Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and am Marie Hordern. Join us each
Speaker 2: day for insight from the best in markets, economics, and
Speaker 2: geopolitics from our global headquarters in New York City. We
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Speaker 2: Bloomberg Terminal and the Bloomberg Business app. Joining us for
Speaker 2: a conversation live on Bloomberg TV, the seventy ninth Secretary
Speaker 2: of the Treasury, Scott Besson secondary best and it's good
Speaker 2: to see you, sir. A warm congratulations from all of
Speaker 2: us to you. Quite an arrival from what was it,
Speaker 2: Little River, South Carolina.
Speaker 3: Yes, it's an American success story or in America.
Speaker 2: To the office of Alexander Hamildson with some unique experience.
Speaker 2: How is that going to help you, sir, approach some
Speaker 2: of the challenges in this economy?
Speaker 3: Well, Jonathan, the way I look at it, for my
Speaker 3: career for thirty five years, I've been sitting outside the
Speaker 3: room with my ear up against the door, or trying
Speaker 3: to look over the transum, trying to figure out what
Speaker 3: policy makers should do or going to do, and how
Speaker 3: that would affect the markets. Now I'm inside the room
Speaker 3: trying to figure out what everybody outside the room expects
Speaker 3: us to do, how the market's going to react, and
Speaker 3: what the economic and market implications are a short term
Speaker 3: but more importantly medium term, and how that's going to
Speaker 3: affect the underlying economy.
Speaker 2: We've got a lot to discuss, So let's start with
Speaker 2: the debt market. What people expected you to do, maybe
Speaker 2: was changed some of the issuance for treasury. Something that
Speaker 2: you'd said back last summer about then Secretary Yellen was
Speaker 2: that jellin had taken control of monetary policy through treasury issuance.
Speaker 2: Then you're basically maintaining her plans. Can you help explain that,
Speaker 2: help us understand where you're coming from.
Speaker 4: Sure, So the.
Speaker 3: Previous administration shorten some of the duration, and we haven't
Speaker 3: shortened it further. We've just kept the policy in place,
Speaker 3: and I believe over the medium term it's going to
Speaker 3: play out as it becomes clear that everything the President
Speaker 3: Trump's administration is doing will be disinflationary. We're going to
Speaker 3: bring down energy costs, We're going to bring down regulation.
Speaker 3: What DOSEE is doing in terms of cost cutting. And
Speaker 3: I think once the tax cuts and jawbacks is made permanent,
Speaker 3: then we can have a revenue increase cost decrease. And
Speaker 3: as you said, is the nation's top bond salesman, I
Speaker 3: got a pretty good story.
Speaker 2: So what's the medium term? Help me understand that. What
Speaker 2: is the medium term? And then once you see all
Speaker 2: those things, let's say those ambitions become reality, then do
Speaker 2: you start to think about term again?
Speaker 4: The debt.
Speaker 3: Sure, but that's that's a long way off, and we're
Speaker 3: going to see what the market wants. As Lisa noted
Speaker 3: this morning that the and it's fun to see someone
Speaker 3: who believes that Fed minutes are exciting that the Fed
Speaker 3: said that they may stop their balance sheet runoff. So
Speaker 3: you know, easier for me to extend duration when I'm
Speaker 3: not competing with another big seller.
Speaker 5: So when do you think that time would be end
Speaker 5: of the year or further down into the administration's term.
Speaker 4: It's going to be it's going to be path dependent.
Speaker 3: We're still seeing sort of the residual Biden inflation that's
Speaker 3: still coming through. Uh, And I think as a the
Speaker 3: market starts to realize what we're doing and inflation starts
Speaker 3: to drop, then we will we will see. So it's
Speaker 3: going to be path dependent. That's the eventual goal, but
Speaker 3: you know, I'm not going to signal it now.
Speaker 5: When you mentioned the FED minutes, participants indicated yesterday that
Speaker 5: one of the problems they had was they were waiting
Speaker 5: for Trump policies to come into place. Do you think
Speaker 5: that those policies, when you think of tariffs, potentially deportations, immigration,
Speaker 5: this can be inflationary. Is it going to hold back
Speaker 5: the FED from cutting rates?
Speaker 3: Well to the extent the team transitory at the FED
Speaker 3: is still has any credibility.
Speaker 4: I would say.
Speaker 3: That tariffs, if they have any price adjustments, are the
Speaker 3: most transitory thing there are, so I don't think that
Speaker 3: should hold them back very long. And I would point
Speaker 3: out that, depending on what number you want to use,
Speaker 3: ten twenty million people who came across the border, we
Speaker 3: had the worst inflation of forty years when we added
Speaker 3: ten or twenty million people. So I'm not sure why
Speaker 3: people are saying that it's inflationary to tell them to
Speaker 3: go home So when.
Speaker 5: You look at team Transitory, do you think the next
Speaker 5: move for them would be a cut?
Speaker 4: Amory.
Speaker 3: I have said publicly that I will talk about what
Speaker 3: the FED has done. When I was a market commentator
Speaker 3: and investor, I would talk about what.
Speaker 4: They should do.
Speaker 3: Now I will leave it to them, and sure Powell
Speaker 3: and I have a weekly breakfast. We saw each other yesterday,
Speaker 3: and I will convey my thoughts there.
Speaker 2: Well, let's talk about what they have done. We can
Speaker 2: comment on that. You said you're willing to They cut
Speaker 2: rights one hundred basis points going into the end of
Speaker 2: last year, and I don't think happened yield to the
Speaker 2: long end roads. They didn't decline. Do you think feder
Speaker 2: reserve easing contributed to high long end yields?
Speaker 3: Well, Jonathan, I would just say the point of cutting
Speaker 3: rates is to cut rates. So if they cut rates
Speaker 3: and rates went up, then there probably was something there.
Speaker 3: I thought that the rate cut in September. I said
Speaker 3: it maybe even on your show here, that it was oversized.
Speaker 3: The market responded. But now we're seeing term premium come
Speaker 3: back down, so we'll see what happens from here.
Speaker 6: Do you think the current rate right now is enough
Speaker 6: to bring down ten year yields over time just by
Speaker 6: virtue of being restrictive.
Speaker 4: Again, I'm not going to comment on current policies.
Speaker 6: I am curious you talk about how you do look
Speaker 6: at the tenure yield every single day.
Speaker 1: I love that. I love that you're the top.
Speaker 6: Bond salesman in the United States, and I'm wondering, are
Speaker 6: you expecting it or hoping it to go down from here?
Speaker 6: Is that necessary to reach to achieve your three percent
Speaker 6: growth target?
Speaker 3: Well, what's necessary are the underlying conditions. So the underlying
Speaker 3: conditions that we need for yields to come down.
Speaker 4: For growth to go back up.
Speaker 3: We've got this affordability crisis in housing, We've got an
Speaker 3: affordability crisis in the auto payments. So one thing that
Speaker 3: would be very stimulative. And as Jonathan mentioned earlier, the
Speaker 3: ten years come down or rates have come down every
Speaker 3: week since Donald Trump's been president. So if we can
Speaker 3: continue that for fifty two weeks, that'd be great, and
Speaker 3: it'd be very it would be a win for the
Speaker 3: American people, which at the end of the day, that
Speaker 3: is our goal. So if we do what we say
Speaker 3: we're going to do, if we can rein in the
Speaker 3: budget deficit, if we have non inflationary growth, if we
Speaker 3: bring down energy prices, and I think now that I
Speaker 3: have the numbers on the inside, there was a big
Speaker 3: contributor to this massive inflation was a regulation. I think
Speaker 3: you said earlier this morning that the what if these
Speaker 3: things cause inflation? As am Marie just said some of
Speaker 3: the policies, Well, what really happened under the previous administration
Speaker 3: was you created a demand shock with government spending, but
Speaker 3: it was met by supply constraints as there was more regulation.
Speaker 3: And Trump one point zero, we created demand shock with
Speaker 3: tax cuts and it was met by supply side response
Speaker 3: of less regulation. So you know, the Biden administration created
Speaker 3: this inflation. That a demand shock and constraining supply is
Speaker 3: the ultimate recipe for inflation.
Speaker 2: And now you want to count spending the DOGE program,
Speaker 2: let's talk about it. You've called it one of the
Speaker 2: most important audits to government ever. You remember the Clinton
Speaker 2: tried something similar, the National Partnership for Reinventing Government. How
Speaker 2: different will this be and what kind of cost savings?
Speaker 2: And even the team thinking about.
Speaker 4: Yeah, and John, I can go all the way back.
Speaker 3: Given my tenure in the business, I can go all
Speaker 3: the way back to the eighties to the Grace Commission,
Speaker 3: and they had some great the ideas, most of them
Speaker 3: not implemented.
Speaker 4: I think that the Clinton.
Speaker 3: Gore initiative, I think a lot of that was academics.
Speaker 4: So this is.
Speaker 3: People on the ground all areas of government, and it's
Speaker 3: moving quickly, and I really do think it's unfortunate, but
Speaker 3: it's been lampooned and the attack the way it has.
Speaker 3: But when it's being attacked like that, it tells me
Speaker 3: that there are a lot of entrenched interest in terms.
Speaker 3: When you're moving people's cheese, they don't like it, and
Speaker 3: it's not their chase, it's the American people's chase.
Speaker 5: Well, how about putting some of that cheese back into
Speaker 5: American people's pocket. How inflation would those five thousand dollars
Speaker 5: potential doge checks be that the President spoke about yesterday.
Speaker 3: Well, I think again that if we are bringing down
Speaker 3: energy prices, if we are cutting the regulation. So I
Speaker 3: think that it's a to quote the Vice President during
Speaker 3: the campaign, I think it's holistic and I think that.
Speaker 4: It's all kind of one mosaic.
Speaker 3: If you were to inject a lot of money into
Speaker 3: the economy, because Amory think about this, that we are
Speaker 3: at this massive deficit to GDP six point seven almost
Speaker 3: seven percent, So what will be happening on one side,
Speaker 3: You'll be bringing down that's spending in the economy. So
Speaker 3: very easy mental model is every three hundred billion is
Speaker 3: about one percent of GDP.
Speaker 4: So every three.
Speaker 3: Hundred billion that DOGE is able to save, could you
Speaker 3: put that back in the economy into people's pockets.
Speaker 5: One thing potentially that could happen and people are questioning
Speaker 5: it is maybe remarking gold. Elon Musk, who's leading DOGE,
Speaker 5: was talking about maybe going to Fort Knox to make
Speaker 5: sure those gold reserves are there.
Speaker 1: That comes under your purview. Do you have any plans
Speaker 1: to visit Kentucky?
Speaker 3: I don't have any plans. I can tell you that
Speaker 3: we do an audit every year. I can tell the
Speaker 3: American people on camera right now that there was a
Speaker 3: report September thirtieth, twenty twenty four.
Speaker 4: All the gold is there.
Speaker 3: Any US Senator who wants to come and visit it
Speaker 3: can arrange a visit through our office.
Speaker 5: Gold was your biggest holding when you're a hedge fund
Speaker 5: manager before you divested to become the Treasury Secretary, So
Speaker 5: you know the value of where gold is right now
Speaker 5: versus where it's marked on its balance sheet just north
Speaker 5: of forty dollars an ounce, it's close to three thousand.
Speaker 5: Is it under consideration for this administration to revalue gold?
Speaker 3: I think that somehow when we were telling about the
Speaker 3: Sovereign Wealth Fund and I said monetize the balance sheet,
Speaker 3: I can promise you that's not what I had in mind.
Speaker 5: So it's not under consideration, not on the table, that's
Speaker 5: not what I had in mind.
Speaker 6: When you look at the dose savings that you have
Speaker 6: so far, how much is that going to go to
Speaker 6: offset some of the tax extensions.
Speaker 1: That we see.
Speaker 6: What other savings are you looking at that potentially are crucial.
Speaker 3: Well, again, they're just getting started. And one of the
Speaker 3: shocking things to me has been when we talk about waste,
Speaker 3: fraud and abuse, we all think of what comes out
Speaker 3: of DC.
Speaker 4: We think of some waste and fraud and friction costs.
Speaker 3: Because one way to think about this is twenty five
Speaker 3: percent of the US economy flows through Washington, DC. So
Speaker 3: if we can cut the friction on that, that's a
Speaker 3: lot of savings. What I we are discovering now and
Speaker 3: wate fraud and abuse. There may be much more fraud
Speaker 3: going on than we thought, and I think you're going
Speaker 3: to be hearing about that.
Speaker 4: Over the coming week.
Speaker 2: Can we hear about it now?
Speaker 4: I think you're going to be hearing about it on
Speaker 4: the coming weeks.
Speaker 2: What kind of fraud are you thinking about? What kind
Speaker 2: of fraud have you identified?
Speaker 3: Again, i'd refer you to so you're here now, so
Speaker 3: I've refer it out of you. I'd refer you to
Speaker 3: some of the statements by Lee Zelden at the EPA.
Speaker 2: Okay, well, we can build on that in the weeks
Speaker 2: to come. I can refer to you some comments from
Speaker 2: the Washington Post on defense cuts. They're reporting the p Hexseth,
Speaker 2: the Defense Secretary or the senior leaders of the Pentagon
Speaker 2: and throughout the US military to develop plans for cutting
Speaker 2: eight percent from the defense budget in each of the
Speaker 2: next five years. You're aware of that plan.
Speaker 3: I'm in contact with Secretary of HEXITS and we're working
Speaker 3: very closely. And again, you're not going to jump the
Speaker 3: gun here on TV, but I think everything's on the
Speaker 3: table and can things work more efficiently.
Speaker 1: When it comes to the defense budget.
Speaker 5: We spent more last year on our interest payments than defense.
Speaker 5: So are you hoping for twenty twenty five to spend
Speaker 5: more on defense than the interest payments?
Speaker 4: Well, it would depend how we got there too.
Speaker 3: That does defense spending go down, does the interest bill
Speaker 3: go down?
Speaker 4: We'll see what that calculus is.
Speaker 2: Got to focus on tariffs too. Revenue raising is part
Speaker 2: of that story. Reciprocity, national security. You want fair trade.
Speaker 2: That we all want fair trade. The President has discussed
Speaker 2: reciprocal tariffs. He's mentioned the Europeans also offered to drop
Speaker 2: auto tariffs. Could we start there? Have the Europeans actually
Speaker 2: made that offer? Can you confirm that?
Speaker 3: I haven't seen that, but it's possible. I think that
Speaker 3: good thing about President Trump's negotiating style is people put
Speaker 3: things that were or they not on.
Speaker 4: The table before on the table very quickly.
Speaker 5: So that would be reciprocity and maybe negotiating. But to
Speaker 5: offset the tax cuts, where's the revenue raising?
Speaker 3: So there could be Not everyone is going to give
Speaker 3: on every point, right, So the Europeans seemingly put forward
Speaker 3: very quickly auto terrafs, but not every country is going
Speaker 3: to do that. My view, as I've said before, China
Speaker 3: is the most imbalanced, unbalanced economy in the history of
Speaker 3: the world, and they are trying to export their way
Speaker 3: out of what is a very serious recepsion, and the
Speaker 3: rest of the world can't do that. They can't dump
Speaker 3: Chinese goods. They're going to have to rebalance their economy.
Speaker 3: So tariffs on Chinese goods went up ten percent, and
Speaker 3: a lot of that again Mexico, Canada, China. That was
Speaker 3: in response to the fentanyl crisis.
Speaker 5: China is the only one though, that those terrorfts have
Speaker 5: actually stayed in place.
Speaker 1: Is that the opening salvo?
Speaker 5: How high do you think Trump wants to go when
Speaker 5: it comes to Chinese terraffs Well, I'm.
Speaker 3: Not going to give away as negotiating hand on TV.
Speaker 3: I do have my first call with my Chinese counterpart
Speaker 3: tomorrow morning, so I look forward to a very productive discussion.
Speaker 1: What's the first point you want to bring up.
Speaker 3: That we want to work together And as we said,
Speaker 3: a lot of the precursor ingredients from fentanyl originate in China,
Speaker 3: so we really want.
Speaker 4: To put a stop to that very quickly.
Speaker 2: Historically, there's been some currency concerns with regards to China
Speaker 2: as well. In the conversations we had you. Before taking
Speaker 2: up this post with you, you mentioned that some countries,
Speaker 2: some currencies aren't undervalued. Is China one of them? Is
Speaker 2: that something you'd like to remedy.
Speaker 3: Yep, Well, Jonathan, what I've said is, make no mistake,
Speaker 3: the US still has a strong dollar policy, but that
Speaker 3: does not mean that by laterally other countries can weaken
Speaker 3: their currencies versus the dollar or manipulate their currencies, but
Speaker 3: specifically on China, China is a very difficult currency to
Speaker 3: value because I really think that when we think about
Speaker 3: the value of the R and B, it's in three
Speaker 3: different equilibrium. On any academic model, say purchasing power parity,
Speaker 3: it's cheap.
Speaker 4: On the other side, you have one point four billion.
Speaker 3: People who are subject to capital controls and they want
Speaker 3: to get some of their money out of the country.
Speaker 3: And then you have what I would call the X factor.
Speaker 3: If you put money into China today, what's your belief
Speaker 3: that you will get it out in two, three, four years.
Speaker 3: So it's very difficult to come up with a point
Speaker 3: value of the currency.
Speaker 6: You've talked about the desire to have a strong dollar
Speaker 6: policy for the United States, but is a strong dollar
Speaker 6: at odds with the idea of bringing industrial production back
Speaker 6: to the United States and sort of speaks to some
Speaker 6: of the concerns about out other countries trying to devalue
Speaker 6: their currencies.
Speaker 3: Well, I think that we will necessarily have a strong
Speaker 3: dollar if we run good policies, and I think we're
Speaker 3: going to run good policies if we.
Speaker 4: If we cut the trade deficits.
Speaker 3: When you think about the trade deficit is a combination
Speaker 3: of terms of trade, value of the dollar and our
Speaker 3: own budget deficits. So if we bring down the budget deficit,
Speaker 3: then I think everyone if we are deregulating, if we are,
Speaker 3: if we make the tax cuts permanent, if we make
Speaker 3: the US more business friendly, then the everyone, all the
Speaker 3: reserve managers in the world, all the private investors are
Speaker 3: going to want a piece of that, and the dollar
Speaker 3: will be strong.
Speaker 4: But we will be able.
Speaker 3: To push back on that through good policies, through productivity,
Speaker 3: the US productivity. I think that I've been meeting with
Speaker 3: a lot of the tech leaders lately, and I think
Speaker 3: we are very close to the cusp of this AI
Speaker 3: finally coming into the productivity numbers.
Speaker 6: Do you think that a strong dollar is necessary in
Speaker 6: order to offset some of the costs that could be
Speaker 6: otherwise associated with the tariffs.
Speaker 3: Traditional economic theory would tell you that the dollar strengthens
Speaker 3: on the tariffs, but who knows what we've already seen
Speaker 3: since the dollar appreciation since November fifth. Markets live in
Speaker 3: the future, so have we already priced in some of that?
Speaker 3: And on the other side, what we are trying to
Speaker 3: do is to get other economies to successfully rebalance.
Speaker 4: My conversation tomorrow.
Speaker 3: With my and this is really just an introductory conversation,
Speaker 3: but as we go down the road, the Chinese need
Speaker 3: to rebalance their economy in favor of consumption, that they
Speaker 3: are suppressing the consumer in favor of the business community.
Speaker 3: So as that happens, then they will increase their demand.
Speaker 4: Same thing in Europe, you know Mario Drogy.
Speaker 3: For any of your viewers who didn't see it, Mario
Speaker 3: Drogy had a fantastic editorial this weekend in the Financial
Speaker 3: Times where he said, look, we have put the equivalent
Speaker 3: of more terrorists on ourselves, more terrorists on ourselves than
Speaker 3: the US could ever contemplate. So could you get a
Speaker 3: very strong euro Somehow they had an immaculate deregulation just quickly.
Speaker 5: You're having this call with your Chinese counterpart. Will you
Speaker 5: see him next week at the G twenty Finance Minister's meeting.
Speaker 3: I'm not going to Cape Town due to some domestic considerations.
Speaker 3: I actually think that he's not attending either.
Speaker 2: So is that what he's told you?
Speaker 4: This is the that we've gotten.
Speaker 2: Okay?
Speaker 3: So, and again I also believe several of my other
Speaker 3: counterparts won't be there. I have been speaking and in
Speaker 3: contact with them regularly, and then I will be seeing
Speaker 3: them at the Spring IMF World Bank meetings in DC.
Speaker 2: I wanted to talk to you about national security as well,
Speaker 2: and the dollar has certainly got a role to plan
Speaker 2: on that front. The sanctions policy of the United States
Speaker 2: as we look back, do you think that's been misused abused?
Speaker 4: Excellent question, Jonathan.
Speaker 3: That when I came into Treasury, if you think about
Speaker 3: sort of Treasury is five pieces. There's irs on one side,
Speaker 3: the men on the other, but the main focus of
Speaker 3: in the building at Treasury is domestic finance, international finance.
Speaker 3: That's what I've been doing for my career for thirty
Speaker 3: five years. I was able to hit the ground running
Speaker 3: on that, what we call TFI. Terrorism finance is where
Speaker 3: my biggest learning curve is. So I'm spending a lot
Speaker 3: of time on that, and I'm reviewing the sanctions policies.
Speaker 4: Why do we do what we do? Have they been effective?
Speaker 3: Are we running a twenty first century program as opposed
Speaker 3: to some outdated modalities.
Speaker 5: Well, the current sanctions are in place in places like
Speaker 5: Russia to try to get Puttin to negotiating table. You
Speaker 5: are intricately involved in these in this deal. You were
Speaker 5: justin Kiev, you met with President Zelenski. Trump yesterday called
Speaker 5: Zelensky a dictator without these elections and said that he
Speaker 5: better move fast or he's not going to have a
Speaker 5: country left. Does this language make it harder for you
Speaker 5: to get that minerals deal over the finish line?
Speaker 3: Well, look, I think President Zolensky unfortunately escalated and has
Speaker 3: put some daylight between.
Speaker 4: Them, escalating that a lot of his remarks.
Speaker 3: In Munich, I thought we're inappropriate. President Zelenski, when I
Speaker 3: met with him, assured me that he'd be the signing
Speaker 3: the minerals deal in Munich.
Speaker 4: He has not.
Speaker 3: And look the real purpose here and I think it's
Speaker 3: turned into this media circus. The President Trump had a
Speaker 3: very elegant plan and it was bring the Ukrainians closer
Speaker 3: to the US.
Speaker 4: Let's do this economic deal.
Speaker 3: And the even Carl Rove in the Wall Street Journal
Speaker 3: this morning approves of it that the US, with greater
Speaker 3: economic interest in Ukraine, provides a security shield.
Speaker 4: So the sequencing of.
Speaker 3: What was going to happen was bring the Ukrainians closer
Speaker 3: to the US through economic ties, convince the American people
Speaker 3: and the American public, get them onside, and then tell
Speaker 3: the Russians go to the negotiating table with a very
Speaker 3: fulsome message that if we need to, we will take
Speaker 3: sanctions up.
Speaker 5: Well, what about tapping a Russian frozen assets and three
Speaker 5: hundred billion dollars? Would you force your European counterparts to
Speaker 5: not just have them frozen, but actually tap them. Trump
Speaker 5: talks about repaying the American taxpayer.
Speaker 1: Shouldn't Russia be a part of that.
Speaker 3: Well, what's happening now is they are being tapped.
Speaker 4: So the returns from interest, the returns.
Speaker 3: From the freezed asset pile, is going to pay the Europeans.
Speaker 3: You know, what's very important to understand here is everything
Speaker 3: the US has done to date, the American people, the
Speaker 3: American taxpayer, is grants the Europeans roughly half of what
Speaker 3: they've done are loans, and the runoff from the frozen
Speaker 3: assets is being used to repay European loans.
Speaker 2: If you communicated that to the Europeans, the europe sent
Speaker 2: with them. What's that If you communicate to the Europeans
Speaker 2: that you're absent with.
Speaker 4: Them, I think Vice President events that are a pretty
Speaker 4: good job. In Unich.
Speaker 2: Do you think they understand that the United States is
Speaker 2: running a deficit of north of six percent close to say,
Speaker 2: and that the budget for defense is north of eight
Speaker 2: hundred billion dollars? Do they think? Do you think they
Speaker 2: understand the gravity at the moment in the United States
Speaker 2: the US perspective.
Speaker 3: Look, I think that they understand that President Trump during
Speaker 3: his first term this term, Vice President Vance and the
Speaker 3: entire security apparatus had told them that many of the
Speaker 3: countries are deficient in their NATO spending and they need
Speaker 3: to come up. When I went to Ukraine, you fly
Speaker 3: into Poland. Poland is spending almost five percent of GDP
Speaker 3: on defense and look at Poland sitting next to Ukraine.
Speaker 3: Poland is one of the great economics success stories of
Speaker 3: the past thirty years. After China, they've had the fastest growth.
Speaker 3: So why couldn't Ukraine, with some US capital ingenuity know
Speaker 3: how and root out some of the corruption do as
Speaker 3: well as their neighbors done.
Speaker 2: If Europe spends more, will it allow Americans to come
Speaker 2: back on defense spending? Is that the ultimate goal?
Speaker 3: The ultimate goal is for the Europeans to come up
Speaker 3: to where they've said that they are going to and
Speaker 3: to provide their share of the NATO spending.
Speaker 5: You mentioned sanctions, So do you have both on the
Speaker 5: table ready to go a sanctions ramp up or wind
Speaker 5: down on Russia depending how these talks go.
Speaker 4: I think that'd be a very good characterization.
Speaker 5: When it comes to the talks. Trump still thinks he's
Speaker 5: going to meet with Putin. He said probably by the
Speaker 5: end of the month. The end of the month is
Speaker 5: next week. Are you preparing for that.
Speaker 3: I'm not going to give away the timetable, but the
Speaker 3: President is committed to ending this conflict very quickly.
Speaker 4: And I will tell you your name, Kiev. I went to
Speaker 4: a children's hospital that had been bombed. And this was
Speaker 4: not a children's.
Speaker 3: Hospital where you take your child if he or she
Speaker 3: scrapes like this.
Speaker 5: Was see you can imagine I did that trip that
Speaker 5: you're talking about just a few months ago. You can
Speaker 5: imagine why they haven't had elections in right, they're living
Speaker 5: in this martial law.
Speaker 3: They are, and it's probably a necessary, probably necessary to
Speaker 3: move forward with the democratic process.
Speaker 2: We've covered a lot of topics. One name that has
Speaker 2: not come up very much is Elon Musk. Let's finish there.
Speaker 2: You've had some tremendous colleagues in your experience over your career,
Speaker 2: including the great investor Standing Drunken Miller. You've worked alongside
Speaker 2: Donald Trump through the campaign. Can you just describe what
Speaker 2: it's like to work with someone like Elon Musk, someone
Speaker 2: as successful an American business Just what's that like day
Speaker 2: to day?
Speaker 3: Yeah, Look, Elon Musk, like stand drunk and Moller like
Speaker 3: I always compare the great business people to great athletes.
Speaker 3: They keep their eye on the prize, whether that whether
Speaker 3: he's the Messy or Michael the Messy or Michael Jordan.
Speaker 3: He is focused and his energy level is unbelievable and
Speaker 3: he's gotten to where he has because everything's on the table.
Speaker 3: There's always this examination of why are we doing it
Speaker 3: this way? Why are we doing what we're doing? And
Speaker 3: most of all, if something's not working, Let's fix it.
Speaker 5: You know, Sam Oltman was on Bloomberg TV just two
Speaker 5: weeks ago and called Elon Muss insecure.
Speaker 1: Do you view him as much?
Speaker 3: I'm not going to get into the tech magnet the.
Speaker 2: Kind of slap best secondly best, and I would say
Speaker 2: that's wise. He is drawing criticism, though, when you and
Speaker 2: the administration come out and pick out the various things
Speaker 2: where money is being wasted on, I think we can
Speaker 2: all agree that that's a waste of money. When there
Speaker 2: might be some concern is the way that some people
Speaker 2: are being laid off in Washington that lacks some dignity?
Speaker 2: Could you comment on that today?
Speaker 3: Look, I think that, uh, there are many fine public servants,
Speaker 3: and but I think that.
Speaker 4: I've been in Washington.
Speaker 3: It's three or four weeks now, and there's a real
Speaker 3: bias towards the status quo. And if you don't move
Speaker 3: quickly then they then the lobbyists get involved, the entrenched interest,
Speaker 3: and it's impossible to get anything done. So you know,
Speaker 3: any anyone who has experienced, uh in financial hardship, the
Speaker 3: any kind of the mental duress, uh, you know, I'm
Speaker 3: sorry for them, but that's also what the average American
Speaker 3: experiences every day most of us. You know, you all
Speaker 3: come to work, you want good readings, the you know
Speaker 3: you uh, you get a performance readout.
Speaker 4: You really push forward.
Speaker 3: And I can tell you that in Treasury, I have
Speaker 3: been so impressed with the quality of the permanent staff
Speaker 3: and I want to get everybody back to the office
Speaker 3: and a lot of people are on board with that.
Speaker 5: When it comes to your prior life, you didn't have
Speaker 5: a boss. You said it would be like atrophy if
Speaker 5: you weren't trading financial markets every single day. What is
Speaker 5: it like now to be in this position where you
Speaker 5: make decisions that people can trade against what you're doing,
Speaker 5: and you also have a boss that sits pretty close
Speaker 5: to you. In terms of the Treasury Department and the
Speaker 5: West Wing.
Speaker 3: Well, look, I only had my own firm for eight years,
Speaker 3: so I worked with mister Sours, with Stan Druck and
Speaker 3: Mower and it's a great feedback mechanism. And I think
Speaker 3: I have the best position in DC. I'm on the
Speaker 3: White House campus.
Speaker 4: We have a great staff. In Treasury.
Speaker 3: I can be in the Oval in four minutes, so
Speaker 3: there's proximity. And again, not like Elon Musk, President Trump
Speaker 3: is committed to shaking up the status quo. He came
Speaker 3: in with a mandate and he's moving on it very quickly.
Speaker 2: You're a total gentleman, and you've been very gracious with
Speaker 2: your time. Thanks for being a good friend to this
Speaker 2: program over the last year, Secretary Besson there of the
Speaker 2: Treasury Secretary, best and thank you, Sir Canardi Goldberg of
Speaker 2: TD Writing markets retain a dual focus as the year
Speaker 2: wears on, economic fundamentals and politics. Trade uncertainty is dominated headlines,
Speaker 2: but immigration and fiscal policy also matters significantly to the market.
Speaker 2: Gannardi joins us now for more. Cannardi, It's good to
Speaker 2: see you. Let's talk about this bond market. You're to
Speaker 2: drop in. They're not climbing. That was not the call
Speaker 2: coming into twenty five from the consensus. Your call is
Speaker 2: a bit different. What are you looking for, Well.
Speaker 7: We're still looking for kind of a first half, second
Speaker 7: half story. I think the first half is all about
Speaker 7: trying to figure out Trump to some extent, and trying
Speaker 7: to figure out the macro backdrop as well. We have
Speaker 7: a fairly strong macroeconomy that is on its way to
Speaker 7: gradually moderating, and then we've got a lot of the
Speaker 7: uncertainty on trade, on tariffs, on immigration, on all these things,
Speaker 7: and that's really going to push us towards kind of
Speaker 7: a second half where we do think, we reassess and
Speaker 7: rates slowly drift flower over the course of the year.
Speaker 6: So right now range bound is people wigh these sort
Speaker 6: of counterbalances and remain in a fog where do you
Speaker 6: have clarity yet?
Speaker 1: Do you understand Trump?
Speaker 4: I'll put it to you this way.
Speaker 7: With a lot of my conversations with clients, the conviction
Speaker 7: level on a scale of one to ten is about
Speaker 7: a negative two. You know, nobody has any clue as
Speaker 7: to what's coming next.
Speaker 2: And really what we're trying.
Speaker 7: To understand is what is the end goal of a
Speaker 7: lot of these policies. And we're still very much in
Speaker 7: the thick of it. I mean, it's been a month
Speaker 7: at this point. It's felt like much longer than that.
Speaker 7: For the bond market, I can tell you it seems
Speaker 7: like everything is calmed, but underneath the surface, there's a
Speaker 7: lot of analysis going on, a lot of people trying
Speaker 7: to understand what exactly is the angle of these policies.
Speaker 7: I don't think the market has a good sense of
Speaker 7: that yet right now.
Speaker 6: Where you looked at the meeting minutes yesterday that came
Speaker 6: out from the last FMC meeting, and they talked about
Speaker 6: the uncertainty, the policy uncertainty, and said that generally it
Speaker 6: pointed to upside risks to the inflation outlook. Do agree
Speaker 6: that when you put the soup together, the risk is
Speaker 6: to an upside bent and inflation rather than a downside
Speaker 6: swing in growth.
Speaker 7: I think if you look at the data you've seen
Speaker 7: in the last couple of months, you know the FED
Speaker 7: is very much painted by that. They do try to
Speaker 7: look at longer term trends. The last couple of months
Speaker 7: have been a little firm, although I will say less
Speaker 7: firm than expected. And if you look at the translation
Speaker 7: into core PCE, we're still looking for a point twenty
Speaker 7: five on a month a month reading just next week,
Speaker 7: so we're not really seeing this massive reacceleration of inflation
Speaker 7: that folks were worried about. So I think we're still
Speaker 7: on a downward trajectory. The issue is it's not downward
Speaker 7: enough for the Fed. They wanted to be making more progress,
Speaker 7: and I think that's what's got the body market a
Speaker 7: little stuck.
Speaker 6: It's not lower enough for the Fed, and it's not
Speaker 6: lower enough for the Treasury Department.
Speaker 1: And we're going to be speaking.
Speaker 6: With Scott Bessett who talked about how he is focused
Speaker 6: on the tenure yield. How much control do you think
Speaker 6: the Treasury has over this? How much will their issuance
Speaker 6: plans as well as just how they offset some of
Speaker 6: the spending. How much is that going to really be
Speaker 6: the main driver for where the tenure is.
Speaker 7: I think the focus from this administration is well received
Speaker 7: by modern markets.
Speaker 4: I can tell you that much.
Speaker 7: There's a lot of I would say, you know, like
Speaker 7: of the fact that he is looking at the long
Speaker 7: end of the Yeld curve and saying, what can we
Speaker 7: do to ensure that there's ample supply demand. Maybe that
Speaker 7: means once November comes around, which is when we expect
Speaker 7: auction sizes.
Speaker 4: To increase, maybe they moderate the increases in the long end.
Speaker 4: Maybe they don't even increase.
Speaker 7: Ten twenty and thirty or auction sizes. That's something that's
Speaker 7: potentially on the table. I doubt that would have been
Speaker 7: on the table with prior administrations. They would have tried
Speaker 7: to raise it in all venues. Here, we're really looking
Speaker 7: at where is the kind of the optimal issuance point
Speaker 7: with the with the keen kind of point of let's
Speaker 7: try not to increase rates further out the curve term
Speaker 7: premium is already higher, so that's something that you know,
Speaker 7: the US taxpayer has to be paying for, and they're
Speaker 7: really trying to minimize constant taxpayers.
Speaker 2: That's that's really the Treasury's goal.
Speaker 5: What can they do in the short term though, if
Speaker 5: they're laser focused on bringing down the tenure, I.
Speaker 4: Mean, get the budget in order.
Speaker 7: I mean, that's really the next big thing, and not.
Speaker 1: Send out five thousand dollars checks.
Speaker 7: It would be use five thousand dollars checks to pay
Speaker 7: down the deficit, right, I mean, that would be kind
Speaker 7: of the best thing that's received by the bond market
Speaker 7: so far. I mean, if you really want to do this,
Speaker 7: you know, we're running about a six percent deficit to GDP.
Speaker 7: Bring that down.
Speaker 4: I know there's a lot of efforts to do that.
Speaker 7: At the moment. We'll have to see what the results
Speaker 7: of that are. I don't know if the bond market
Speaker 7: is fully convinced that lower deficits is the direction we're heading,
Speaker 7: and to what extent they're going to be lower a.
Speaker 2: Seventy dice, but you have. It's a folding rising and
Speaker 2: that's the change that not many people expected coming into
Speaker 2: the new Yea.
Speaker 6: I love it is talking about in terms of the
Speaker 6: analysis underneath the hood of all of these potential policies
Speaker 6: and how they offset each other. And right now the
Speaker 6: focus is more on what this could mean for a
Speaker 6: growth head more than say inflation.
Speaker 2: Canadia's good to see you as always, appreciate your time,
Speaker 2: Thank you, sir, Cannada girl. But the i f TD
Speaker 2: securities on this bond market, all the asym of New
Speaker 2: Century Advisors joins us. Now for more, Claudia, welcome to
Speaker 2: the program. I want to get straight to that economic data.
Speaker 2: Jobless claims it doesn't look like there's a ton of
Speaker 2: weakness here when you look at the labor market from above,
Speaker 2: from thirty five thousand feet, any reason for concern at
Speaker 2: the moment.
Speaker 8: So thirty five thousand feet, the labor market still looks
Speaker 8: really good. Now, clearly we have to pay attention to
Speaker 8: the layoffs that are happening within the federal government and
Speaker 8: how that might spread through contractors and other kinds of
Speaker 8: grants that are held back. But that is at the
Speaker 8: high level. That's just one corner of the labor market.
Speaker 8: But I think back to the point chat about this uncertainty.
Speaker 8: We came into this moment with hiring rates that look
Speaker 8: kind of unusual for the amount of layoffs. Like layoffs
Speaker 8: look really good, But we are an environment that isn't
Speaker 8: absorbing the workers who are out there looking for jobs.
Speaker 8: So if we do get into a place of layoffs,
Speaker 8: then that can be a real problem. It can turn
Speaker 8: into a problem very quickly. Not a problem now, but
Speaker 8: it could be.
Speaker 6: Claudia has ever been an analog a time and history
Speaker 6: that you can point to where there was a lot
Speaker 6: of policy uncertainty and a pretty ballad labor market. It's
Speaker 6: someone that was kind of in stasis and not expanding
Speaker 6: and not contracting.
Speaker 2: That's tough.
Speaker 8: I mean, it is true that when we start into
Speaker 8: an administration there is going to be a lot of
Speaker 8: a new administration uncertainty about where the economic policy is
Speaker 8: going all together.
Speaker 4: Right, So we have.
Speaker 8: These moments and time and it doesn't have to, you know,
Speaker 8: really cause a big upset in the labor market. It's
Speaker 8: more what the policies turn into going forward. So we're
Speaker 8: in kind of this like holding pattern at the moment,
Speaker 8: but I wouldn't necessarily say.
Speaker 4: This is out out of the.
Speaker 1: Normal, Claudia.
Speaker 6: I'm wondering as an economist how much you're increasingly looking
Speaker 6: at the economic data put out by the government versus
Speaker 6: the economic data put out by corporate executives. And I
Speaker 6: say this because increasingly what you're seeing in the stock
Speaker 6: market is corporate earnings are really the driver of pretty
Speaker 6: much everything across the board. I wonder if that's increasingly
Speaker 6: on the bond side, and from an economics perspective as well, well, I.
Speaker 8: Think it's important to I mean, we need to be
Speaker 8: looking at all pieces of data. A lot of the
Speaker 8: government data do a much better job of rolling it
Speaker 8: all up, giving us the big picture, the trends where
Speaker 8: we're going as an economy overall. Clearly there are going
Speaker 8: to be important idiosyncratic at the different the firm levels,
Speaker 8: the earnings levels, that will drive I say, markets an
Speaker 8: important way. So I don't think we should ever be
Speaker 8: in an either or situation, And there can be times
Speaker 8: where it's really difficult to match up the two, where
Speaker 8: you have things going on in sectors that are very
Speaker 8: different than the economy as a whole CAU.
Speaker 5: We talk about what's going on in the job sector
Speaker 5: at the federal level. If we're seeing a dogification of
Speaker 5: the federal workforce, what kind of average numbers do you
Speaker 5: expect to be added every month? Last year is about
Speaker 5: thirty five thousand on average of federal workforce employees added
Speaker 5: to the job report.
Speaker 8: Right, So at this point it's really hard to get
Speaker 8: a firm sense of numbers coming out of DOGE and
Speaker 8: just the reporting. You know, we're getting things very much
Speaker 8: in piecemeal in terms of the layoffs that have actually happened,
Speaker 8: the layoffs that are likely to happen. So I think,
Speaker 8: you know, keeping in perspective, federal government workforce less than
Speaker 8: two percent of the full government if we had the
Speaker 8: full probationary workers. So those two hundred thousand workers that
Speaker 8: have been targeted, they were all laid off, Like that's
Speaker 8: a tenth of a percentage point on the unemployment rate.
Speaker 8: These are small numbers in that big picture. They're incredibly
Speaker 8: disruptive in the federal government. That could be disruptive for services.
Speaker 8: But we have to like these We're getting constant headlines
Speaker 8: of layoffs and they will add up. It's just a
Speaker 8: question of how big those really are in reality, and
Speaker 8: that's just not a known yet and how it spreads, right,
Speaker 8: this is not just about the federal workforce. It's being targeted.
Speaker 8: So I think at this point it's it's clearly a negative.
Speaker 8: I can tell you the direction that that looks like
Speaker 8: on the jobs report, but whether it's the kind of
Speaker 8: numbers that are portending of a recession or a major
Speaker 8: contractional labor market like that would require a lot of
Speaker 8: amplification outside of the federal government sector.
Speaker 5: On the flip side, how are you taking into consideration
Speaker 5: what we're seeing on the immigration side with the Trump
Speaker 5: administration deportations and much stricter border control.
Speaker 8: Right, So again this is one where the numbers are
Speaker 8: going to really matter. I mean in terms of are
Speaker 8: they really doing the deep are the deportations really adding
Speaker 8: up in a way that the administration aspires to And
Speaker 8: they may not be there now, maybe they'll get there,
Speaker 8: but we you know that a lot of that is
Speaker 8: going to be potentially destructive to supply side, right, Like
Speaker 8: we're losing workers that you know that have been a
Speaker 8: big booster growth coming into this could be a drag
Speaker 8: on growth. But again, at this point, the numbers being
Speaker 8: aspired to for exceed what it looks like are actually
Speaker 8: the deportations that are happening. So I mean, at the
Speaker 8: end of the day and the data and what's happened,
Speaker 8: like the reality matters, and we don't know what the
Speaker 8: reality is.
Speaker 2: Right now, Laudia, I appreciate you re inside. As always, Cordia,
Speaker 2: Sam that of New Century assizes. This is the Bloomberg
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Speaker 1: Mm hmm