1 00:00:09,840 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Ley. 2 00:00:13,960 --> 00:00:17,560 Speaker 1: We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:29,040 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. Well, 5 00:00:29,080 --> 00:00:32,080 Speaker 1: it is now my pleasure to introduce Kim Shoon Halt. 6 00:00:32,159 --> 00:00:35,000 Speaker 1: He is ny U Professor and director of the Center 7 00:00:35,040 --> 00:00:38,440 Speaker 1: for Global Economy and Business, and he joins us here 8 00:00:38,520 --> 00:00:42,600 Speaker 1: in our eleven at three of studios. Thank you, professor, 9 00:00:42,680 --> 00:00:46,360 Speaker 1: great to have you here. Happy holidays, my pleasure. Are 10 00:00:46,400 --> 00:00:48,839 Speaker 1: they really happy holidays for business? Based on what you 11 00:00:48,880 --> 00:00:51,960 Speaker 1: know out of the tax overhaul bill and what you 12 00:00:52,040 --> 00:00:55,320 Speaker 1: see as in terms of changes in any financial regulations 13 00:00:55,320 --> 00:00:58,800 Speaker 1: for businesses, Well, let's see leave the financial regulations aside 14 00:00:58,800 --> 00:01:01,880 Speaker 1: for the moment, but and even the tax changes aside, 15 00:01:02,440 --> 00:01:05,560 Speaker 1: business is doing pretty well. Profits are high as a 16 00:01:05,600 --> 00:01:08,240 Speaker 1: share of GDP, so this is a pretty strong period 17 00:01:08,240 --> 00:01:11,240 Speaker 1: of the economy. Growth is above the level that we 18 00:01:11,280 --> 00:01:14,760 Speaker 1: can sustain over the long run. So UH and unemployments 19 00:01:14,800 --> 00:01:17,000 Speaker 1: down to the lowest level we've seen in more than 20 00:01:17,040 --> 00:01:19,839 Speaker 1: a decade. We may hit the lowest we've seen since 21 00:01:19,840 --> 00:01:24,560 Speaker 1: the nineteen sixties during eighteen So this is a strong 22 00:01:24,600 --> 00:01:28,119 Speaker 1: period for the economy. What to what do you attest this? Uh, 23 00:01:28,280 --> 00:01:31,319 Speaker 1: this strength in the economy. Is it government policy? Is 24 00:01:31,360 --> 00:01:35,399 Speaker 1: it natural? Business cycle? Credit cycle? Look, this is the 25 00:01:35,520 --> 00:01:39,039 Speaker 1: ninth year of expansion and so UH, this has been 26 00:01:39,080 --> 00:01:43,400 Speaker 1: a disappointing expansion for most of its history. But we're 27 00:01:43,440 --> 00:01:46,440 Speaker 1: finally getting to a point where we're approached. We're very 28 00:01:46,480 --> 00:01:50,400 Speaker 1: close to full utilization of labor resources. UH, and that's 29 00:01:50,440 --> 00:01:53,120 Speaker 1: exactly when you would expect businesses to be looking for 30 00:01:53,160 --> 00:01:57,840 Speaker 1: other ways to expand. Investment picks up. UH. And in addition, 31 00:01:57,920 --> 00:02:00,560 Speaker 1: profitability has been high for some time. So if anything, 32 00:02:00,880 --> 00:02:03,880 Speaker 1: investment has lagged profits. I guess, okay, but I guess 33 00:02:03,960 --> 00:02:06,520 Speaker 1: one of what what in your mind based on your analysis, 34 00:02:06,600 --> 00:02:11,880 Speaker 1: what accounts for this strength and corporate profits? What accounts 35 00:02:12,000 --> 00:02:15,760 Speaker 1: for the low level of unemployment? Is it a policy? 36 00:02:15,840 --> 00:02:18,240 Speaker 1: Is it political? Is it natural? What is it that 37 00:02:18,360 --> 00:02:21,239 Speaker 1: you believe accounts for all this? The single most important 38 00:02:21,280 --> 00:02:25,120 Speaker 1: thing has been a very stimulative monetary policy over the 39 00:02:25,200 --> 00:02:28,080 Speaker 1: last seven or eight years. That has taken a long 40 00:02:28,200 --> 00:02:32,120 Speaker 1: time to have its impact. But UH, central bank policy 41 00:02:32,120 --> 00:02:36,200 Speaker 1: in the US has been very accommodative. We've stimulated financial conditions, 42 00:02:36,480 --> 00:02:39,760 Speaker 1: so stock prices are high, bond prices are high, meaning 43 00:02:39,800 --> 00:02:43,120 Speaker 1: bond yields are low. All of that eventually has had 44 00:02:43,160 --> 00:02:46,320 Speaker 1: an impact on stimulating aggregate demand in the economy. All right, 45 00:02:46,360 --> 00:02:48,600 Speaker 1: So I gotta jump in here, um kim, because we 46 00:02:48,600 --> 00:02:50,639 Speaker 1: were talking a bunch on TV. But I'm just curious, 47 00:02:50,639 --> 00:02:54,080 Speaker 1: why does it not feel terrific and why? And I 48 00:02:54,120 --> 00:02:56,960 Speaker 1: guess most importantly is we've talked about the gap between 49 00:02:57,360 --> 00:03:00,400 Speaker 1: the folks that are wealthy getting wealthier and those who 50 00:03:00,400 --> 00:03:04,760 Speaker 1: are not. Does anything and better in terms of reducing 51 00:03:04,760 --> 00:03:08,400 Speaker 1: that gap, Well, let's take the two parts separately. First, 52 00:03:08,440 --> 00:03:11,400 Speaker 1: wise have been so disappointing. Um, I think there are 53 00:03:11,400 --> 00:03:14,240 Speaker 1: a variety of reasons. One is that long run growth 54 00:03:14,280 --> 00:03:17,640 Speaker 1: appears to have slowed, and we were observing that during 55 00:03:17,680 --> 00:03:21,080 Speaker 1: the recovery, So productivity growth has slowed a lot. That's 56 00:03:21,120 --> 00:03:24,280 Speaker 1: really hurt us over time, and that's really a problem 57 00:03:24,360 --> 00:03:28,400 Speaker 1: for for our long run living standards. Uh. Second reason 58 00:03:28,520 --> 00:03:32,000 Speaker 1: is that the in the after effects of the financial 59 00:03:32,040 --> 00:03:36,160 Speaker 1: crisis were just enormous in reducing the ability of our 60 00:03:36,240 --> 00:03:40,520 Speaker 1: financial sector to provide support for the economy and and 61 00:03:40,520 --> 00:03:44,400 Speaker 1: and also of the ability of non financial firms to 62 00:03:44,960 --> 00:03:48,920 Speaker 1: manage their expansion. So and households were severely damaged. And 63 00:03:49,080 --> 00:03:51,520 Speaker 1: think of how much damage there was the household wealth 64 00:03:51,560 --> 00:03:54,280 Speaker 1: for an extended period of time. So this is this 65 00:03:54,320 --> 00:03:56,760 Speaker 1: has been a disappointing recovery. It's amazing that we're in 66 00:03:56,800 --> 00:03:59,480 Speaker 1: the ninth year and do see so few imbalances. It's 67 00:03:59,560 --> 00:04:02,280 Speaker 1: partly it's taken so long to get here, but we're 68 00:04:02,320 --> 00:04:05,120 Speaker 1: now here. And that's why given that we're at this stage, 69 00:04:05,160 --> 00:04:07,360 Speaker 1: this is when you'd expect investment to pick up. So 70 00:04:07,400 --> 00:04:09,680 Speaker 1: what worries you? Then, well, let me just respond to 71 00:04:09,720 --> 00:04:12,880 Speaker 1: your other question of that income equality. Um, Frankly, I 72 00:04:12,920 --> 00:04:16,120 Speaker 1: don't see that getting better without government action. And if anything, 73 00:04:16,200 --> 00:04:20,200 Speaker 1: government action has worked the other way. Um So, Uh, 74 00:04:20,360 --> 00:04:24,119 Speaker 1: you know, we've been in this long transition period in which, um, 75 00:04:24,160 --> 00:04:28,080 Speaker 1: there are benefits to people with higher incomes and higher 76 00:04:28,120 --> 00:04:31,640 Speaker 1: skills and uh, and that's still there. There. There's a 77 00:04:31,720 --> 00:04:35,160 Speaker 1: huge premium for getting a college education today. UM, so 78 00:04:35,240 --> 00:04:38,960 Speaker 1: people with more skills get higher earnings, and that differentials 79 00:04:39,040 --> 00:04:42,239 Speaker 1: not going away quickly. So I don't think that gets 80 00:04:42,279 --> 00:04:46,599 Speaker 1: corrected without government changes. Probably for me to introduce the 81 00:04:46,600 --> 00:04:49,240 Speaker 1: actual answer, but I'm just going to pose something and Carol, 82 00:04:49,279 --> 00:04:50,839 Speaker 1: you know, you bring this up, this idea that people 83 00:04:50,880 --> 00:04:53,520 Speaker 1: do not feel as if the economy has entered this 84 00:04:53,600 --> 00:04:57,279 Speaker 1: strong position, and Professor I would just wonder it hasn't. 85 00:04:57,640 --> 00:04:59,120 Speaker 1: Is it possible that a lot of this has to 86 00:04:59,160 --> 00:05:03,000 Speaker 1: do with security, and I mean physical security, because physical 87 00:05:03,080 --> 00:05:07,360 Speaker 1: security has created let's say, time constraints on everything from 88 00:05:07,400 --> 00:05:09,680 Speaker 1: going to the airport to going on a train. In 89 00:05:09,720 --> 00:05:13,200 Speaker 1: other words, the in the Sekey apparatus, the security apparatus 90 00:05:13,240 --> 00:05:15,240 Speaker 1: in the country is vastly different than it was and 91 00:05:15,360 --> 00:05:19,159 Speaker 1: let's say previous recoveries. And as a result, you're being 92 00:05:19,200 --> 00:05:21,880 Speaker 1: required as an individual to have more patients, to set 93 00:05:21,880 --> 00:05:24,159 Speaker 1: aside more time for things that you don't necessarily like 94 00:05:24,279 --> 00:05:27,279 Speaker 1: to do, such as standing in a line. Also, you 95 00:05:27,360 --> 00:05:31,320 Speaker 1: see around you the effects of lack of spending on infrastructure, 96 00:05:31,360 --> 00:05:33,080 Speaker 1: so that can make you feel terrible when you hit 97 00:05:33,120 --> 00:05:36,719 Speaker 1: a pothole or when you're you know, being forced into 98 00:05:37,080 --> 00:05:40,120 Speaker 1: one lane and driving, you know, circles to try to 99 00:05:40,160 --> 00:05:43,479 Speaker 1: get to the airport departure gates. Is that part of 100 00:05:43,520 --> 00:05:46,680 Speaker 1: what makes us feel this way? Him, I can't say 101 00:05:46,720 --> 00:05:49,800 Speaker 1: with certainty that that's making such a that's why. That's 102 00:05:49,800 --> 00:05:52,720 Speaker 1: why I offer. But but here's I would give you 103 00:05:52,800 --> 00:05:56,280 Speaker 1: a simpler hypothesis. Because we started from such a very 104 00:05:56,360 --> 00:05:59,440 Speaker 1: high unemployment rate. In this expansion, we've had very low 105 00:05:59,480 --> 00:06:04,440 Speaker 1: wage growth, and so people's incomes just haven't expanded until recently. 106 00:06:04,480 --> 00:06:06,520 Speaker 1: And if you're asking me as an economist, what would 107 00:06:06,560 --> 00:06:09,159 Speaker 1: I focus on first? That's what i'd focus Why is 108 00:06:09,200 --> 00:06:12,000 Speaker 1: that not happening? Considering we talk about the improvements in 109 00:06:12,040 --> 00:06:17,160 Speaker 1: corporate profits. Revenues are growing, um, you look at some 110 00:06:17,240 --> 00:06:19,960 Speaker 1: of the CEO pay packages and they're doing just fine. 111 00:06:20,000 --> 00:06:22,080 Speaker 1: Why has it not trickled down? Is it just that 112 00:06:22,120 --> 00:06:25,719 Speaker 1: companies have not had to pay to get workers until 113 00:06:25,800 --> 00:06:29,440 Speaker 1: relatively recently, there's been an abundance of labor supply relative 114 00:06:29,480 --> 00:06:33,000 Speaker 1: to demand, and I think we're in that period precisely 115 00:06:33,000 --> 00:06:35,359 Speaker 1: when that's changed. We're in the sweet spot where the 116 00:06:35,400 --> 00:06:38,960 Speaker 1: economy is operating with nearly full employment, and that changes 117 00:06:39,000 --> 00:06:41,720 Speaker 1: the way firms behave. It means that they're willing to 118 00:06:41,800 --> 00:06:44,400 Speaker 1: pay more for workers. It means they're willing to invest more. 119 00:06:44,839 --> 00:06:48,440 Speaker 1: This is when we benefit from the expansion. Usually in 120 00:06:48,520 --> 00:06:52,080 Speaker 1: most expansions, that will happen a lot earlier. The Phillips curve. Sorry, 121 00:06:52,120 --> 00:06:55,160 Speaker 1: the Phillips curve actually works. It's not clear that I 122 00:06:55,200 --> 00:06:57,640 Speaker 1: would want to rely on that for policy, but I 123 00:06:57,640 --> 00:07:00,599 Speaker 1: think it's probably the case that when the labor market 124 00:07:00,680 --> 00:07:03,919 Speaker 1: gets tighter, that causes firms to bid for labor. It 125 00:07:03,960 --> 00:07:06,880 Speaker 1: just takes time. Uh. And remember, you know, we're in 126 00:07:06,920 --> 00:07:09,240 Speaker 1: a different labor market structure that we used to be 127 00:07:09,840 --> 00:07:14,480 Speaker 1: far less unionization, so there's uh less threat of strike. Um, 128 00:07:14,640 --> 00:07:17,160 Speaker 1: but from time to time we will see strikes precisely 129 00:07:17,160 --> 00:07:20,280 Speaker 1: because labor is less abundant than it was when you 130 00:07:20,600 --> 00:07:23,200 Speaker 1: mentioned corporate profits. I just want to follow up on 131 00:07:23,240 --> 00:07:27,400 Speaker 1: what Carol said about that translating into higher wages. If 132 00:07:27,400 --> 00:07:31,240 Speaker 1: the corporate profits are do indeed exists, they must exist somewhere. 133 00:07:31,280 --> 00:07:34,040 Speaker 1: They either exist in forms and dividends, share buy backs, 134 00:07:34,160 --> 00:07:38,600 Speaker 1: or just cash on a company's balance sheet. Uh. If 135 00:07:38,680 --> 00:07:42,520 Speaker 1: that's the case, is it really just because workers will 136 00:07:42,560 --> 00:07:45,200 Speaker 1: spend the money that the economy will benefit because the 137 00:07:45,200 --> 00:07:48,240 Speaker 1: money is there, it just isn't being spent. Is that 138 00:07:48,280 --> 00:07:50,720 Speaker 1: which are Well? You know, the fact if firms get 139 00:07:50,760 --> 00:07:54,200 Speaker 1: profits doesn't mean it automatically gets spent. It does mean 140 00:07:54,240 --> 00:07:56,840 Speaker 1: it does raise the question are they doing the investment? 141 00:07:57,200 --> 00:08:00,280 Speaker 1: Is someone who has greater wealth willing to spend more. 142 00:08:00,720 --> 00:08:04,040 Speaker 1: People may want to accumulate wealth without spending more, especially 143 00:08:04,040 --> 00:08:06,640 Speaker 1: when they live in a period of uncertainty. But what 144 00:08:06,680 --> 00:08:10,280 Speaker 1: we're seeing now is the personal savings ratio is going down, right, 145 00:08:10,400 --> 00:08:13,240 Speaker 1: and that's telling you people aren't spending more. That has 146 00:08:13,440 --> 00:08:16,240 Speaker 1: begun to change. We went through a period early in 147 00:08:16,280 --> 00:08:18,880 Speaker 1: this recovery where the savings ratio went up. I was 148 00:08:18,920 --> 00:08:21,200 Speaker 1: telling you they were really nervous about the environment in 149 00:08:21,280 --> 00:08:24,920 Speaker 1: which they operated. So uh, I think we're finally getting 150 00:08:24,920 --> 00:08:27,400 Speaker 1: to the point where in most recoveries we would have 151 00:08:27,440 --> 00:08:30,880 Speaker 1: been at this stage five or six years ago. See Carol, 152 00:08:30,920 --> 00:08:34,760 Speaker 1: it really just oil ball boils down to making more money. 153 00:08:34,800 --> 00:08:36,600 Speaker 1: If you make more money, you're gonna feel a lot better. 154 00:08:36,760 --> 00:08:40,800 Speaker 1: Works for me exactly. We're waiting, right, We are waiting. 155 00:08:40,800 --> 00:08:42,680 Speaker 1: We'll have to start to see if we do see 156 00:08:42,760 --> 00:08:46,040 Speaker 1: more wage pressures. Certainly the stats, the statistics, the monthly 157 00:08:46,080 --> 00:08:49,199 Speaker 1: labor reports haven't necessarily bore that out, but that will 158 00:08:49,240 --> 00:08:52,040 Speaker 1: be keeping a track of it. Joining us with our 159 00:08:52,120 --> 00:08:55,640 Speaker 1: continuing conversation is Kim Shoon Haltze, n y U, Professor 160 00:08:55,679 --> 00:08:58,960 Speaker 1: and director of the Center for Global Economy and Business 161 00:08:58,960 --> 00:09:02,199 Speaker 1: and I guess I would be remiss in this century 162 00:09:02,240 --> 00:09:06,040 Speaker 1: if I did not mention that bitcoin has increased about 163 00:09:06,080 --> 00:09:08,199 Speaker 1: nine and a half percent in values, trading at about 164 00:09:08,200 --> 00:09:12,800 Speaker 1: fifteen thousand, eighty three dollars a theoryum also a little 165 00:09:12,800 --> 00:09:16,679 Speaker 1: bit higher light coin other cryptocurrency gaining three percent. And 166 00:09:16,720 --> 00:09:19,480 Speaker 1: Professor Schoenheltz, you were saying just during the break that 167 00:09:20,120 --> 00:09:23,360 Speaker 1: you know that things are getting into a bubble if 168 00:09:23,840 --> 00:09:26,520 Speaker 1: you get a lot of questions about bitcoin. Did you 169 00:09:26,559 --> 00:09:29,520 Speaker 1: receive a lot of questions about bitcoin over the last 170 00:09:29,559 --> 00:09:32,520 Speaker 1: week or so? Yeah, I think that one of the hallmarks, 171 00:09:32,559 --> 00:09:34,400 Speaker 1: one of the hallmarks of a bubble is that it 172 00:09:34,480 --> 00:09:38,600 Speaker 1: becomes the topic of conversation. And uh, I think partly 173 00:09:38,640 --> 00:09:41,000 Speaker 1: because of the enormous press attention that it's getting, and 174 00:09:41,000 --> 00:09:44,800 Speaker 1: that's reflecting the price action in the markets. We're seeing 175 00:09:44,800 --> 00:09:47,360 Speaker 1: a lot of people who have very limited knowledge about 176 00:09:47,400 --> 00:09:50,600 Speaker 1: this asking questions. It's fine to be asking questions. The 177 00:09:50,760 --> 00:09:54,880 Speaker 1: danger is that the price movements sell themselves, induce people 178 00:09:54,920 --> 00:09:57,640 Speaker 1: to buy. And when you start to see that, that's 179 00:09:57,720 --> 00:10:00,040 Speaker 1: that's what you worry about a bubble. Was that you 180 00:10:00,120 --> 00:10:02,960 Speaker 1: talked earlier on TV about Bloomberg surveillance, about fomo fear 181 00:10:03,000 --> 00:10:06,080 Speaker 1: of missing out, or maybe it was another even someone else, 182 00:10:06,080 --> 00:10:08,960 Speaker 1: But it's a pretty common fear that people think that 183 00:10:09,040 --> 00:10:11,559 Speaker 1: they have to get involved in something. Is that when 184 00:10:11,600 --> 00:10:14,240 Speaker 1: it's on the way up, and um, that's worrisome. We've 185 00:10:14,240 --> 00:10:18,240 Speaker 1: seen that with many other assets. This is not unusual. Fortunately, 186 00:10:18,280 --> 00:10:21,079 Speaker 1: it's not so big that it will affect the economy 187 00:10:21,120 --> 00:10:24,560 Speaker 1: at large if the bubble bursts. But um, but it 188 00:10:24,679 --> 00:10:27,760 Speaker 1: is worrisome for the investors themselves. Was that an investment conference? 189 00:10:27,800 --> 00:10:30,120 Speaker 1: Michael Lewis gave a big keynote. You know, best selling 190 00:10:30,160 --> 00:10:35,240 Speaker 1: author um Liars, Poker, Flashboys, The Big Short and uh 191 00:10:35,320 --> 00:10:37,679 Speaker 1: and knows a lot about the financial industry. And someone 192 00:10:37,880 --> 00:10:39,720 Speaker 1: asked him, you know, why haven't you written about bitcoin. 193 00:10:39,960 --> 00:10:42,520 Speaker 1: He talked about being in a gathering with other folks 194 00:10:42,520 --> 00:10:44,240 Speaker 1: who were in the know about bitcoin, and he said, well, 195 00:10:44,240 --> 00:10:45,959 Speaker 1: can I buy anything with bitcoin? They're like, yeah, you 196 00:10:46,000 --> 00:10:47,240 Speaker 1: can buy a cup of coffee. We'll take you to 197 00:10:47,320 --> 00:10:49,679 Speaker 1: the corner. They went to the corner that he had 198 00:10:49,679 --> 00:10:52,480 Speaker 1: some bitcoin. He couldn't do it, they couldn't actually make 199 00:10:52,520 --> 00:10:55,880 Speaker 1: the process happen. He finally throughout some dollars and did it. 200 00:10:55,960 --> 00:10:58,319 Speaker 1: But his point was, tell me when I can actually 201 00:10:58,360 --> 00:11:01,280 Speaker 1: do something with it, then then I think there's a story. 202 00:11:01,280 --> 00:11:04,280 Speaker 1: There's something much more productive here. That's a great way 203 00:11:04,320 --> 00:11:07,240 Speaker 1: to respond. By the way, I like Michael Lewis's books, 204 00:11:07,280 --> 00:11:11,000 Speaker 1: so I'm not surprised. Um. The question is what are 205 00:11:11,040 --> 00:11:14,199 Speaker 1: the fundamental values of a bitcoin. It can't be a 206 00:11:14,240 --> 00:11:17,600 Speaker 1: dividend that will get paid because bitcoin doesn't have any earnings, 207 00:11:17,640 --> 00:11:19,960 Speaker 1: So it has to be from the use, the widespread 208 00:11:20,080 --> 00:11:23,440 Speaker 1: use of that as a means of exchange. In fact, 209 00:11:23,559 --> 00:11:28,400 Speaker 1: over the last year, the use has collapsed. Percent of 210 00:11:28,440 --> 00:11:31,840 Speaker 1: trading in bitcoin is gone over the last year because 211 00:11:31,840 --> 00:11:36,839 Speaker 1: the Chinese authorities shut down the exchanges the dominator, So 212 00:11:37,400 --> 00:11:39,760 Speaker 1: most of the trading in two thousands sixteen in bitcoin 213 00:11:39,920 --> 00:11:44,120 Speaker 1: was in on the Chinese exchanges. That's gone. Having having 214 00:11:44,160 --> 00:11:47,320 Speaker 1: said all that, the very concept though of a should 215 00:11:47,360 --> 00:11:50,040 Speaker 1: we call it maybe an ultracurrency or an ultra means 216 00:11:50,040 --> 00:11:54,400 Speaker 1: of exchange. It is not part of the financial system 217 00:11:54,440 --> 00:11:56,880 Speaker 1: as we know it. Do you think that there's any 218 00:11:56,920 --> 00:11:59,920 Speaker 1: possibility that that the digital world will come up with 219 00:12:00,000 --> 00:12:02,760 Speaker 1: an answer for that? Look, there are central banks that 220 00:12:02,760 --> 00:12:05,240 Speaker 1: are exploring now whether they want to create their own 221 00:12:05,240 --> 00:12:08,119 Speaker 1: digital currencies, and you can see why there's an incentive 222 00:12:08,160 --> 00:12:11,640 Speaker 1: because governments look at currency issue as a good way 223 00:12:11,679 --> 00:12:15,320 Speaker 1: of financing themselves. It's low cost compared to issuing interest 224 00:12:15,360 --> 00:12:19,839 Speaker 1: paying debt um. But even in that area, there are 225 00:12:19,840 --> 00:12:23,040 Speaker 1: worries about having digital currencies that are run by governments, 226 00:12:23,080 --> 00:12:27,560 Speaker 1: because the question is will people eventually prefer that to having, say, 227 00:12:27,679 --> 00:12:30,400 Speaker 1: a deposited a bank, And if they do, will will 228 00:12:30,400 --> 00:12:32,800 Speaker 1: the banks be able to raise their liabilities with which 229 00:12:32,840 --> 00:12:35,480 Speaker 1: to provide the credit in the economy. If at some 230 00:12:35,559 --> 00:12:38,200 Speaker 1: point in the future we end up depending on the 231 00:12:38,280 --> 00:12:42,400 Speaker 1: central banks as digital currency issuers to be providing credit, 232 00:12:42,760 --> 00:12:46,719 Speaker 1: we will have replaced the private intermediation mechanism. That's a 233 00:12:46,720 --> 00:12:49,920 Speaker 1: worry that I have about any digital currency form. And 234 00:12:50,000 --> 00:12:53,480 Speaker 1: the if it's state run, isn't that happening already to 235 00:12:53,559 --> 00:12:57,400 Speaker 1: a certain extent, that that middle person, that middleman, whether 236 00:12:57,480 --> 00:13:00,600 Speaker 1: it's in the banking industry or the financial service, this industry, 237 00:13:00,679 --> 00:13:03,719 Speaker 1: really any industry is getting crushed because the margins are 238 00:13:03,760 --> 00:13:06,640 Speaker 1: just getting so thin. Well, we have to look at 239 00:13:06,640 --> 00:13:09,040 Speaker 1: the statistics. I think when you were asking the question, 240 00:13:09,080 --> 00:13:11,439 Speaker 1: I was thinking you're right to an excellent extent, because 241 00:13:11,440 --> 00:13:13,560 Speaker 1: the balance sheets of most of the central banks have 242 00:13:13,559 --> 00:13:16,920 Speaker 1: gotten a lot bigger, and during the crisis, some of 243 00:13:16,920 --> 00:13:22,000 Speaker 1: them were purposely acting to replace intermediate private intermediation that 244 00:13:22,120 --> 00:13:25,840 Speaker 1: was no longer providing the services that we needed. But 245 00:13:26,320 --> 00:13:30,240 Speaker 1: in a normal expansion, I think it's really worrisome to 246 00:13:30,320 --> 00:13:33,480 Speaker 1: have the central bank replace the private sector as the 247 00:13:33,480 --> 00:13:37,520 Speaker 1: supplier of credit. Eventually, that raises the question whether credit 248 00:13:37,559 --> 00:13:40,760 Speaker 1: will get politicized whether sorry, no, no, no, forgive me 249 00:13:41,040 --> 00:13:43,360 Speaker 1: what I mean to interrupt? All right, So we're all 250 00:13:43,400 --> 00:13:45,680 Speaker 1: gonna have to try and figure out what ultimately bitcoin 251 00:13:45,840 --> 00:13:47,840 Speaker 1: is all about, right, and the financial system system is 252 00:13:47,840 --> 00:13:49,520 Speaker 1: trying to figure that out, Kim. In the meantime, you 253 00:13:49,559 --> 00:13:51,480 Speaker 1: wrote something over the summer which I want to just 254 00:13:51,559 --> 00:13:53,800 Speaker 1: quickly get to. We've got about forty five second. You 255 00:13:53,800 --> 00:13:56,520 Speaker 1: wrote about the U. S. Treasuries missed opportunity. There are 256 00:13:56,559 --> 00:13:59,160 Speaker 1: things within our financial system as it exists that we 257 00:13:59,160 --> 00:14:00,719 Speaker 1: should be paying a tech too. If you could just 258 00:14:00,800 --> 00:14:05,400 Speaker 1: quickly you know the we're in a better place than 259 00:14:05,440 --> 00:14:09,040 Speaker 1: we were a decade ago. The finance the banking system 260 00:14:09,160 --> 00:14:12,200 Speaker 1: is far better capitalized than it was a decade ago, 261 00:14:12,640 --> 00:14:16,120 Speaker 1: but that's because it was pitifully capitalized a decade ago, 262 00:14:16,200 --> 00:14:18,560 Speaker 1: and we're in a better position now, but there's a 263 00:14:18,559 --> 00:14:21,600 Speaker 1: lot we could do both to make our financial system 264 00:14:21,640 --> 00:14:25,040 Speaker 1: more efficient and safer at the same time, which tells 265 00:14:25,080 --> 00:14:28,800 Speaker 1: you we're not running an efficient set of regulations. Unfortunately, 266 00:14:28,800 --> 00:14:32,400 Speaker 1: I thought the Treasury's proposals fall short in a variety 267 00:14:32,440 --> 00:14:37,240 Speaker 1: of ways. If anything, they're not supporting greater capital requirements 268 00:14:37,240 --> 00:14:39,560 Speaker 1: for banks, which I think would make our systems safer, 269 00:14:40,040 --> 00:14:43,400 Speaker 1: and they have fallen short of being willing to impose 270 00:14:43,760 --> 00:14:46,920 Speaker 1: efficiency rules that would help us advance. We have to 271 00:14:46,920 --> 00:14:49,440 Speaker 1: be watching what's coming out of Washington, because certainly there 272 00:14:49,440 --> 00:14:52,320 Speaker 1: could be some changes. Kim John Hilped of n Y. 273 00:14:52,440 --> 00:14:55,560 Speaker 1: You joining us here on Bloomberg's aveillance. Carol Master, Pim Fox, 274 00:14:55,640 --> 00:15:12,880 Speaker 1: This is Bloomberg. Now. I want to bring in our 275 00:15:12,920 --> 00:15:16,120 Speaker 1: next guest. Sharon O'Halleran is the George Blumenthal Professor of 276 00:15:16,160 --> 00:15:20,080 Speaker 1: Political Economy and Professor of International and Public Affairs at 277 00:15:20,120 --> 00:15:24,680 Speaker 1: Columbia University, the author of the book entitled Politics, Process 278 00:15:24,760 --> 00:15:27,840 Speaker 1: and American Trade Policy, and she joins us here in 279 00:15:27,920 --> 00:15:31,240 Speaker 1: our eleven Trio Studios. Professor how halleran, thank you very 280 00:15:31,280 --> 00:15:34,200 Speaker 1: much for being with us. Maybe just begin by giving 281 00:15:34,280 --> 00:15:37,560 Speaker 1: us your thoughts about the tax overhaul plan. And the 282 00:15:37,600 --> 00:15:40,800 Speaker 1: effects that you believe it will have on the economy, 283 00:15:40,880 --> 00:15:44,000 Speaker 1: warranteed even on consumers. So first of all, we know 284 00:15:44,360 --> 00:15:47,200 Speaker 1: that it reduces the corporate tax, and it brings it 285 00:15:47,240 --> 00:15:51,880 Speaker 1: in line with many of our trading peers. And we 286 00:15:51,920 --> 00:15:54,920 Speaker 1: saw other countries doing the same, such as France and 287 00:15:54,960 --> 00:15:58,760 Speaker 1: even Germany who reduced their corporate tax even below ours. 288 00:15:59,640 --> 00:16:02,680 Speaker 1: And we see in addition that many of the individual 289 00:16:02,760 --> 00:16:09,920 Speaker 1: tax were cut substantially, and that was they were significant. 290 00:16:10,600 --> 00:16:15,600 Speaker 1: And we also see that this was rather a retrogressive 291 00:16:15,640 --> 00:16:19,880 Speaker 1: tax in the sense that those folks at the higher 292 00:16:20,360 --> 00:16:24,640 Speaker 1: end of the income distribution, we're gonna get disproportionately more 293 00:16:25,320 --> 00:16:28,560 Speaker 1: than those at the lower ends. So for example, if 294 00:16:28,560 --> 00:16:30,840 Speaker 1: you make ten thousand dollars, you're going to get about 295 00:16:30,880 --> 00:16:36,040 Speaker 1: ten dollars of BANG, and if you're making over a million, 296 00:16:36,080 --> 00:16:39,640 Speaker 1: you're gonna get about seventy dollars of bang. And if 297 00:16:39,680 --> 00:16:44,920 Speaker 1: you think that, in fact, the this is a stimulus 298 00:16:44,960 --> 00:16:49,800 Speaker 1: to the economy, the impact of people at at those brackets, 299 00:16:49,960 --> 00:16:53,200 Speaker 1: if they spend usually the lower incomes spend dollar per dollar, 300 00:16:54,080 --> 00:16:57,480 Speaker 1: then that's going to have a less impact than somewhat 301 00:16:57,480 --> 00:16:59,800 Speaker 1: the higher end, who will tend to either save or 302 00:17:00,400 --> 00:17:05,640 Speaker 1: put that in a less save dollar for dollar impact. 303 00:17:05,760 --> 00:17:11,080 Speaker 1: So so okay, so that makes okay, get it that. Obviously, 304 00:17:11,160 --> 00:17:13,840 Speaker 1: if you're making a lot more money um in terms 305 00:17:13,880 --> 00:17:17,840 Speaker 1: of the possible benefits to taxes and tax cuts, you're 306 00:17:17,880 --> 00:17:21,040 Speaker 1: going to see bigger, a bigger bang. Having said that, 307 00:17:21,359 --> 00:17:24,240 Speaker 1: those folks at the lower end of the income scale, 308 00:17:24,400 --> 00:17:26,920 Speaker 1: as you said, tend to spend more rather than save 309 00:17:27,000 --> 00:17:29,840 Speaker 1: it or invest it. Will that have much of an 310 00:17:29,880 --> 00:17:33,679 Speaker 1: economic impact? Will that make a difference in their lives too? 311 00:17:34,960 --> 00:17:38,760 Speaker 1: So there will be very little difference at the lower 312 00:17:38,920 --> 00:17:41,119 Speaker 1: end of the impact. I mean they at the lower 313 00:17:41,200 --> 00:17:44,320 Speaker 1: end of the scale. Clearly, they'll most everybody will see 314 00:17:44,400 --> 00:17:49,120 Speaker 1: some cut. Again, it's not going to have a substantial 315 00:17:49,280 --> 00:17:54,560 Speaker 1: impact at that at that area. The places where there 316 00:17:54,680 --> 00:17:58,480 Speaker 1: will be significant impact is what you will see is 317 00:17:58,680 --> 00:18:02,760 Speaker 1: one they have reduce teach of the scales down and 318 00:18:02,800 --> 00:18:05,760 Speaker 1: they've closed some of the loopholes, which is good. They've 319 00:18:06,160 --> 00:18:11,919 Speaker 1: increased the individual um credits and that's important. So they've 320 00:18:12,000 --> 00:18:17,200 Speaker 1: attempted to simplify those that the different types of schedules. 321 00:18:17,720 --> 00:18:20,800 Speaker 1: I think it's been not aspective as they had hoped, 322 00:18:21,760 --> 00:18:25,679 Speaker 1: but that I think is going to be the effect. 323 00:18:25,760 --> 00:18:31,080 Speaker 1: In addition, these rates are not permanent. In fact, they 324 00:18:31,080 --> 00:18:34,920 Speaker 1: fade off by and so in fact we're going to 325 00:18:35,040 --> 00:18:37,600 Speaker 1: kick back to the old rates. You know, one of 326 00:18:37,680 --> 00:18:40,120 Speaker 1: one thing I wanted to ask you though about the 327 00:18:40,160 --> 00:18:42,760 Speaker 1: process having to do this. I understand the idea of 328 00:18:42,800 --> 00:18:46,239 Speaker 1: trying to align the corporate tax rate and make it 329 00:18:46,320 --> 00:18:48,760 Speaker 1: more harmonious with the rest of the world so that 330 00:18:48,800 --> 00:18:52,119 Speaker 1: we are not at a disadvantage. All right, So, having 331 00:18:52,160 --> 00:18:57,880 Speaker 1: said that, is there on the personal side? Is there 332 00:18:57,920 --> 00:19:04,359 Speaker 1: an economic benefit to the reduction of state and local 333 00:19:04,400 --> 00:19:09,720 Speaker 1: tax deductions? Is there? Sorry, obviously there's an economic bench 334 00:19:09,760 --> 00:19:12,560 Speaker 1: to state and local But but we didn't reduce state 335 00:19:12,640 --> 00:19:18,280 Speaker 1: and local tax deductions. We reduced the federal income tax. 336 00:19:19,520 --> 00:19:22,520 Speaker 1: That is true. We are actually making it that you 337 00:19:22,640 --> 00:19:27,159 Speaker 1: cannot re deduced or take out you can deduct, you cannot. 338 00:19:27,400 --> 00:19:30,000 Speaker 1: So my point of the states where that that exists, 339 00:19:30,000 --> 00:19:31,960 Speaker 1: where you're not going to be able to reduce cut, 340 00:19:32,000 --> 00:19:35,080 Speaker 1: you know, deductor state and local taxes, won't those states 341 00:19:35,119 --> 00:19:37,280 Speaker 1: just have to increase taxes in order to make up 342 00:19:37,320 --> 00:19:41,120 Speaker 1: for that budget uh shortfall, Because I mean it's still 343 00:19:41,160 --> 00:19:43,520 Speaker 1: as if that things have to be paid for. Well, 344 00:19:43,640 --> 00:19:46,320 Speaker 1: that's not clear that they're going to be able to 345 00:19:46,480 --> 00:19:49,280 Speaker 1: because the high tax states already going to be at 346 00:19:49,280 --> 00:19:53,720 Speaker 1: a significant disadvantage to the low tax states such as Florida, 347 00:19:54,040 --> 00:19:56,720 Speaker 1: and it's going to be very difficult for New Jersey, 348 00:19:56,800 --> 00:20:00,200 Speaker 1: New York, Connecticut to raise the state and local tex is. 349 00:20:01,040 --> 00:20:05,199 Speaker 1: So all of a sudden, there's going to be enormous 350 00:20:05,240 --> 00:20:09,680 Speaker 1: amount of competition, and therefore the way in which they're 351 00:20:09,680 --> 00:20:12,520 Speaker 1: not gonna be able to raise what's called the mill rates, right, 352 00:20:12,600 --> 00:20:14,600 Speaker 1: So the way in which they're going to have to 353 00:20:14,640 --> 00:20:17,159 Speaker 1: do that is going to be almost through surcharges of 354 00:20:17,680 --> 00:20:19,800 Speaker 1: sales tax. Okay. The point I'm trying to make though, 355 00:20:19,920 --> 00:20:22,720 Speaker 1: is that if the United States is lowering corporate tax 356 00:20:22,800 --> 00:20:25,000 Speaker 1: rates to be more consistent with the rest of the world, 357 00:20:25,280 --> 00:20:27,879 Speaker 1: we're doing just the opposite when it comes to state 358 00:20:28,280 --> 00:20:30,960 Speaker 1: and local taxes. We're making it as if they're all 359 00:20:31,040 --> 00:20:34,240 Speaker 1: different foreign countries competing with each other and it's a 360 00:20:34,320 --> 00:20:38,040 Speaker 1: race to the bottom. Right. So one corporate text is 361 00:20:38,119 --> 00:20:41,080 Speaker 1: the effective corporate text if you look at what ge 362 00:20:41,320 --> 00:20:45,240 Speaker 1: Spent was paid, was because they they have the best 363 00:20:45,680 --> 00:20:49,040 Speaker 1: accountants in the world. Okay, that's really their comparative advantage. 364 00:20:49,359 --> 00:20:54,560 Speaker 1: So that let's sit it straight, So we're just harmonizing 365 00:20:54,600 --> 00:20:58,600 Speaker 1: that and cutting cutting out the loopholes. Second, it's already 366 00:20:58,760 --> 00:21:02,439 Speaker 1: it's we've always had competition between the states over tax 367 00:21:02,440 --> 00:21:05,160 Speaker 1: and tax structure, and there's been advantages to being in 368 00:21:05,200 --> 00:21:09,159 Speaker 1: these high tax areas, either because of locality you're in 369 00:21:09,160 --> 00:21:12,960 Speaker 1: New York, you're in the north Northeast, there's good school districts, 370 00:21:12,960 --> 00:21:15,720 Speaker 1: so forth, and so on. The way you move to 371 00:21:15,960 --> 00:21:19,120 Speaker 1: that when you no longer can use your state local 372 00:21:19,400 --> 00:21:24,000 Speaker 1: taxes is that you use sales tax, you use different 373 00:21:24,000 --> 00:21:27,919 Speaker 1: types of excise taxes, use toll roles. Those are the 374 00:21:27,920 --> 00:21:31,760 Speaker 1: ways in which you get the money to pay for 375 00:21:32,280 --> 00:21:38,359 Speaker 1: the schools, their highways, the other types of infrastructure that 376 00:21:38,440 --> 00:21:42,200 Speaker 1: the local communities need. So, Sharon, and just going back 377 00:21:42,240 --> 00:21:47,200 Speaker 1: to economic impact that your research says that it's unclear 378 00:21:47,280 --> 00:21:49,879 Speaker 1: what the long term effects will be ultimately from this 379 00:21:50,000 --> 00:21:52,640 Speaker 1: tax overhaul package, what it will be on the economy, 380 00:21:52,680 --> 00:21:55,560 Speaker 1: we just kind of don't know. Well, that's correct. I mean, 381 00:21:56,080 --> 00:21:59,879 Speaker 1: in the end, in ten years out, about sixty of 382 00:22:00,000 --> 00:22:03,680 Speaker 1: Americans will be paying more, right, because the individual tax 383 00:22:03,800 --> 00:22:05,679 Speaker 1: rates are going to be going well, be will be 384 00:22:05,680 --> 00:22:11,520 Speaker 1: phased out. And consequently, it's not clear whether in fact, 385 00:22:11,520 --> 00:22:13,679 Speaker 1: this is going to be an overall stimulus to the 386 00:22:13,680 --> 00:22:17,280 Speaker 1: economy and lead to greater growth. Moreover, you don't know 387 00:22:17,520 --> 00:22:19,560 Speaker 1: if at the higher ends that there's going to be 388 00:22:19,600 --> 00:22:22,639 Speaker 1: greater investment, greater consumption, if it's going to have the 389 00:22:22,640 --> 00:22:25,359 Speaker 1: trickle down effects that they're all thinking that it will, 390 00:22:25,680 --> 00:22:29,880 Speaker 1: especially when you're in a scenario where you have very 391 00:22:29,920 --> 00:22:37,040 Speaker 1: low employment, unemployment, you have basically low inflation, so you're 392 00:22:37,080 --> 00:22:40,360 Speaker 1: not in the area of the era of the Reagan 393 00:22:40,920 --> 00:22:44,760 Speaker 1: economics where that did have a stimulating effect. So it's 394 00:22:44,800 --> 00:22:48,680 Speaker 1: not clear that this is the environment where a tax 395 00:22:48,720 --> 00:22:52,400 Speaker 1: cut is going to have a lot of traction. Would 396 00:22:52,400 --> 00:22:56,440 Speaker 1: you have crafted at tax overhaul with great differences than 397 00:22:56,560 --> 00:22:59,840 Speaker 1: than what we saw so I would do the corporate tax. 398 00:23:00,040 --> 00:23:02,280 Speaker 1: I do think that's that is something that has to 399 00:23:02,320 --> 00:23:05,600 Speaker 1: have had and be become efficient. I would have put 400 00:23:05,600 --> 00:23:09,280 Speaker 1: in sentence in place to repatriate a lot of the 401 00:23:09,320 --> 00:23:12,359 Speaker 1: funds I would have done. I think that's something that 402 00:23:12,400 --> 00:23:16,000 Speaker 1: makes a lot of sense. Uh, there are different there 403 00:23:16,000 --> 00:23:20,040 Speaker 1: are inefficiencies within our tax structure. I think I would 404 00:23:20,040 --> 00:23:24,120 Speaker 1: have tried to simplify first and foremost before I would 405 00:23:24,160 --> 00:23:27,679 Speaker 1: have focused on the individual cuts because I think just 406 00:23:27,760 --> 00:23:32,000 Speaker 1: simplifying and closing loopholes would have done a lot for us. 407 00:23:33,359 --> 00:23:37,639 Speaker 1: Without getting into the nitty gritty. I definitely wouldn't have 408 00:23:37,720 --> 00:23:42,200 Speaker 1: gone after the the the education. Sharon O'Halloran is with us. 409 00:23:42,240 --> 00:23:45,399 Speaker 1: She is the George Bluementhal Professor of Political Economy and 410 00:23:45,440 --> 00:23:48,639 Speaker 1: Professor of International in Public Affairs at Columbia University in 411 00:23:48,720 --> 00:23:52,320 Speaker 1: New York, New York. Author also of the book Politics Process, 412 00:23:52,560 --> 00:23:54,840 Speaker 1: an American Trade Policy. I sounded like a New Yorker 413 00:23:55,160 --> 00:23:58,600 Speaker 1: for a moment. Hey, Sharon, you guys recently held a 414 00:23:58,640 --> 00:24:01,840 Speaker 1: conference up at columb Yeah, you had folks like Jack 415 00:24:01,920 --> 00:24:07,080 Speaker 1: lou former Treasury Secretary, Nobel Laurie, Joseph Stiglitz, Barney Frank 416 00:24:07,440 --> 00:24:10,480 Speaker 1: uh many others, and you were taking a look at 417 00:24:10,600 --> 00:24:13,879 Speaker 1: ten years after the financial crisis, um, and what do 418 00:24:13,920 --> 00:24:19,240 Speaker 1: you guys find? So we found that, in fact, there's 419 00:24:19,280 --> 00:24:23,520 Speaker 1: a lot of really retrospective looking at where we are 420 00:24:23,640 --> 00:24:28,960 Speaker 1: now by everyone across the political spectrum. And there's a 421 00:24:29,080 --> 00:24:36,840 Speaker 1: sense that, uh, while the we've the different regulations that 422 00:24:37,200 --> 00:24:40,600 Speaker 1: we put in place have actually addressed the issues that 423 00:24:40,640 --> 00:24:44,320 Speaker 1: they meant to address, such as recapitalizing the banks and 424 00:24:44,400 --> 00:24:48,960 Speaker 1: making them strong and safe, for the next financial crisis 425 00:24:49,000 --> 00:24:52,000 Speaker 1: that we sort of the ones that we experienced, their 426 00:24:52,080 --> 00:24:56,679 Speaker 1: new sets of risks that are emerging. The well known 427 00:24:56,720 --> 00:24:59,119 Speaker 1: ones such as we've seen, is pushing a lot of 428 00:24:59,119 --> 00:25:03,680 Speaker 1: the riskier activities out into the shadow banking areas or 429 00:25:03,680 --> 00:25:07,000 Speaker 1: the non regulating sectors. And those areas are not just 430 00:25:07,240 --> 00:25:11,800 Speaker 1: hedge funds anymore. There they're they're sort of banks or 431 00:25:11,840 --> 00:25:15,920 Speaker 1: bank like entities that are even happening online, and so 432 00:25:15,960 --> 00:25:19,560 Speaker 1: they're completely unfamiliar than what we saw ten years ago 433 00:25:19,680 --> 00:25:22,440 Speaker 1: and completely under the radar and can be missed absolutely. 434 00:25:22,840 --> 00:25:26,360 Speaker 1: So those other areas that are taking place that are 435 00:25:26,400 --> 00:25:31,600 Speaker 1: becoming problematic are mutual funds. That is another area that 436 00:25:31,760 --> 00:25:34,240 Speaker 1: people are concerned because that's a huge part of the market, 437 00:25:34,400 --> 00:25:38,280 Speaker 1: and that's not there's so much lack of transparency in 438 00:25:38,280 --> 00:25:41,720 Speaker 1: that market. So that's another area. The other areas that 439 00:25:41,760 --> 00:25:45,920 Speaker 1: we've seen that's creating bubbles of risk, if you will, 440 00:25:46,160 --> 00:25:50,160 Speaker 1: are the push to move all of the different derivatives 441 00:25:50,200 --> 00:25:52,920 Speaker 1: and swaps and all of those different types of financial 442 00:25:52,960 --> 00:25:57,000 Speaker 1: instruments that many said that caused the financial crisis onto 443 00:25:57,040 --> 00:25:59,920 Speaker 1: clearing houses or you think that's good because that stand 444 00:26:00,040 --> 00:26:03,240 Speaker 1: dedizes the products process that those products, puts them on 445 00:26:03,560 --> 00:26:08,280 Speaker 1: a common contracts and so forth. However, what that does 446 00:26:09,040 --> 00:26:13,240 Speaker 1: is it centralizes the risk, and so what's happening is 447 00:26:13,280 --> 00:26:16,600 Speaker 1: that you have a single point of failure, and so 448 00:26:16,640 --> 00:26:21,640 Speaker 1: that actually may the increasing systemic risk. So while we've 449 00:26:21,640 --> 00:26:26,600 Speaker 1: seen increases in the safety and soundness of institutional banks, 450 00:26:26,640 --> 00:26:31,160 Speaker 1: banks and capital and capital absorbing shock absorbing capital, we're 451 00:26:31,160 --> 00:26:36,400 Speaker 1: seeing growing systemic risk at various points taking place. So 452 00:26:36,720 --> 00:26:39,320 Speaker 1: that those are some of the areas that we that 453 00:26:39,440 --> 00:26:43,479 Speaker 1: we're coming up within the discussion. You know what, just 454 00:26:43,560 --> 00:26:47,840 Speaker 1: to follow up on your comment about derivatives and centralized 455 00:26:47,920 --> 00:26:50,679 Speaker 1: risk having to do with clearing houses, have have we 456 00:26:50,800 --> 00:26:56,880 Speaker 1: done anything to change the compensation structure so that these 457 00:26:57,000 --> 00:27:02,399 Speaker 1: kinds of deals that would potentially produce problems are not profitable. 458 00:27:02,440 --> 00:27:04,520 Speaker 1: I mean, I would imagine that the reason people do 459 00:27:04,640 --> 00:27:07,639 Speaker 1: deals or create certain products is they know they can 460 00:27:07,680 --> 00:27:09,560 Speaker 1: make money at it. And if you can't make money 461 00:27:09,600 --> 00:27:11,800 Speaker 1: at it, you're not gonna do it. So is it 462 00:27:11,840 --> 00:27:15,879 Speaker 1: an issue of the sales compensation programs that need changing. 463 00:27:16,160 --> 00:27:19,560 Speaker 1: So when we think about Dodd Frank, and we go 464 00:27:19,600 --> 00:27:21,959 Speaker 1: back and look at Dodd Frank and we ask whatever 465 00:27:22,040 --> 00:27:27,280 Speaker 1: happened to the executive compensation provisions, and we see that 466 00:27:27,640 --> 00:27:34,000 Speaker 1: it was really the top executives, that top paid executives 467 00:27:34,119 --> 00:27:37,879 Speaker 1: that were actually going to be monitored and going to 468 00:27:37,920 --> 00:27:40,080 Speaker 1: have to disclose and you're gonna have to pay attention 469 00:27:40,119 --> 00:27:44,639 Speaker 1: to their bonuses and so forth. But as was noted, 470 00:27:44,680 --> 00:27:48,480 Speaker 1: it's usually not the general counsel that's making risky bets. 471 00:27:48,760 --> 00:27:52,359 Speaker 1: It's the traders, and they are not regulated and the 472 00:27:52,520 --> 00:27:54,920 Speaker 1: in the sense that they don't they're not disclosing their 473 00:27:54,920 --> 00:27:58,720 Speaker 1: different types of salaries, so in many ways, their incentive 474 00:27:58,760 --> 00:28:03,320 Speaker 1: structures haven't fundamentally changed. Now many would argue that, oh no, 475 00:28:03,480 --> 00:28:07,480 Speaker 1: there's disclosure. No, oh no, there isn't that clawbacks. There 476 00:28:07,480 --> 00:28:10,280 Speaker 1: are other types of mechanisms in place. We are they 477 00:28:10,280 --> 00:28:14,199 Speaker 1: are much more they are much more regulated. They have 478 00:28:14,359 --> 00:28:17,280 Speaker 1: to have different types of compliance procedures, So they would 479 00:28:17,520 --> 00:28:20,160 Speaker 1: people in the banking industry would cite all of those 480 00:28:20,200 --> 00:28:22,919 Speaker 1: different types of checks, and those are all true. But 481 00:28:23,000 --> 00:28:26,520 Speaker 1: if you ask the individual what types of incentives are 482 00:28:26,600 --> 00:28:31,439 Speaker 1: in place, they have many of the same. So if 483 00:28:31,440 --> 00:28:34,760 Speaker 1: you have many of the same incentives to do much 484 00:28:34,800 --> 00:28:38,000 Speaker 1: of the same behavior, right, the question is is the 485 00:28:38,040 --> 00:28:41,320 Speaker 1: compliance And that's part of all you know, everybody getting 486 00:28:41,360 --> 00:28:43,680 Speaker 1: a Series fourteen. I mean that's great, But I mean 487 00:28:43,760 --> 00:28:45,880 Speaker 1: if the incentive is to sell whatever it is you 488 00:28:45,920 --> 00:28:49,520 Speaker 1: have to sell, well, you know, why would you expect 489 00:28:49,520 --> 00:28:52,960 Speaker 1: a different result eventually? So, the way that regulations of 490 00:28:53,000 --> 00:28:56,320 Speaker 1: the Dodd Frank work was to put in more capital, right, 491 00:28:56,520 --> 00:29:00,040 Speaker 1: to limit the types of risky activities that could it 492 00:29:00,120 --> 00:29:02,880 Speaker 1: could take, right like in the vocal rule, move out 493 00:29:02,920 --> 00:29:06,880 Speaker 1: the proprietary trading. Right. But what's happened is most of 494 00:29:06,880 --> 00:29:11,160 Speaker 1: that risky activity again has moved outside of the regulated areas. 495 00:29:11,800 --> 00:29:15,440 Speaker 1: So you can ask, Okay, so the banks and the 496 00:29:15,480 --> 00:29:21,440 Speaker 1: investment banks, the significantly important financial institutions, they may not 497 00:29:21,520 --> 00:29:24,960 Speaker 1: be taking those tail end extreme bets, but doesn't mean 498 00:29:24,960 --> 00:29:28,240 Speaker 1: that they're not happening within this system. So in the 499 00:29:28,320 --> 00:29:32,400 Speaker 1: current environment, in the current White House, President Trump has 500 00:29:32,480 --> 00:29:36,800 Speaker 1: laid out seven core principles for regulating the US financial system. Right, 501 00:29:36,840 --> 00:29:41,320 Speaker 1: it was an executive order. So based on that, we're 502 00:29:41,320 --> 00:29:43,520 Speaker 1: not going to get more oversight, right, We're gonna get 503 00:29:43,600 --> 00:29:49,280 Speaker 1: less oversight right. In and in in the discussions, it 504 00:29:49,360 --> 00:29:55,320 Speaker 1: was clear that a lot of the substantive issues that 505 00:29:55,400 --> 00:29:57,640 Speaker 1: were in Dodd Frank were more or less correct. They 506 00:29:57,640 --> 00:30:00,680 Speaker 1: were trying to do the right things to to make 507 00:30:00,720 --> 00:30:04,640 Speaker 1: the banks safe and sound and the system safe and town. 508 00:30:05,920 --> 00:30:08,520 Speaker 1: It was how they were doing it. Now that the 509 00:30:08,640 --> 00:30:12,320 Speaker 1: question is in the implementation of those principles, have they 510 00:30:12,400 --> 00:30:17,360 Speaker 1: got that right or the question was were these regulations 511 00:30:17,440 --> 00:30:20,920 Speaker 1: in particular, like in particular Voker with those fit for 512 00:30:20,920 --> 00:30:24,160 Speaker 1: the purpose at hand, or other other regulations that would 513 00:30:24,160 --> 00:30:26,720 Speaker 1: be more appropriate. And so that was some of the discussion. 514 00:30:27,120 --> 00:30:32,000 Speaker 1: And here that is what the Trump regulations are the 515 00:30:32,040 --> 00:30:34,840 Speaker 1: Trump executive ors are really thinking of. One is their 516 00:30:34,880 --> 00:30:40,560 Speaker 1: way to make these regulations more efficient, less complex, because 517 00:30:40,600 --> 00:30:43,080 Speaker 1: they are very complex. When you have regulations like the 518 00:30:43,120 --> 00:30:47,080 Speaker 1: Vocal Rule that are what four pages long? At that point, 519 00:30:47,160 --> 00:30:50,760 Speaker 1: good luck everybody, exactly. The only people who really know 520 00:30:50,960 --> 00:30:54,880 Speaker 1: them are the bankers, the lawyers of the bankers actually, 521 00:30:55,520 --> 00:30:58,080 Speaker 1: and they're the only ones who can tell you how 522 00:30:58,160 --> 00:31:02,080 Speaker 1: to manipulate them. So at that point it's very difficult 523 00:31:02,120 --> 00:31:04,920 Speaker 1: to not only oversee them, but to understand whether you're 524 00:31:04,960 --> 00:31:09,240 Speaker 1: in compliance or not. So that's that's Those are some 525 00:31:09,320 --> 00:31:13,360 Speaker 1: of the issues at hand. In addition, there are other 526 00:31:13,480 --> 00:31:17,719 Speaker 1: principles about eliminating that. Uh. They want to get rid 527 00:31:17,720 --> 00:31:21,280 Speaker 1: of the consumer financial protection which is what we saw right, 528 00:31:21,320 --> 00:31:23,600 Speaker 1: and it was put in place. Um, a baby of 529 00:31:23,640 --> 00:31:25,840 Speaker 1: Elizabeth Warren, if you will to really kind of watch 530 00:31:25,840 --> 00:31:28,400 Speaker 1: out for consumers, Um, Sharon, we're gonna have to continue 531 00:31:28,400 --> 00:31:31,520 Speaker 1: this conversation another time. There's certainly a lot of moving 532 00:31:31,600 --> 00:31:35,960 Speaker 1: parts whenever we talk about the financial regulatory environment. Sharon O'Halleran, 533 00:31:36,040 --> 00:31:39,320 Speaker 1: thank you so much, Professor Sharon O'Halleran. Uh. George Bloementhal, 534 00:31:39,360 --> 00:31:42,680 Speaker 1: Professor of Political economy and Professor of International and Public 535 00:31:42,680 --> 00:31:59,000 Speaker 1: Affairs at Columbia University in New York City. Well, as 536 00:31:59,040 --> 00:32:02,200 Speaker 1: we've reported early your Saudi Arabia expects oil revenue to 537 00:32:02,280 --> 00:32:06,760 Speaker 1: jump by by three. That would put oil at about 538 00:32:06,800 --> 00:32:10,160 Speaker 1: seventy five dollars a barrel. Here to help us understand 539 00:32:10,200 --> 00:32:13,040 Speaker 1: this is Stephen Short. He is the editor of the 540 00:32:13,160 --> 00:32:15,479 Speaker 1: Short Report. He joins us now on the phone. Stephen, 541 00:32:15,520 --> 00:32:18,560 Speaker 1: thanks very much for being with us. So seventy a 542 00:32:18,720 --> 00:32:23,080 Speaker 1: barrel by three? What kind of percentage do you give? That? 543 00:32:24,480 --> 00:32:27,120 Speaker 1: A very low percentage of PIM. We have to keep 544 00:32:27,120 --> 00:32:30,600 Speaker 1: in mind that the only reason why we have a 545 00:32:30,720 --> 00:32:35,360 Speaker 1: long term economic forecasting is to make astrology look respectable. 546 00:32:35,920 --> 00:32:39,280 Speaker 1: So that said, I do think the market is challenged 547 00:32:39,360 --> 00:32:43,160 Speaker 1: from a number of standpoints. Um most importantly, of course, 548 00:32:43,840 --> 00:32:48,760 Speaker 1: is the rapid growth of shale production predominantly here in 549 00:32:49,080 --> 00:32:52,440 Speaker 1: North America, but certainly that technology will expand to other 550 00:32:52,480 --> 00:32:56,920 Speaker 1: markets around the globe. So, but we recently had an 551 00:32:56,920 --> 00:33:01,400 Speaker 1: announcement by Saudi Aramco that they were making in some 552 00:33:01,480 --> 00:33:04,320 Speaker 1: corners who thought it was a very peculiar move to 553 00:33:04,360 --> 00:33:10,040 Speaker 1: expand beyond their borders and purchase assets, a lot of 554 00:33:10,080 --> 00:33:13,840 Speaker 1: assets based on shell here in North America. So we're 555 00:33:13,840 --> 00:33:18,000 Speaker 1: starting to see the Aramco game plan come into focus 556 00:33:18,120 --> 00:33:22,280 Speaker 1: right now. And that game plan is based on two phases. 557 00:33:22,480 --> 00:33:25,920 Speaker 1: First and foremost, as I said, the acquisition of assets 558 00:33:25,920 --> 00:33:30,520 Speaker 1: beyond its borders. But also we have the announcement that 559 00:33:30,560 --> 00:33:33,080 Speaker 1: they were going to wean that is, Saudi Radio Government's 560 00:33:33,120 --> 00:33:36,440 Speaker 1: going to wean their power generation off of crude oil. 561 00:33:36,880 --> 00:33:39,160 Speaker 1: They burn a significant amount of crude oil in the 562 00:33:39,200 --> 00:33:41,440 Speaker 1: summer in their power plants to keep those a C 563 00:33:41,600 --> 00:33:45,560 Speaker 1: s running in that hot Saudi uh summer. So they're 564 00:33:45,600 --> 00:33:48,800 Speaker 1: going to make the transition over into natural gas, which 565 00:33:48,840 --> 00:33:53,280 Speaker 1: again helps explain their acquisition. And they're growing important needs 566 00:33:53,320 --> 00:33:56,440 Speaker 1: for l en J, so that is going to open 567 00:33:56,520 --> 00:33:59,080 Speaker 1: up tens of millions of more barrels of crudel that 568 00:33:59,120 --> 00:34:01,560 Speaker 1: will be able to at the export market, because when 569 00:34:01,600 --> 00:34:04,200 Speaker 1: you think about it, every barrel crudal that's burned to 570 00:34:04,280 --> 00:34:06,600 Speaker 1: keeping a c on and SETI is not a barrel 571 00:34:06,640 --> 00:34:10,040 Speaker 1: you're earning export income on. So Aramco does seem to 572 00:34:10,080 --> 00:34:13,440 Speaker 1: be making the steps to boost their bottom line. But 573 00:34:13,520 --> 00:34:17,400 Speaker 1: as I said, given two things, first and foremost the 574 00:34:17,440 --> 00:34:20,680 Speaker 1: growth of access to supply. But we also have to 575 00:34:20,760 --> 00:34:24,480 Speaker 1: keep in mind, guys, that the entire economics of crudal 576 00:34:24,560 --> 00:34:28,040 Speaker 1: have changed over the last ten years. You have to 577 00:34:28,120 --> 00:34:31,120 Speaker 1: keep two things in line. With regard to factors that 578 00:34:31,840 --> 00:34:36,040 Speaker 1: that impact consumer behavior. We've always had the first variable, 579 00:34:36,120 --> 00:34:38,239 Speaker 1: that is the price shock going back. We've had our 580 00:34:38,400 --> 00:34:40,760 Speaker 1: our troughs and our peaks going back to the Arab 581 00:34:40,800 --> 00:34:43,680 Speaker 1: oil embargo in the early nineteen seventies. But we have 582 00:34:43,840 --> 00:34:48,279 Speaker 1: never until recently had that second component, and that's the substitute. 583 00:34:48,600 --> 00:34:51,400 Speaker 1: So the substitute being, of course the growth of hybrid 584 00:34:51,440 --> 00:34:55,440 Speaker 1: technology evs and so forth, the genies out of the 585 00:34:55,440 --> 00:34:59,200 Speaker 1: barrel right there. So I don't expect demand to have 586 00:34:59,360 --> 00:35:04,440 Speaker 1: that commence impact that has had in previous rallies. Include all, 587 00:35:04,560 --> 00:35:09,240 Speaker 1: given that consumer behavior has indeed changed. So that's seventy 588 00:35:09,239 --> 00:35:13,320 Speaker 1: five dollar oil. It's a long way off on that prediction. Uh. 589 00:35:13,320 --> 00:35:15,759 Speaker 1: And I do think it is going to have its 590 00:35:15,840 --> 00:35:18,719 Speaker 1: roadblocks in the years ahead. Well, especially when you've got 591 00:35:18,760 --> 00:35:21,200 Speaker 1: China coming out and they're saying they're going to, you know, 592 00:35:21,320 --> 00:35:25,319 Speaker 1: plan to ban sales of fossil fuel cars entirely. That 593 00:35:25,560 --> 00:35:28,440 Speaker 1: huge market has got to make anybody and everybody in 594 00:35:28,480 --> 00:35:33,160 Speaker 1: the energy market, you know, sit up and take notice. Oh, absolutely, Carol. 595 00:35:33,400 --> 00:35:35,560 Speaker 1: And it's it's not just in China, of course, there 596 00:35:35,560 --> 00:35:40,319 Speaker 1: are headlines over in California. We've recently had a couple 597 00:35:40,320 --> 00:35:42,920 Speaker 1: of months ago the announcement by Volvo that they are 598 00:35:42,960 --> 00:35:47,120 Speaker 1: completely going over to two E d s and so forth. So, yes, 599 00:35:47,520 --> 00:35:50,920 Speaker 1: whether it is commercially successful, whether it's being ordered by 600 00:35:51,040 --> 00:35:55,160 Speaker 1: government FIAT, uh, certainly. And and this is why you 601 00:35:55,200 --> 00:35:58,799 Speaker 1: are seeing the major did the dps, the shelves and 602 00:35:58,800 --> 00:36:04,280 Speaker 1: so forth. Did they are rebranding themselves as a gas 603 00:36:04,360 --> 00:36:07,360 Speaker 1: natural gas companies. They're they're getting away from that oil. 604 00:36:07,920 --> 00:36:11,480 Speaker 1: I was recently at a conference over this summer where 605 00:36:11,800 --> 00:36:16,440 Speaker 1: a major car manufacturer is um beginning to brand itself 606 00:36:16,480 --> 00:36:20,080 Speaker 1: as a transportation company. So then when we start the 607 00:36:20,120 --> 00:36:25,240 Speaker 1: factor in the growth of the potential growth of driverless technology. Uh. 608 00:36:25,360 --> 00:36:28,040 Speaker 1: It gets to the point where, look, I I have 609 00:36:28,120 --> 00:36:30,360 Speaker 1: a car for myself, My wife has a car, we have. 610 00:36:30,600 --> 00:36:33,360 Speaker 1: We have a clunker car for for our older kids. 611 00:36:33,800 --> 00:36:38,040 Speaker 1: That's three cars in a generation. You know, conceivably we 612 00:36:38,200 --> 00:36:40,680 Speaker 1: not we might not have to own any car. If 613 00:36:40,760 --> 00:36:42,600 Speaker 1: I can call up a lift or an uber and 614 00:36:42,640 --> 00:36:44,520 Speaker 1: have a driverless car come and pick me up or 615 00:36:44,520 --> 00:36:46,839 Speaker 1: take the kids to the school, why do I need 616 00:36:46,960 --> 00:36:49,680 Speaker 1: to own a car. So these are certainly factors that 617 00:36:49,719 --> 00:36:52,040 Speaker 1: are going to play in hand. And again it's going 618 00:36:52,120 --> 00:36:56,320 Speaker 1: to keep a lid I believe on crudle prices in 619 00:36:56,360 --> 00:36:59,360 Speaker 1: the foreseeable future economy. Maybe I'm asking the obvious, but 620 00:36:59,400 --> 00:37:01,240 Speaker 1: I'm gonna go ahead and do it anyway. With Saudi 621 00:37:02,080 --> 00:37:04,440 Speaker 1: Aramco getting ready to do its IPO or hopefully do 622 00:37:04,440 --> 00:37:07,279 Speaker 1: it's IPO this year, there's been some questions about the 623 00:37:07,360 --> 00:37:09,799 Speaker 1: valuation to truly and one truly and what what might 624 00:37:09,800 --> 00:37:12,000 Speaker 1: it be? Our headlines like this, this is again a 625 00:37:12,040 --> 00:37:16,560 Speaker 1: story about where they expect oil revenue, you know increasing. Bye, 626 00:37:16,640 --> 00:37:19,480 Speaker 1: it's a few years off here according to people in 627 00:37:19,520 --> 00:37:21,640 Speaker 1: the know. I mean, is this just about boosting the 628 00:37:21,719 --> 00:37:24,880 Speaker 1: value of that I p O. I'm gonna put my 629 00:37:24,920 --> 00:37:27,920 Speaker 1: skeptical hat on and say, yes, I do believe that 630 00:37:28,320 --> 00:37:31,480 Speaker 1: is a lot of jaw owning to attempt to keep 631 00:37:31,520 --> 00:37:35,359 Speaker 1: the price higher. Because obviously you're an oil producer, uh 632 00:37:35,440 --> 00:37:37,920 Speaker 1: you go for evaluation, you're going for an IPO. You 633 00:37:37,920 --> 00:37:41,000 Speaker 1: want that your your your product that you sell as 634 00:37:41,080 --> 00:37:44,320 Speaker 1: high as possible. And that's why I do think that 635 00:37:44,480 --> 00:37:47,400 Speaker 1: this was the announcement that they're going to take all that. 636 00:37:47,840 --> 00:37:51,080 Speaker 1: You know, that transition of moving oil from their power 637 00:37:51,120 --> 00:37:54,520 Speaker 1: generation to the export market certainly will boost the bottom line. 638 00:37:54,800 --> 00:37:58,160 Speaker 1: And Wall Street has taken notice. If if we look 639 00:37:58,200 --> 00:38:02,200 Speaker 1: at the bets that trade oil traders are taking on 640 00:38:02,600 --> 00:38:06,400 Speaker 1: with higher oil prices, they've gone you know, once again, 641 00:38:06,680 --> 00:38:09,800 Speaker 1: they went all in last November after the first OPEC 642 00:38:09,840 --> 00:38:13,880 Speaker 1: announcement to cut. They got burned terribly in the first quarter. 643 00:38:14,600 --> 00:38:17,279 Speaker 1: But they're they're at it again. While she's sitting on 644 00:38:17,360 --> 00:38:21,520 Speaker 1: record lunch in the Brent Crudel market, sitting on a 645 00:38:21,680 --> 00:38:26,600 Speaker 1: four year high length shipping UH in thenamics wt I contract. 646 00:38:26,840 --> 00:38:30,040 Speaker 1: So they're the ones a lot having buying this market. 647 00:38:30,200 --> 00:38:33,000 Speaker 1: We are speaking with. Stephen Shorty is the editor of 648 00:38:33,040 --> 00:38:36,840 Speaker 1: the short report all about energy markets. Stephen, you mentioned 649 00:38:36,960 --> 00:38:41,080 Speaker 1: natural gas earlier and how many oil companies are rebranding 650 00:38:41,120 --> 00:38:44,840 Speaker 1: themselves as natural gas companies, such as BP and Shell. 651 00:38:45,440 --> 00:38:49,759 Speaker 1: What's the best way to profit from this uh rebranding 652 00:38:49,760 --> 00:38:53,120 Speaker 1: effort from the desire to use more natural gas rather 653 00:38:53,160 --> 00:38:57,440 Speaker 1: than oil. Well, absolutely, Tim, and first and foremost it 654 00:38:57,480 --> 00:39:00,719 Speaker 1: would be in the petrochemical industries that at these are 655 00:39:00,719 --> 00:39:03,560 Speaker 1: industries that are highly dependent on natural gas, and we 656 00:39:03,640 --> 00:39:07,400 Speaker 1: do have an access uh to uh to a m 657 00:39:08,719 --> 00:39:12,319 Speaker 1: you know, pun intended a boatload of of natural gas. 658 00:39:12,400 --> 00:39:14,600 Speaker 1: So I always like to and I always go for 659 00:39:14,719 --> 00:39:18,600 Speaker 1: the levi Strous's method him look at the guys who 660 00:39:18,680 --> 00:39:22,640 Speaker 1: are supplying the material, uh, the infrastructure. That is to say, 661 00:39:22,760 --> 00:39:26,680 Speaker 1: we're now in a tremendous UH period where the industry 662 00:39:26,760 --> 00:39:29,840 Speaker 1: is turning on a dime. Uh. Fifteen years ago, you 663 00:39:29,920 --> 00:39:33,880 Speaker 1: had natural gas that supplied nearly the lower forty eight 664 00:39:33,920 --> 00:39:37,120 Speaker 1: or the contiguous United States gas needs UH and hence, 665 00:39:37,120 --> 00:39:41,120 Speaker 1: when you've got a Hurricane Harvey or Hurricane Hermor, for example, 666 00:39:41,440 --> 00:39:45,680 Speaker 1: natural cast prices with double, triple, quadruple UH. This time around, 667 00:39:45,800 --> 00:39:49,040 Speaker 1: they haven't. And that's because now nearly a third comes 668 00:39:49,080 --> 00:39:52,040 Speaker 1: from the Appalachian basin, So we're in the process now 669 00:39:52,239 --> 00:39:56,719 Speaker 1: deglutting that market. So infrastructure place, pipeline plays plays that 670 00:39:57,280 --> 00:40:01,799 Speaker 1: will will benefit from the growth of l engine export markets. 671 00:40:01,880 --> 00:40:04,640 Speaker 1: So it's the place that are can take the gas 672 00:40:04,680 --> 00:40:06,879 Speaker 1: from where it is in the producing area and get 673 00:40:06,920 --> 00:40:09,200 Speaker 1: it to where it needs to be. Pipelines up to 674 00:40:10,040 --> 00:40:13,560 Speaker 1: eastern Ontario, pipelines down to the southeast to get to 675 00:40:13,600 --> 00:40:16,520 Speaker 1: the export market, Pipelines to get to the East coast 676 00:40:16,560 --> 00:40:20,120 Speaker 1: to the export market. Mexico has made a you know, 677 00:40:20,640 --> 00:40:25,040 Speaker 1: you know, has made a tremendous investment, and Mexican demand 678 00:40:25,160 --> 00:40:28,360 Speaker 1: for for natural gas coming out of the Southwest is 679 00:40:29,440 --> 00:40:32,400 Speaker 1: robust right now, is only going to grow over the 680 00:40:32,480 --> 00:40:34,480 Speaker 1: years ahead. So so look at where the growth in 681 00:40:34,560 --> 00:40:37,480 Speaker 1: demand is going to be and plan accordingly. And this 682 00:40:37,680 --> 00:40:41,400 Speaker 1: comes even as natural gas prices remain below three dollars 683 00:40:41,440 --> 00:40:44,520 Speaker 1: per million BTU. Correcting me right now, where two sixty 684 00:40:44,840 --> 00:40:47,960 Speaker 1: seven do you see the actual price of natural gas 685 00:40:48,000 --> 00:40:50,840 Speaker 1: moving higher? Or as you said, just sell the pics 686 00:40:50,880 --> 00:40:54,000 Speaker 1: and the shovels. Yeah, well, I again, I think the 687 00:40:54,040 --> 00:40:56,640 Speaker 1: pics and the shovels are are are of every safe 688 00:40:56,680 --> 00:41:00,800 Speaker 1: bet and if you are investing in companies that do 689 00:41:01,400 --> 00:41:05,279 Speaker 1: have a tremendous uh need for natural gas. Part of 690 00:41:05,320 --> 00:41:08,960 Speaker 1: the speed stock being in petrochemical, being in power, uh, 691 00:41:09,120 --> 00:41:13,160 Speaker 1: being in steel heavy manufacturer, and so forth. Um, if 692 00:41:13,160 --> 00:41:15,040 Speaker 1: you if you're investing in one of these companies, you 693 00:41:15,040 --> 00:41:17,920 Speaker 1: you want to make sure that they are doing everything 694 00:41:18,480 --> 00:41:21,960 Speaker 1: and their power to lock in natural gas prices at 695 00:41:22,000 --> 00:41:25,440 Speaker 1: these levels, because, as I said, as these infrastructure plays grow, 696 00:41:25,560 --> 00:41:29,080 Speaker 1: the demand will grow, and natural gas prices are are 697 00:41:29,200 --> 00:41:33,600 Speaker 1: historically at very very low levels, record levels if you 698 00:41:33,640 --> 00:41:36,920 Speaker 1: take inflation into account. So if you have a company 699 00:41:36,960 --> 00:41:41,080 Speaker 1: that has a tremendous consumption of natural gas, before you 700 00:41:41,120 --> 00:41:43,960 Speaker 1: invest in that company, make sure go back to their 701 00:41:44,000 --> 00:41:46,439 Speaker 1: annual ports, go back to their investor meetings, make sure 702 00:41:46,480 --> 00:41:49,880 Speaker 1: they are locking in natural gas prices at these levels. 703 00:41:49,920 --> 00:41:53,480 Speaker 1: Because in the short term, PIM, we're an extreme bear 704 00:41:53,640 --> 00:41:55,759 Speaker 1: market and I'm not going to rule out natural gas 705 00:41:55,760 --> 00:41:59,760 Speaker 1: prices through this winter falling lower. But in the years ahead, 706 00:42:00,200 --> 00:42:02,360 Speaker 1: you can these companies can go out and find a 707 00:42:02,400 --> 00:42:06,719 Speaker 1: swap deal that will sell them uh the oil. Excuse me, 708 00:42:06,719 --> 00:42:09,759 Speaker 1: guest natural gas at these levels five six, seven years out. 709 00:42:10,000 --> 00:42:13,440 Speaker 1: If these companies are not locking in natural gas prices 710 00:42:13,440 --> 00:42:15,920 Speaker 1: at these levels. I think they're doing their investors a 711 00:42:16,000 --> 00:42:18,239 Speaker 1: tremendous disservice. All right, So in other words, I know 712 00:42:18,320 --> 00:42:21,839 Speaker 1: your investment. Speaking of knowing your investment, we kidded before 713 00:42:21,840 --> 00:42:25,200 Speaker 1: bringing you in UM about talking about bitcoin, and I 714 00:42:25,200 --> 00:42:27,200 Speaker 1: thought I was going to go there and loan, Behold, 715 00:42:27,239 --> 00:42:29,680 Speaker 1: I'm reading on the Bloomberg terminal, checking out the top 716 00:42:29,800 --> 00:42:33,960 Speaker 1: energy menu, and it says how China has used made 717 00:42:33,960 --> 00:42:39,400 Speaker 1: the first ever purchase of Middle East oil using blockchain technology, 718 00:42:39,440 --> 00:42:42,960 Speaker 1: so not necessarily using bitcoin, but talking about blockchain technology, 719 00:42:43,280 --> 00:42:45,960 Speaker 1: do you, Stephen, you have been following the energy world 720 00:42:46,000 --> 00:42:49,160 Speaker 1: for a long time. Do you see either digital currency 721 00:42:49,239 --> 00:42:53,800 Speaker 1: or blockchain the backbone, the digital ledger that supports digital 722 00:42:53,840 --> 00:42:57,759 Speaker 1: currencies ultimately being used in the commodity universe and specifically 723 00:42:57,760 --> 00:43:00,960 Speaker 1: in the energy universe. Uh. The answer is yes. But 724 00:43:01,080 --> 00:43:02,840 Speaker 1: I want to put the caveat out there that I 725 00:43:03,080 --> 00:43:06,640 Speaker 1: don't possess nearly the amount of great matter to understand 726 00:43:06,920 --> 00:43:11,000 Speaker 1: these cryptocurrencies, uh, and and the bid that's going into them, 727 00:43:11,040 --> 00:43:14,200 Speaker 1: and what I perceived to be a just historic bubble. 728 00:43:14,440 --> 00:43:17,719 Speaker 1: But that said, Carol, over the past ten years, there 729 00:43:17,800 --> 00:43:22,920 Speaker 1: has been um an effort by Iran, by Russia. Uh, 730 00:43:22,960 --> 00:43:25,600 Speaker 1: to wean the world off of the petro dollar, and 731 00:43:25,600 --> 00:43:28,880 Speaker 1: and and Americans really have to consider, you know what 732 00:43:29,000 --> 00:43:33,000 Speaker 1: a benefit uh, the US dollar being the world's invoicing 733 00:43:33,080 --> 00:43:36,399 Speaker 1: currency has has been because yeah, those dollars go out 734 00:43:36,400 --> 00:43:38,279 Speaker 1: to purchase the soil, but they always come back in 735 00:43:38,360 --> 00:43:42,160 Speaker 1: the United States, uh, to invest back into the United States. 736 00:43:42,480 --> 00:43:47,080 Speaker 1: So I do think, um, whether it is the viable option. Uh, 737 00:43:47,719 --> 00:43:51,520 Speaker 1: you know countries you know, for example Venezuela, which we 738 00:43:51,560 --> 00:43:55,080 Speaker 1: do have sanctions on uh, and it is putting a 739 00:43:55,120 --> 00:43:58,760 Speaker 1: strain on the Madua government. It has talked about moving 740 00:43:58,760 --> 00:44:02,400 Speaker 1: towards the cryptocurrency and and weaning themselves off the dependence 741 00:44:02,840 --> 00:44:07,200 Speaker 1: of having to own dollars or or for that hard currency. 742 00:44:07,680 --> 00:44:11,280 Speaker 1: So yes, I do think that is the potential. Although 743 00:44:11,360 --> 00:44:15,359 Speaker 1: again once again the caveat here is that is a 744 00:44:15,400 --> 00:44:19,600 Speaker 1: market that it reminds me of and run Carol Fit 745 00:44:19,880 --> 00:44:22,759 Speaker 1: sixteen years ago. Everybody thought they were the smartest guys 746 00:44:22,760 --> 00:44:25,480 Speaker 1: in the book, but everyone is afraid to admit that 747 00:44:25,520 --> 00:44:27,839 Speaker 1: they didn't understand what the heck these guys were doing. 748 00:44:27,920 --> 00:44:30,400 Speaker 1: And of course they were a bunch of crooks. So 749 00:44:30,880 --> 00:44:34,160 Speaker 1: I'm not calling bitcoin crooks or anything, but there's a 750 00:44:34,239 --> 00:44:36,640 Speaker 1: lot of people I think investing in it and then 751 00:44:36,719 --> 00:44:39,480 Speaker 1: and and they're afraid to admit they really don't understand 752 00:44:39,960 --> 00:44:42,480 Speaker 1: what's going on. I don't understand what's going on. I'm 753 00:44:42,480 --> 00:44:44,920 Speaker 1: staying away from it. But that's not to say, as 754 00:44:45,360 --> 00:44:48,239 Speaker 1: you rightfully pointed out the move by China, We've seen 755 00:44:48,320 --> 00:44:51,400 Speaker 1: the move by Venezuela. There's been moves over the years 756 00:44:51,560 --> 00:44:56,040 Speaker 1: from Iran and then excuse me, Russia to wean themselves 757 00:44:56,040 --> 00:44:59,440 Speaker 1: off of the dollar. And I do think cryptocurrencies will 758 00:44:59,480 --> 00:45:03,960 Speaker 1: help uh speed that along. Stephen Short, anytime someone puts 759 00:45:03,960 --> 00:45:07,480 Speaker 1: a picture of Bill Murray in their research report, a 760 00:45:07,600 --> 00:45:12,040 Speaker 1: flag it and ask you what does omnium gathering? What 761 00:45:12,080 --> 00:45:15,759 Speaker 1: does that mean for investors? And a picture of Bill 762 00:45:15,840 --> 00:45:18,800 Speaker 1: Murray and the Short Report right or r O G. 763 00:45:19,000 --> 00:45:23,560 Speaker 1: I'm the gathering is our take, our commentary, our observations 764 00:45:23,560 --> 00:45:26,280 Speaker 1: in our in the daily issues of the Short Report 765 00:45:26,560 --> 00:45:30,120 Speaker 1: on things that have an immediate impact on the energy industry. 766 00:45:30,160 --> 00:45:32,640 Speaker 1: And to your point, if anyone the Bill Murray fan, 767 00:45:32,880 --> 00:45:36,600 Speaker 1: specifically the movie Meatballs, when he's trying to rally the 768 00:45:36,640 --> 00:45:40,279 Speaker 1: troops playing against that that superior camp across the lake, 769 00:45:40,520 --> 00:45:42,839 Speaker 1: he's saying, look, they're better than us, but we can 770 00:45:42,880 --> 00:45:44,920 Speaker 1: beat him because the fact that they're better than us, 771 00:45:44,960 --> 00:45:47,440 Speaker 1: it just doesn't matter. And so when I look at it, 772 00:45:47,560 --> 00:45:50,000 Speaker 1: and this was a proposed the natural gas market that 773 00:45:50,080 --> 00:45:54,319 Speaker 1: we have industrial demands, UH is back and that's been 774 00:45:54,400 --> 00:45:58,200 Speaker 1: the one UH driver in natural gas prices over the 775 00:45:58,239 --> 00:46:01,759 Speaker 1: last eight years. UH that that has kept the lid 776 00:46:01,840 --> 00:46:05,040 Speaker 1: on natural gas prices UM. And so look, and we 777 00:46:05,040 --> 00:46:07,520 Speaker 1: have to keep in mind at the end, it wasn't 778 00:46:07,560 --> 00:46:10,800 Speaker 1: just the oil market that crashed. The industrial metals complex 779 00:46:11,080 --> 00:46:14,319 Speaker 1: crashed the industrial metal and not your that is your 780 00:46:14,440 --> 00:46:17,480 Speaker 1: your tell tale of an economy that was sputtering. Stephen, 781 00:46:17,480 --> 00:46:20,320 Speaker 1: we gotta run. Thank you so much so for talking 782 00:46:20,360 --> 00:46:23,120 Speaker 1: with us on this Tuesday, Stephen Shark of the Shork Report. 783 00:46:28,840 --> 00:46:33,040 Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and 784 00:46:33,120 --> 00:46:38,440 Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast 785 00:46:38,480 --> 00:46:42,720 Speaker 1: platform you prefer. I'm on Twitter at Tom Keane before 786 00:46:42,760 --> 00:46:46,600 Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg 787 00:46:46,680 --> 00:46:46,960 Speaker 1: Radio