds of fiscal easing during the German reunification. The

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Speaker 4: first one was nineteen ninety and that was a de

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Speaker 4: facto helicopter drop of money into Eastern Germany. That was

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Speaker 4: when the Eastern deutsch Mark and the Western dotsche Mark

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Speaker 4: were equated one for one. It was effectively a fiscal

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Speaker 4: transfer to Eastern Germany. We calculate that to be eight

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Speaker 4: percent of GDP. So that was nineteen ninety and then

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Speaker 4: in nineteen ninety five you had another fiscal expansion, a

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Speaker 4: one off fiscal expansion of roughly another eight percent. Now

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Speaker 4: we're talking here six percent deficits, but for many more years.

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Speaker 4: So if you add up the numbers, arguably this is

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Speaker 4: even bigger than German reunification.

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Speaker 1: You put out a note on March four, and it's

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Speaker 1: filled with, you know, dramatic language. You say it's hard

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Speaker 1: to overestimate the scale of change taking place in global

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Speaker 1: economic and geopolitical relations. You say that this is the

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Speaker 1: biggest shift in trade relations since the collapse of Bretton Woods.

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Speaker 1: And I think it's very interesting that you mentioned, even

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Speaker 1: just a few weeks ago, when Germany was having its

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Speaker 1: national election. There wasn't much talk about this. What specifically

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Speaker 1: from the Trump administration, whether it's on trade or defense,

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Speaker 1: has caused such a dramatic about phase.

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Speaker 4: So I would say it's been building, it's been building

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Speaker 4: for months, it's been building for weeks. But the watershed

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Speaker 4: moment was really the Munich Security Conference. And we are

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Speaker 4: Dutch back, we're based in Germany. We get the vibe

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Speaker 4: so to speak. Yeah, but the political vibes domestically in

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Speaker 4: Germany dramatically shifted after the Munich Security Conference, the speech

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Speaker 4: that was given by the Vice president, the broader body

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Speaker 4: language around that, I'd be relocked in to say that

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Speaker 4: was the single thing that caused everything. But most certainly

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Speaker 4: it was a trigger for a change in mindset. And

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Speaker 4: this change in mindset we identified as soon as the

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Speaker 4: election was over in terms of the negotiations beginning. It

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Speaker 4: culminated this week with the announcements. Say the announcements, even

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Speaker 4: we were expecting something, but even for us it was

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Speaker 4: at the very top end of expectations.

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Speaker 2: Can you talk about the corporate vibes, maybe our companies

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Speaker 2: are management getting excited about extra fiscal stimulus or are

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Speaker 2: they still very nervous about both the security situation and

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Speaker 2: the potential incoming tariffs.

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Speaker 4: So the geopolitical backdrop has been a challenge. Trade uncertainty

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Speaker 4: is clearly huge, and we saw it with the ECB

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Speaker 4: meeting earlier today. But what I would say is this

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Speaker 4: has been present in the back around now for months,

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Speaker 4: and you can see in policy uncertainty, in disease in

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Speaker 4: Germany and in broader Europe, which have been very high

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Speaker 4: for a long time over the last couple of quarters.

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Speaker 4: So in a sense, what is really genuinely new over

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Speaker 4: the last few weeks is this positive shock, and I

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Speaker 4: think what is most interesting is to give you an example,

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Speaker 4: we had a large investor round table just last week

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Speaker 4: in Germany. This is after the negotiations had begun, and

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Speaker 4: around that roundtable we had a large number of real

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Speaker 4: money investors domestically based in Germany allocating their money to

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Speaker 4: European fixed income. And while everyone expected announcements around defense,

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Speaker 4: no one really expected anything big on infrastructure. No one

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Speaker 4: expected the reform of the debt break up front. So

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Speaker 4: I would say this is just a biggert surprise internationally,

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Speaker 4: as it is domestically, at least from the investor fe

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Speaker 4: feedback and the corporate feedback I've experienced.

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Speaker 1: We've seen this big spike in the euro over the

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Speaker 1: last couple of days, but you know, it's still fairly low,

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Speaker 1: and it's not even back to where it was in

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Speaker 1: the beginning of December. It's actually it's still below pre

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Speaker 1: election levels. Could this dramatically change the trajectory over the

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Speaker 1: coming months and years of the exchange rate?

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Speaker 4: So I think to answer that question, you have to

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Speaker 4: look at both sides of the Atlantic. So you have

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Speaker 4: to question what is going on with the US administration,

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Speaker 4: what's happening in Europe. A very good starting point is

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Speaker 4: to think about relative neutral rates or what's known as

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Speaker 4: relative are star now in kind of high frequency, short

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Speaker 4: term On a short term basis, of course, these things

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Speaker 4: are very hard to estimate, but if you take a

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Speaker 4: step back, relative neutral has been a pretty good guide

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Speaker 4: in the broader dollar trends over the last few decades. Now,

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Speaker 4: what's interesting is, and I use this re unification analogy,

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Speaker 4: if you go back to them, that period saw the

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Speaker 4: relative our star between Europe and the US go from

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Speaker 4: around minus two hundred during the mid nineteen eighties to

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Speaker 4: zero in the early nineteen nineties. This was a period

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Speaker 4: where the European neutral rate was rising. As Eastern Germany

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Speaker 4: was being unified with Western Germany, you had the big

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Speaker 4: increase in fiscal expenditure. So to answer your question, if

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Speaker 4: this big infrastructure shift defense shift goes ahead, if it's

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Speaker 4: able to push trend growth higher, productivity higher, by extension

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Speaker 4: ECB rates higher, I think it certainly has potential to

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Speaker 4: be materially positive for the Europe. Now how positive also

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Speaker 4: depends on what's going on on the other side of

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Speaker 4: the Atlantic and what are the policies pursued there. So

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Speaker 4: maybe that's something to discuss in our conversation. But I

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Speaker 4: would say how much trend growth is being affected and

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Speaker 4: the ECBs is at the core of how much it's

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Speaker 4: going to affect the Europe.

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Speaker 2: Okay, I'm going to take debate and ask the really

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Speaker 2: simple question, which is what happens to a country's currency

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Speaker 2: when they enact tariffs so the US, and the reason

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Speaker 2: I ask it is because people seem to have different opinions.

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Speaker 2: On the one hand, some people think it slows down

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Speaker 2: growth and therefore currency will come down. Other people think

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Speaker 2: maybe it'll speed it up. Currency goes up real rates

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Speaker 2: go up, et cetera. Where do you sit in that debate?

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Speaker 4: So it's it sounds like a very simple question, but

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Speaker 4: I think as we've seen, it ends up being an

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Speaker 4: extremely complicated one. I would say it depends on two things.

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Speaker 4: How the tariff's being enacted and to whom are the

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Speaker 4: tariffs being enacted. Now, if you're talking about a situation

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Speaker 4: of bilateral tariffs, so for example, under the first Trump administration,

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Speaker 4: where it's just against China, the US clearly has an advantage.

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Speaker 4: It's running a trade deficits, so extension, if it applies

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Speaker 4: a tariff, that tariff is going to be more damaging

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Speaker 4: to the country it's running a deficit with, because it's

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Speaker 4: just a larger portion of that good of that country's goods. Now,

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Speaker 4: I think when we're thinking about Trump policy under the

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Speaker 4: second administration, we're applying the same logic. The US has

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Speaker 4: a trade deficit with the rest of the world. But

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Speaker 4: there are two key differences, and this has also taken

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Speaker 4: me by surprise compared to the start of the year.

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Speaker 4: The first one is how tariff policy is being applied.

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Speaker 4: And I think the danger it's presenting to the US

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Speaker 4: economy is it's being done in a very haphazard, inconsistent way,

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Speaker 4: where the and businesses are struggling to understand both the

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Speaker 4: path and the endpoint. And I mentioned that because if

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Speaker 4: you look at the key transmission channel of tariffs into

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Speaker 4: the economy, it's uncertainty. That was certainly the case during

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Speaker 4: the first administration. Certainly the case now and the pattern

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Speaker 4: we're seeing ever since January is US uncertainty is now

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Speaker 4: going up faster than it is in the rest of

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Speaker 4: the world. Now, partly that's because the rest of the

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Speaker 4: world's already been worried about tarifs for a long time,

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Speaker 4: but I think it's also the way the policy is

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Speaker 4: being executed that there is very little clarity and there

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Speaker 4: is a constant back and forth. I'd say that's the first.

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Speaker 1: Yeah, I'm just gonna say, even since we've been talking

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Speaker 1: on this, Trump likely to defer tariffs on goods and

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Speaker 1: services under us MCA. I guess by a month. It's unclear.

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Speaker 1: And this is from Howard Lutnex speaking on CNBC. So

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Speaker 1: there are changes of foot even to the sort of

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Speaker 1: North American trade relationship. It's changing by the day. The

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Speaker 1: exact nature of this anyway, keep going.

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Speaker 4: I think that's exactly it. It's the constant back and

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Speaker 4: forth which at the end of the day makes it

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Speaker 4: extremely difficult to plan. And remember, the starting point of

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Speaker 4: expectation was a very positive one that this would be

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Speaker 4: a very business friendly administration. So I'd say that's one part.

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Speaker 4: The second part relates to who you are tariffing, and

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Speaker 4: if you are tariffing a country where the bilateral trade

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Speaker 4: relationship is extremely strong, is less imbalanced, is more codependent,

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Speaker 4: and here I'm referencing Mexico, but even more importantly Canada.

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Speaker 4: If you're tariffing such a country, the economic impact is

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Speaker 4: going to be much bigger than if you're applying the

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Speaker 4: same thing to Europe or China. Effectively, I think of

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Speaker 4: the economy in the US as part of a broader

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Speaker 4: North American economy. You have integrated supply chains that have

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Speaker 4: been building for decades, and therefore a tariff policy which

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Speaker 4: essentially unwinds that and unwinds an international agreement which you've signed,

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Speaker 4: I think is much more damaging than if we were

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Speaker 4: thinking about the same for Europe and China. So it's

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Speaker 4: taken me by surprise that the whole policy started with

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Speaker 4: Canada and is taking place in such a haphazard way,

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Speaker 4: and I think that's at the core of why the

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Speaker 4: dollar is not strengthened.

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Speaker 1: So one of the things that I mentioned in the

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Speaker 1: beginning is that in order to get to a point

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Speaker 1: where Europe really pivots or reforms or in some way

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Speaker 1: or it does something big, you really need two things

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Speaker 1: to happen, which is, you need the recognition that it

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Speaker 1: should be done, and then you need the political stars

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Speaker 1: to align. And that's very trick within the Eurozone for

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Speaker 1: various reasons, you know, setting aside German physical expansion, capital markets,

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Speaker 1: deepening capital markets, integration, other things like that, progress on

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Speaker 1: areas like that has been really slow, etc.

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Speaker 2: You know.

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Speaker 1: One of the things that we've seen, very interestingly enough,

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Speaker 1: is that Donald Trump breathed new life into the Liberal

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Speaker 1: Party in Canada. They were basically left for dead about

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Speaker 1: a month ago, the party of Trudeau, who's not in

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Speaker 1: the running to be the next prime minister. And now

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Speaker 1: suddenly their poles are surging. Like when you look at

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Speaker 1: the European political landscape, do the sort of center right

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Speaker 1: or center liberal parties do they seem to have new

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Speaker 1: signs of life in this environment.

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Speaker 4: I think it's too early to tell because a lot

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Speaker 4: of the major interventions in Europe have only happened over

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Speaker 4: the last few weeks in reference to the Munich Security

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Speaker 4: Conference in particular. But what I would certainly agree with

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Speaker 4: you is that the threatened withdrawal of the security guarantee

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Speaker 4: is providing, if I could call it, a guiding star

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Speaker 4: to Europe in terms of something everyone can coordinate around with,

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Speaker 4: which is defense. And the one point to make is,

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Speaker 4: of course, when you start Europe as a very low

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Speaker 4: industrial defense base, it will need to build that out.

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Speaker 4: But that's precisely the reason why that could serve as

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Speaker 4: a new growth engine. And we have to think about

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Speaker 4: broader spillovers of defense. For example, just over the last

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Speaker 4: two days we've seen negotiations between Italy and Turkey to

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Speaker 4: develop drone technology. We're seeing a potential shift away from

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Speaker 4: Starlink to European satellite company for Ukraine and all these things.

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Speaker 4: The initial trigger might be a military reason, but there's

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Speaker 4: broader technological spillovers and growth spillovers. And the last point

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Speaker 4: is we have to remember the starting point of Germany

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Speaker 4: is solo. Germany has not grown for the last two

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Speaker 4: or three years. Germany has engineering expertise, has access capacity.

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Speaker 4: The economy is actually fairly well placed to benefit from

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Speaker 4: using defense as a new industrial strategy, so to speak.

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Speaker 4: Germany is a third of Europe, so if Germany's moving,

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Speaker 4: even if no one else is moving, it can be

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Speaker 4: quite material, especially given that Germany has been the drag

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Speaker 4: in the first place.

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Speaker 1: And Tracy, you know something that George mentioned defense as

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Speaker 1: a potential true engine of growth with spillovers. I mean,

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Speaker 1: this is the story, right that we've been talking about

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Speaker 1: in American industrial policy history. It really is always defense,

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Speaker 1: and then defense gave us eventually the iPhone. But this

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Speaker 1: is really always seems to be how it happens. In

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Speaker 1: anxiety about existential security, I.

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Speaker 2: Look forward to the German iPhone. Okay, I'm going to

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Speaker 2: ask a sort of bigger question, just going back to

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Speaker 2: the scope and the significance of all of this, I

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Speaker 2: have to ask what happens to US treasuries here and

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Speaker 2: the US dollar in the sense that you know, I

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Speaker 2: mentioned earlier that one way of looking at this is

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Speaker 2: that Europe is no longer funding the US fiscal expansion.

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Speaker 2: Instead they're funding their own. Germany has in fact been

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Speaker 2: a really important buyer of US treasuries in recent years,

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Speaker 2: and Europe's also a big buyer of US corporate bonds,

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Speaker 2: and you know, US treasury purchases kind of go hand

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Speaker 2: in hand with the dollars special status in the financial

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Speaker 2: system as the reserve currency. Does this change that equation? Perhaps?

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Speaker 2: Is the dollar at risk of losing its special status?

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Speaker 4: Well? I think you raise a very important question, and

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Speaker 4: there's different ways of looking at it, but my starting

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Speaker 4: point would be that you're absolutely correct in Europe being

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Speaker 4: the marginal buyer of treasuries. There's been a lot of

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Speaker 4: discussion recently around the Mara Lago Accord and the role

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Speaker 4: of reserve managers central banks of not being buyers of

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Speaker 4: debt for the last ten years. In fact, the share

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Speaker 4: of reserves has been declining in terms of global GDP,

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Speaker 4: So the marginal buyer has been the private sector. It's

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Speaker 4: been primarily Europeans, potentially Japanese as you alluded to. Does

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Speaker 4: that create a problem for the US, I would say

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Speaker 4: depends on what's going on with the US policy stance.

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Speaker 4: If the idea is the US fiscal stance is shrinking

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Speaker 4: at the same time because the US is consolidating, it's

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Speaker 4: going to be okay if the US is sticking with

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Speaker 4: these deficits of six seven percent, and I think critically

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Speaker 4: when we're thinking about the funding of the so called

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Speaker 4: twin deficit, it's not just about the magnitude, but it's

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Speaker 4: about the context. Is the US outperforming in terms of growth?

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Speaker 4: Is the US respecting property rights so to speak? Is

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Speaker 4: the dollar a high yielder? If Europe is improving. But

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Speaker 4: at the same time, all of these properties are highlighted

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Speaker 4: at being undermined. For example, tariff policy slowing down US growth.

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Speaker 4: It's causing the Fed to cut rates. The dollars no

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Speaker 4: longer a high yielder. The Trump administration is making references

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Speaker 4: to Greenland at risk of slightly oversimplifying that is a

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Speaker 4: property ownership reference, which at the margin is eroding some

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Speaker 4: of the attractiveness of the dollar as a safe haven.

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Speaker 4: If all of these are happening at the same time,

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Speaker 4: I would say it does put into question the dollar

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Speaker 4: safe haven role at the core of it. If I

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Speaker 4: look at the US, the US needs to pursue sound

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Speaker 4: economic policy, and then it will be okay. If that

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Speaker 4: doesn't happen, the threshold for the twin deficits to matter goes.

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Speaker 2: Down all right, George, Sarahvelos from Deutsche Bank, thank you

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Speaker 2: so much for coming on all lots. It was good

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Speaker 2: to catch up with you after many, many years. Thanks

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Speaker 2: so much.

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Speaker 1: Yeah, that was fantastic, George, truly the perfect game.

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Speaker 4: Thank you. It was a great pleasure. Joe.

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Speaker 2: I'm so glad we did that episode because, as we

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Speaker 2: pointed out in the beginning, there is a lot going on,

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Speaker 2: certainly here in the US. The focus tends to be

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Speaker 2: on what the Trump administration is doing, and there's been

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Speaker 2: less focused certainly on the impacts in other countries. So

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Speaker 2: it's good to catch up on all of that. And

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Speaker 2: I think probably the most striking thing in all of

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Speaker 2: this is the possibility of Europe really coming together and integrating,

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Speaker 2: because if you think about the struggles the Eurozone had

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Speaker 2: in the past, it was mostly around integration and political discord.

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Speaker 2: Even up until a month or two ago, as George

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Speaker 2: was saying, we had some political difficulties in Germany and

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Speaker 2: the coalition government and things like that. It is very

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Speaker 2: striking to see people coming together just a month.

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Speaker 1: Yeah, you know, there is a sense that I played

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Speaker 1: Devil's advocate for a second, that what is going on

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00:26:06,080 --> 00:26:09,720
Speaker 1: right now sounds very similar to what Jim Bianco told

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00:26:09,760 --> 00:26:12,520
Speaker 1: us a couple of weeks ago about what a sort

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00:26:12,560 --> 00:26:16,679
Speaker 1: of defactoed mar Lago accord would look like, which is

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Speaker 1: Europe picking up a much larger share of the defense budget,

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00:26:20,800 --> 00:26:24,160
Speaker 1: the euro arising, the dollar weakening, et cetera. I mean,

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Speaker 1: that's what Trump browbeaded European leader is about in the

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00:26:27,840 --> 00:26:30,400
Speaker 1: first administration that they weren't living up to their NATO

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00:26:30,480 --> 00:26:31,960
Speaker 1: obligations and so forth.

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00:26:32,080 --> 00:26:32,280
Speaker 2: You know.

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00:26:32,440 --> 00:26:34,639
Speaker 1: So there's a sense that part of what we're seeing

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00:26:34,680 --> 00:26:36,399
Speaker 1: is something that Trump has wanted to see for a

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Speaker 1: long time. But it's really striking to me the two

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00:26:40,160 --> 00:26:43,760
Speaker 1: things sort of like this scale of whether it's in

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00:26:43,840 --> 00:26:48,000
Speaker 1: North America or Europe, leaders not feeling that the US

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00:26:48,320 --> 00:26:53,439
Speaker 1: is a reliable signatory to various agreements. And then also

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00:26:53,480 --> 00:26:56,159
Speaker 1: the fact that from a macro perspective, and I'd include

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00:26:56,240 --> 00:26:59,080
Speaker 1: China here too, we are seeing fiscal expansion in much

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00:26:59,119 --> 00:27:01,520
Speaker 1: of the world at this same time the US is

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00:27:01,640 --> 00:27:05,480
Speaker 1: kind of going into austerity mode at least visibly, like

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00:27:05,560 --> 00:27:07,800
Speaker 1: throughout Doge and so forth. And so that is a

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00:27:07,920 --> 00:27:10,359
Speaker 1: very that's a notable macro shift.

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Speaker 2: Well, you say that this is what Trump wants, but

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00:27:13,600 --> 00:27:17,760
Speaker 2: Trump also wants the dollar to maintain its special status,

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00:27:18,000 --> 00:27:22,120
Speaker 2: right And in this scenario, again going to the fiscal

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00:27:22,200 --> 00:27:25,359
Speaker 2: expansion idea, is Germany going to have enough money to

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00:27:25,680 --> 00:27:29,560
Speaker 2: finance both the US and itself if it's pouring you know,

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00:27:29,800 --> 00:27:33,640
Speaker 2: billions of euros into its defense sector and things like that.

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00:27:34,119 --> 00:27:37,160
Speaker 2: I doubt it. I think that balance is certainly shifting.

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00:27:37,800 --> 00:27:37,960
Speaker 4: Now.

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00:27:38,000 --> 00:27:39,920
Speaker 2: That doesn't mean that there aren't going to be any

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00:27:39,960 --> 00:27:43,960
Speaker 2: buyers for US treasures. We talked with Jim about the

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00:27:44,040 --> 00:27:46,480
Speaker 2: idea that well, you know, the US can always make

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00:27:46,600 --> 00:27:50,040
Speaker 2: its banks, for instance, buy more US bonds, so there's

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00:27:50,080 --> 00:27:53,679
Speaker 2: that possibility. But I think this is something worth thinking about.

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00:27:54,040 --> 00:27:57,399
Speaker 1: Yeah, no, totally. I mean, look, I think that what

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Speaker 1: I would say is we're in uncharted territory. And I

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00:28:01,840 --> 00:28:05,040
Speaker 1: just think about like all of the business leaders that

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00:28:05,119 --> 00:28:08,040
Speaker 1: I've heard over the years, it's like, oh, we just

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00:28:08,080 --> 00:28:11,879
Speaker 1: want certainty. We you know, we're okay with regulation, we

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00:28:12,000 --> 00:28:16,080
Speaker 1: just and it's usually something that they say during democratic administrations,

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00:28:16,200 --> 00:28:18,000
Speaker 1: like we just want certainty. We just want to know

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00:28:18,480 --> 00:28:21,240
Speaker 1: what the rules are going to be and so forth,

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00:28:21,880 --> 00:28:25,800
Speaker 1: and businesses love certain all this stuff. And then really

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00:28:26,040 --> 00:28:28,560
Speaker 1: in the last few weeks. It feels like we've gotten

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00:28:28,600 --> 00:28:32,240
Speaker 1: the mother of all sort of uncertainty shocks. As a

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00:28:32,320 --> 00:28:34,960
Speaker 1: result of all this, we.

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Speaker 2: Got to figure out an uncertainty trade that's not just

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00:28:37,800 --> 00:28:39,800
Speaker 2: by the vics. It should be a good one.

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00:28:39,920 --> 00:28:43,960
Speaker 1: Yeah, yeah, but goal's done really well.

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00:28:44,040 --> 00:28:46,120
Speaker 2: Yeah, that's true. All right. Shall we leave it there.

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Speaker 1: Let's leave it there.

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Speaker 2: This has been another episode of the All Thoughts podcast.

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00:28:49,680 --> 00:28:53,080
Speaker 2: I'm Tracy Alloway. You can follow me at Tracy Alloway.

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00:28:52,760 --> 00:28:55,600
Speaker 1: And I'm Joe Wisenthal. You can follow me at the Stalwart.

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00:28:55,880 --> 00:28:59,120
Speaker 1: Follow our producers Kerman Rodriguez at Kerman ermann dash Ol

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Speaker 4: In