Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: Hello and welcome to another episode of the Ad Thoughts podcast.
Speaker 2: I'm Tracy Alloway.
Speaker 1: And I'm Joe Wisenthal.
Speaker 2: Joe, when you hear mar A Lago, what do you
Speaker 2: think of?
Speaker 1: You know what's funny? I don't know Marno Lago is
Speaker 1: Actually I've been meaning to look it up. Is it
Speaker 1: a house?
Speaker 2: I thought you were going to say, I've been meaning
Speaker 2: to go there.
Speaker 1: I'd like to go there too, But is it a house?
Speaker 1: Is it a country club? Is it a place where
Speaker 1: someone can just book a room? Like I actually don't
Speaker 1: have a great conception of it, except I'm sure it's
Speaker 1: very eighties.
Speaker 2: Is then here's what I know. There's Trump, Yes, there's golf,
Speaker 2: heard of it, and that's about it.
Speaker 1: Yeah.
Speaker 2: I think the last thing anyone thinks of when you
Speaker 2: hear the words mar A Lago is the potential for
Speaker 2: another international monetary accord. Like, no one really thinks that, right.
Speaker 1: Did she shouldn't ping go to mar A Lago during
Speaker 1: the first Trump administration? I think he did.
Speaker 2: He might, right, Okay, but there was no new monetary agreement.
Speaker 1: Right, nothing like really that big came of it. We
Speaker 1: know Trump loves it is a Trump aesthetics and I'm
Speaker 1: sure he'd loved to like host world leaders at his club,
Speaker 1: at his house, at his golf course.
Speaker 2: Well, you know, the funny thing is, if there was
Speaker 2: going to be a mar A Lago Accord, like say
Speaker 2: it actually happened, then I think it would be the
Speaker 2: second major monetary agreement that happened in a hotel or
Speaker 2: a building owned by Trump, because the first one was
Speaker 2: the nineteen eighty five Plaza Accords.
Speaker 1: And did he own it at the time.
Speaker 2: I think so.
Speaker 1: Yeah, Well it's got to happen then.
Speaker 2: Yeah, Okay, for those who don't know what we're talking about,
Speaker 2: Wall Street analysts investors are all a buzz over the
Speaker 2: potential for a Mara a Lago accord, the idea being
Speaker 2: that the US kind of sets out this new monetary
Speaker 2: system in a similar way to the nineteen eighty five
Speaker 2: Plaza Accord or the original Bretton Woods agreement. And I
Speaker 2: got to say, this is just interesting from a theoretical perspective. Yeah,
Speaker 2: and I think it also points to a lot of
Speaker 2: important stuff about the way the Trump administration is thinking
Speaker 2: about not just the economy, but the financial system and
Speaker 2: I guess the global order itself, so we should talk
Speaker 2: about it.
Speaker 1: No, it really does speak to it. We should absolutely
Speaker 1: talk about it because there are core tensions within trump
Speaker 1: Ism that this gets to, and one of the big
Speaker 1: ones is I would say there's two specifically, One is
Speaker 1: the sort of desire to turn the US into a
Speaker 1: manufacturing powerhouse, and theoretically one aid for that would be
Speaker 1: a weaker US dollar. And so this idea of the
Speaker 1: dollars too expensive and maybe you know, maybe there's some
Speaker 1: agreement to weaken it could help US manufacturing. And then
Speaker 1: there's question of how inflame lential globally does the US
Speaker 1: want to be period across anything, whether it's military, whether
Speaker 1: it's finance, whether it's currency, et cetera. And you know,
Speaker 1: one of the ideas of like pulling inward tariffs, et cetera,
Speaker 1: changing some questions about the international security relationship. Is this
Speaker 1: idea of like an inward turn and maybe the US
Speaker 1: doesn't want to be as prominent globally on the stage.
Speaker 1: It's all kind of wrapped up in the same question.
Speaker 2: Yeah, absolutely, So again we should talk about it. And
Speaker 2: I'm very pleased to say we have the perfect guest.
Speaker 2: I can't believe he hasn't been on the show I
Speaker 2: know before, But we're going to be speaking with Jim Bianco.
Speaker 2: He is, of course, the president and founder of Bianco Research.
Speaker 2: He recently held a presentation for his clients all about
Speaker 2: the mar A Lago accord, the potential mar Alago, the.
Speaker 1: Mar A Lago accord that doesn't exist, that.
Speaker 2: Doesn't exist yet, the hypothetical that we should nevertheless talk about. So, Jim,
Speaker 2: thank you so much for coming on.
Speaker 3: All thoughts, Ah, thanks for having me and Tracy to
Speaker 3: correct you. Trump bought in nineteen eighty eight and five.
Speaker 2: Gosh darn it. Okay, well, Jim.
Speaker 1: Two hotels that he theoretically at some point was connected to.
Speaker 2: Jim, why don't we start with the client meeting? What
Speaker 2: sort of inspired you to have something specifically dedicated to,
Speaker 2: you know, a hypothetical that hasn't happened yet.
Speaker 3: So Trump becomes president and we've been talking about a
Speaker 3: fire hose of executive orders and new ideas, and we're
Speaker 3: all straining to keep up with everything. And my clients,
Speaker 3: you know, started asking me a lot about what he
Speaker 3: was doing, but they were doing it in isolation. Oh,
Speaker 3: what does tariffs mean? Over here, and what do you
Speaker 3: think they're going to do with the Sovereign Wealth Fund
Speaker 3: over there? And they were tended taking the attitude that
Speaker 3: we're just kind of pruning and nipping around the edges,
Speaker 3: and I said, no, I think there's a bigger plan
Speaker 3: in place here. And it was laid out by Stephn
Speaker 3: Miran when he was with Hudson Bay Capital and now
Speaker 3: he's the Council of Economic Advisor's chairman for President Trump.
Speaker 3: And in Trump one point zero, he worked under Steve
Speaker 3: Mnuchin at the Treasury Secretary in a report he put
Speaker 3: out right after the election about re ordering the monetary system,
Speaker 3: and I said, I think that they're really starting to
Speaker 3: think bigger picture. And within that report was the concept
Speaker 3: of a mar A Lago accord. And what I try
Speaker 3: to emphasize was this is not a roadmap per se
Speaker 3: that we're going to do ABC DNE, but look at
Speaker 3: this as there's bigger things going on here and we
Speaker 3: need to understand what their objectives are, how much of
Speaker 3: it has been implemented, and I would argue to a
Speaker 3: lot has been implemented of it so far, and where
Speaker 3: we're going to go with it. So that was the
Speaker 3: catalyst for why I thought it was important enough for
Speaker 3: its own presentation.
Speaker 1: I guess I have a sort of two part question.
Speaker 1: Is one is is the Marol Lago Accord an event
Speaker 1: that you see happening or potentially happening where a bunch
Speaker 1: of people come to mar A Lago or is it
Speaker 1: like a metonym for a sort of destination, a new
Speaker 1: position for the world in the US if there's some
Speaker 1: number of years and if it's the latter, like we
Speaker 1: no one can really know the ABC, D and E.
Speaker 1: But what does that sort of you know, we're here
Speaker 1: now we get to this destination. What is this sort
Speaker 1: of new role for the US and that destination?
Speaker 3: Yeah, I think it's the latter. It's more of a destination.
Speaker 3: By the way, the name mar A Lago Accord. As
Speaker 3: you pointed out, you know, there's been two big you know,
Speaker 3: monetary realignments, currency agreements in the last fifty years, Bretton
Speaker 3: Woods and the Plaza, which we talked about a second ago.
Speaker 3: Bretton Woods is a resort in New Hampshire, and Plaza
Speaker 3: is obviously a hotel in New York. So these things
Speaker 3: tend to get named after the places that they're constructed,
Speaker 3: So that was the concept behind the name. Marlago Accord
Speaker 3: is just kind of fitting with that genre. Now, where
Speaker 3: are we going. The goal here is to make the
Speaker 3: US more competitive. In the US, to be more competitive,
Speaker 3: I think needs a couple of things that one needs
Speaker 3: to see the dollar go lower, but a specific kind
Speaker 3: of dollar to go lower. Let's call it the trade
Speaker 3: weighted dollar. And the reason I say that is the
Speaker 3: Federal Reserve has this thing called the trade weighted dollar,
Speaker 3: and if you look at it over the last forty years,
Speaker 3: it's up two hundred and eighteen percent. So the dollar
Speaker 3: has been extraordinarily strong. Now you and I might be
Speaker 3: more comfortable looking at the DXY Dollar Index that's down
Speaker 3: five percent over the last forty years. Now, what's the
Speaker 3: difference between the two. The trade weighted dollar is twenty
Speaker 3: six currencies weighted by the amount of trade that we
Speaker 3: do with these countries. The big two dominant players are
Speaker 3: Canada and Mexico. The dollar index to six currencies weighted
Speaker 3: by more financial flows. Fifty seven percent of that is
Speaker 3: the Euro. So when we talk about that, the dollar
Speaker 3: has been holding back manufacturing in the US. Trade in
Speaker 3: the US, it's been this trade weighted dollar that has
Speaker 3: just been getting stronger and stronger and stronger, and we
Speaker 3: keep looking at the Euro going no, it's not, no,
Speaker 3: it's not. But we don't trade with the Eurozone as
Speaker 3: much as we trade with Canada and Mexico, and then
Speaker 3: if you want to even throw in their China as well.
Speaker 3: So that's where I think to bring down the dollar. Now,
Speaker 3: how do you bring down the dollar by reorienting the
Speaker 3: financial system. You have to deal with the debt situation,
Speaker 3: the deficit interest rates in the United States. And that's
Speaker 3: really what the crux of the problem is. Or let
Speaker 3: me put it to you this way. If you want
Speaker 3: to talk about bringing the dollar down, dealing with the deficie,
Speaker 3: dealing with the amount of debt in the United States,
Speaker 3: they're all interrelated. If you fix one, you fix the others.
Speaker 3: If you can't fix one, you can't fix the others.
Speaker 3: And so they all are all part of a larger hole.
Speaker 3: And that's what I think the idea of the Marlago
Speaker 3: Accord is now at its base. It's basically the idea
Speaker 3: behind it is we have thirty six trillion dollars of debt.
Speaker 3: Where did most of that debt come from? It came
Speaker 3: from the military and security arrangements for the post World
Speaker 3: War two era, and during the post World War II era,
Speaker 3: the countries that we protected on our side didn't really
Speaker 3: pay for it. In particular, if you look at the
Speaker 3: European countries, they've paid up until Trump one point zho
Speaker 3: less than one percent of their GDP in defense, where
Speaker 3: in the eighties and nineties the US was paying eight
Speaker 3: or nine percent of its GDP in defense, and it's
Speaker 3: still paying five or six percent of its GDP in defense,
Speaker 3: and so they have had quote unquote a free ride
Speaker 3: for decades on this is the back of American security.
Speaker 3: Trump one point zero came in and said, this is unfair.
Speaker 3: You have to pay more. They agreed to up that
Speaker 3: to two percent. Trump two point zero January twenty third,
Speaker 3: he came and gave a presentation to Davos, the World
Speaker 3: Economic Forum, virtually and he said he's going to demand
Speaker 3: that they pay five percent of their GDP in terms
Speaker 3: of defense. And you've seen since then the European leaders
Speaker 3: have been coming around to this idea that maybe we
Speaker 3: need to pay more for defense, maybe we need to
Speaker 3: suspend the Master's Agreement, which is part of the Euro
Speaker 3: agreement that says that they can't run a deficit more
Speaker 3: than two percent, So they could spend three trillion dollars
Speaker 3: over the next decade on defense, and that's got the
Speaker 3: the years on defense docks going vertical, and this whole
Speaker 3: argument that is coming that maybe they need to do it,
Speaker 3: and that is, you know, maybe coming back to the
Speaker 3: US and the idea, well, if they're going to spend trillions,
Speaker 3: then we could spend a lot less on defense, and
Speaker 3: that that helps our financial position, hopefully relieving us of
Speaker 3: the debt, bringing the deficit down, lowering interest rates, and
Speaker 3: lowering the dollar. That is basically what we're trying to
Speaker 3: come at was that we've got a lot of debt,
Speaker 3: we've got a big deficit. Who should pay for it?
Speaker 3: And the typical answers you've always gotten was while we
Speaker 3: got to raise taxes, we got to cut spending, and
Speaker 3: Trump under his America First policy saying how about those
Speaker 3: guys over there in the NATO countries that haven't paid anything,
Speaker 3: maybe they should start paying more. So the reason I
Speaker 3: thought the mar Alago cord was important to talk about
Speaker 3: now is it's kind of happening in some forms or
Speaker 3: we should start getting our head around it. And part
Speaker 3: of that which I have brought up is tariffs. Tariffs
Speaker 3: are part of this bigger hole. We could talk about
Speaker 3: that as we.
Speaker 1: Hold two things Tracy real quickly. One is I am
Speaker 1: embarrassed to say I did not realize that the long
Speaker 1: term trajectory of the dollar index and the trade weighted
Speaker 1: dollar looks so different. You know, they move pretty similar
Speaker 1: to day to day. But look, it is a really
Speaker 1: striking forty year chart. And also to this point, we're
Speaker 1: recording this on Monday the twenty fourth. Yesterday Germany held
Speaker 1: their elections and it looks like Friedrich Murtz is going
Speaker 1: to be the new und chancellorndes counselate. You can correct me,
Speaker 1: but he talked about it. He's talked about this directly,
Speaker 1: that there's going to have to be some relationship. And
Speaker 1: you can look at stock of a German defense company
Speaker 1: like Rhine Mettal.
Speaker 2: And that's a very good role.
Speaker 1: And it is straight up anyway too.
Speaker 2: Yeah, Okay, So we touched on the dollar and the
Speaker 2: desire to weaken the dollar in order to I guess
Speaker 2: fulfill the Trump mandate to reshot manufacturing. We talked about
Speaker 2: the security element. One thing I do want to talk
Speaker 2: about is interest rates, because when you think about the
Speaker 2: US's role in the global economy, I mean, the US's
Speaker 2: main export is basically debt, right, it's US treasuries, and
Speaker 2: there's been this discussion for a very long time about
Speaker 2: whether that is net net a good thing for the
Speaker 2: US or a bad thing for the US. Jim, can
Speaker 2: you talk about that side of things for a bit.
Speaker 3: Yeah, you're right that. You know, the conveyor belt has
Speaker 3: always been that we import a lot of things, so
Speaker 3: we and we pay for them with dollars. So we
Speaker 3: export all of these dollars to China, to Canada, to Mexico,
Speaker 3: you know, wherever else, you know, to the Petro to
Speaker 3: the petro dollar states or the Gulf states that produce oil.
Speaker 3: And what do they do with all those dollars once
Speaker 3: they get them? They reinvest them back into the United
Speaker 3: States in the treasuries. So when people look at the
Speaker 3: idea that something like half of all treasuries are owned
Speaker 3: outside of the United States, well that's going to be
Speaker 3: the case. When you're running a gigantically large merchandise trade deficit.
Speaker 3: You're paying for that stuff with your currency and dollars
Speaker 3: are not very good in Beijing or in Riad. You
Speaker 3: have to do something with them, and you just reinvest
Speaker 3: them back into dollar based assets like US treasuries. And
Speaker 3: so we've had that whole conveyor belt going. But the
Speaker 3: problem with that conveyor belt is is that it keeps
Speaker 3: the cycle going where that trade weighted dollar keeps going
Speaker 3: up and up and up, and it makes us, being
Speaker 3: an export country mainly manufacturing, more and more uncompetitive. So
Speaker 3: the idea behind the trying to reverse that is by
Speaker 3: maybe ending this relationship with so much debt, bring that down,
Speaker 3: bring down the deficit as well, and hopefully bring down
Speaker 3: interest rates that would lower the value of the dollar
Speaker 3: and make us more competitive. Like I said, you can't
Speaker 3: think of these things as three separate things like the
Speaker 3: level of debt, the deficit, and the level of the
Speaker 3: tradewaight to dollar. They're all somewhat related to each other,
Speaker 3: if not directly related to each other. Dealing with one
Speaker 3: is dealing with the other two.
Speaker 1: You know, a question that I find that I have
Speaker 1: asked in the past is, in the modern economy in
Speaker 1: twenty twenty five, do you still have confidence that currency
Speaker 1: weakness or currency strength are important dimensions of export or
Speaker 1: manufactured competitiveness because I can imagine you know, when you're
Speaker 1: making commodity or something simple, right, your your base is cheaper, Okay,
Speaker 1: you sell more. But now we have these incredibly advanced
Speaker 1: supply chains, there's good reason to believe that in many
Speaker 1: areas that are important to the US, that the US
Speaker 1: is no longer at the leading edge of technology, particularly
Speaker 1: when it comes to automobiles and certain other high tech
Speaker 1: things like that. To a degree in twenty twenty five,
Speaker 1: do you believe that the value of your currency is
Speaker 1: an important dial for your export competitiveness.
Speaker 3: Well, that's a good question, and it depends on what
Speaker 3: you're trying to export. So what the US currently exports
Speaker 3: is more services, and services do tie into a lot
Speaker 3: of intellectual property. And you're right, if we're going to
Speaker 3: be exporting you know, legal services or technology, those services
Speaker 3: are somewhat unique to the US. There are some are
Speaker 3: the US companies that export thos and the level of
Speaker 3: the dollar doesn't really matter. But if you're talking about
Speaker 3: returning a manufacturing base to the US, now you're getting
Speaker 3: more towards a commodity type product. Anybody could produce it
Speaker 3: you know, other countries could produce a manufactured product, whether
Speaker 3: it's steel or even cars, and they could be relatively
Speaker 3: the same as ours, So you compete on price. And
Speaker 3: when you compete on price, then the level of the dollar,
Speaker 3: the level of exchange rates, especially trade weighted exchange rates,
Speaker 3: does matter for the success of those products, and it
Speaker 3: matters quite a bit. So if you're trying to return
Speaker 3: a manufacturing base to the US, the level of the
Speaker 3: trade weighted dollar does matter.
Speaker 2: I wanted to go back to the sovereign wealth fund
Speaker 2: idea as well, because I think when most people here
Speaker 2: you know SWF, they kind of think of commodity exporting countries,
Speaker 2: you know, countries in the Middle East perhaps that export
Speaker 2: things like oil and gas, maybe Norway, And obviously the
Speaker 2: US has become a net exporter of oil in recent years.
Speaker 2: But the one thing we don't have that a lot
Speaker 2: of countries with sovereign wealth funds actually do is a
Speaker 2: current account surplus. Right, So how would a sovereign wealth
Speaker 2: fund actually work in the US given that at the
Speaker 2: moment we don't really have a pool of money to invest.
Speaker 3: Are you sure about that? I thought most people think
Speaker 3: s w F men single white female.
Speaker 1: I was gonna make that joke, not on but yes.
Speaker 3: But as far as the sovereign wealth fund, you're you're right.
Speaker 3: There's lots of sovereign wealth funds around the world and
Speaker 3: they all have one thing in common. They're creditor countries, right,
Speaker 3: they have something that generates cash for them. In fact,
Speaker 3: there's actually one sovereign wealth fund in the United States.
Speaker 3: It's the Alaska Permanent Fund, and that's the royalties that
Speaker 3: it gets. Yeah, that's because of the royalties that it
Speaker 3: gets off of oil. So sovereign wealth funds in that respect,
Speaker 3: whether it's Norway, Alaska, the Golf States, that makes sense
Speaker 3: because they're generating money. They have to do something with
Speaker 3: the money, and they invest it. But we're detonation, as
Speaker 3: you said, there's no cash flow that's sitting around, going
Speaker 3: what are we going to do with this money? Because
Speaker 3: we're a detonation. So at first it was kind of
Speaker 3: a confusing idea, how are we going to create a
Speaker 3: sovereign wealth fund when we're not generating any money? And
Speaker 3: then that was February third, when Trump signed the executive
Speaker 3: order and then Treasury Secretary Besson said we're going to
Speaker 3: monetize the assets of the United States balance sheet and
Speaker 3: put them to work. Okay, what does that mean? No
Speaker 3: one knows for sure, And to be particular, the Treasury said,
Speaker 3: we'll get back to later this year with a paper
Speaker 3: on how this is going to work. But we initially surmised, oh,
Speaker 3: they're going to take some assets that we own, maybe
Speaker 3: realize them at market value, and then put those into
Speaker 3: the Sovereign Wealth Fund. And the two that kind of
Speaker 3: jumped out at first was gold. There's eighty one hundred
Speaker 3: tons of gold that the US owns, subject to Elon Muskin,
Speaker 3: President Trump visiting Fort Knox to make sure that it's
Speaker 3: still there. But assuming that it is, it's valued and
Speaker 3: has been valued at its book value forty two dollars
Speaker 3: and twenty two cents since nineteen seventy three. The market
Speaker 3: values twenty nine hundred dollars. So if you just said, okay,
Speaker 3: we're going to take that eighty one hundred dollars of
Speaker 3: gold and we're going to revalue it to twenty nine
Speaker 3: hundred dollars, there's eight or nine hundred billion dollars right there.
Speaker 3: The other one is bitcoin. The Justice Department, through criminal
Speaker 3: and fraud investigations, has acquired two hundred and seven thousand
Speaker 3: bitcoin that they have not been able to figure out
Speaker 3: who the owners are. It's about eleven billion dollars or so,
Speaker 3: and it's literally sitting on a thumb drive at the
Speaker 3: Justice Department. Maybe we can move that into the Sovereign
Speaker 3: Wealth Fund too, and then those are some of the
Speaker 3: assets it has. Now other assets you could argue could
Speaker 3: be the federal government is the largest real estate owner
Speaker 3: in the United States. It owns parks, it owns other
Speaker 3: types of assets. That it could manage those assets within
Speaker 3: the South of Wealth Fund, and then it could start
Speaker 3: off with trillions of dollars of these assets and borrow
Speaker 3: against that to then buy other assets like TikTok, which
Speaker 3: President Trump has been floating the idea that the US
Speaker 3: should own TikTok. Now, why would they do this. I
Speaker 3: think they would do this for one or two reasons.
Speaker 3: Reason one, if you're thinking like a private sector person, right,
Speaker 3: I got a bunch of debt here, but you want
Speaker 3: to compare it to your total assets or your equity.
Speaker 3: But we're not fully valuing our total assets in equity.
Speaker 3: Let's kind of show that we have a lot more
Speaker 3: assets and equity than we think, so that that level
Speaker 3: of debt doesn't look as onerous as it was. And
Speaker 3: the second one is you could borrow against those assets.
Speaker 3: Because one of the things, you know, within the crypto community,
Speaker 3: they're talking about the Sovereign Wealth Fund is going to
Speaker 3: buy bitcoin, which I don't think is a very good idea,
Speaker 3: but nevertheless, one of the big competiments to buying it
Speaker 3: would be the idea that we're going to borrow even
Speaker 3: more money, potentially crowd out interest rates and drive them
Speaker 3: even higher. Because the American public is going to say,
Speaker 3: I'm happy paying a higher mortgage rate so that we
Speaker 3: could speculate on the price of bitcoin and maybe the
Speaker 3: federal government will turn a profit on it. That's a
Speaker 3: non starter. But if the idea is, well, we're going
Speaker 3: to borrow against some of these gold holdings or some
Speaker 3: of these other holdings and it's not really going to
Speaker 3: affect your level of your mortgage rate, that might be
Speaker 3: a more palatable way to do it. So that's how
Speaker 3: I think the Sovereign Wealth Fund is going to work.
Speaker 3: That's what everybody's surmised. Under the idea that we don't
Speaker 3: know what monetized the assets of the United States means
Speaker 3: we're waiting on the report and we're trying to color
Speaker 3: in the lines until we get that.
Speaker 2: I keep thinking about the twelve billion dollar bitcoin yeahing
Speaker 2: drive and hoping no one loses it. Jim, thank you
Speaker 2: so much for that explanation of you know, it is
Speaker 2: still a hypothetical, a theoretical situation, but you walked us
Speaker 2: through it very very well. So thanks for coming on
Speaker 2: odd Box.
Speaker 1: Thank you, Thanks so much, Jim.
Speaker 2: That was great, Joe. There's so much in there, and
Speaker 2: I guess the big question is obviously the feasibility, because
Speaker 2: the whole mar A Lago accord idea, you're trying to
Speaker 2: resolve these tensions, right, so the idea that you want
Speaker 2: to reshot manufacturing, but you also want a weaker dollar,
Speaker 2: and these things are sort of at odds with each
Speaker 2: other sometimes, all these different moving parts. But I wonder,
Speaker 2: I guess I wonder with the mar A Lago accord,
Speaker 2: a potential one if you're introducing another big tension, which
Speaker 2: is you're sort of moving into a very transactional relationship.
Speaker 3: Yeah.
Speaker 2: Yeah, So the idea that the US wants to be
Speaker 2: compensated for all of the different roles it fulfills in
Speaker 2: not just the global financial system, but in things like
Speaker 2: international security. And at the same time as you move
Speaker 2: into a transactional relationship, it feels like there's less trust
Speaker 2: in these relationships, right Like would countries in Europe NATO countries,
Speaker 2: for instance, want to exchange money for US security when
Speaker 2: what they've been grappling with for the past two months,
Speaker 2: I guess is the idea of the US suddenly changing
Speaker 2: its mind or asking for new things when it comes
Speaker 2: to security agreements.
Speaker 1: So a few things, like Jim said, you know, a
Speaker 1: lot of this is like, you know, it is all
Speaker 1: like hypothetical. We don't know exactly where it's going. But
Speaker 1: just to start, the idea that Europe is sort of
Speaker 1: quote waking up and realizing that it has to take
Speaker 1: care of much more of its defense seems absolutely real
Speaker 1: and not theoretical. Now will be translated into spending, especially
Speaker 1: given you know, the famous German debt break, et cetera.
Speaker 1: We don't know, but that feels like it's going to
Speaker 1: be a real dial mover. By the way, I think,
Speaker 1: seriously all listeners should pull up a chart of Ryan
Speaker 1: Mattel the tickers RHM on the German stock market, and
Speaker 1: just look at this stock and you can see it
Speaker 1: jumped after the Russian invasion of Ukraine and then it's
Speaker 1: just been going absolutely bananas since then. I also recommend
Speaker 1: there's a really good article from November by our friend
Speaker 1: Karthik Sanker, and he really talks about how Bessen has
Speaker 1: been on board with this idea as well, that there
Speaker 1: really should be, in his view, this very transactional relationship
Speaker 1: where if a country wants to be under the US
Speaker 1: security umbrella and wants liberalized trade relations, then it has
Speaker 1: to commit to buying long term treasuries and that that
Speaker 1: should be a trade and so this sort of transactional
Speaker 1: approach look or to the deal like it sort of
Speaker 1: makes sense that this is the direction to look at
Speaker 1: from on many different venues.
Speaker 2: Speaking of transactional, can I recommend one.
Speaker 1: Of my own articles please?
Speaker 3: All Right?
Speaker 2: So last week in the Odd Lots newsletter which everyone
Speaker 2: should subscribe to, I talked about the sort of Chinese
Speaker 2: nesting doll of ideas embedded in the mar A Lago accord.
Speaker 2: So you just mentioned Scott Besson, the new Treasury secretary,
Speaker 2: and then I guess the layer under that is Stephn
Speaker 2: Mirran who we spoke about in that big paper, restructuring
Speaker 2: the global trading system. And then below that is Sultan Posar.
Speaker 2: Oh yeah, and if you read Mirn's paper, you'll see
Speaker 2: a lot of references to Posar's thinking and the New
Speaker 2: Breton Woods concept and the idea of maybe the global
Speaker 2: financial order starting to change.
Speaker 1: And then then below Posar is the Odd Lots Podcast.
Speaker 1: It's sort of like that meme right at the very
Speaker 1: bottom where it's really us that's holding up the entire
Speaker 1: that's right, restructuring the entire system.
Speaker 2: And on that note, everyone should check out some of
Speaker 2: the old episodes we did with Posar on the New
Speaker 2: Breton Woods because because a lot of this is stemming
Speaker 2: from so in the meantime, shall we leave it there.
Speaker 1: Let's leave it there.
Speaker 2: This has been another episode of the Oudlots Podcast. I'm
Speaker 2: Tracy Alloway. You can follow me at Tracy Alloway and.
Speaker 1: I'm joll Wisenthal. You can follow me at the Stalwart.
Speaker 1: Follow our guest Jim Bianco, He's at Bianco Research. Follow
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Speaker 2: Thanks for listening.