1 00:00:10,520 --> 00:00:13,880 Speaker 1: Hello, and welcome to another episode of the All Thoughts Podcast. 2 00:00:13,960 --> 00:00:15,320 Speaker 1: I'm Tracy Alloway. 3 00:00:15,080 --> 00:00:15,640 Speaker 2: And I'm Joe. 4 00:00:15,720 --> 00:00:18,520 Speaker 1: Why isn't thal Joe? Do you remember what we were 5 00:00:18,560 --> 00:00:19,840 Speaker 1: doing this time last year? 6 00:00:21,440 --> 00:00:21,640 Speaker 3: No? 7 00:00:22,320 --> 00:00:25,959 Speaker 1: Yeah, I can barely remember two weeks ago. Yeah, but 8 00:00:26,040 --> 00:00:28,720 Speaker 1: I actually I remember this one mostly because I looked 9 00:00:28,760 --> 00:00:32,120 Speaker 1: it up right before we started doing this recording. But 10 00:00:32,159 --> 00:00:36,120 Speaker 1: this time last year, we were preparing organizing our first 11 00:00:36,400 --> 00:00:41,839 Speaker 1: live All Thoughts debate between Zultan Posar and Perry Maryland. 12 00:00:42,240 --> 00:00:43,000 Speaker 1: That was really fun. 13 00:00:43,040 --> 00:00:44,000 Speaker 2: We got to do that again. 14 00:00:44,200 --> 00:00:47,879 Speaker 1: Yeah, So we were sort of frantically doing a lot 15 00:00:47,920 --> 00:00:50,519 Speaker 1: of the sort of travel arrangements and things like that 16 00:00:50,560 --> 00:00:50,879 Speaker 1: for that. 17 00:00:52,920 --> 00:00:56,040 Speaker 2: Sorry, waking up early in the morning, like of the 18 00:00:56,120 --> 00:00:58,520 Speaker 2: day of the debate, entering names into a database so 19 00:00:58,560 --> 00:00:59,840 Speaker 2: that people could get into the Bloomberg. 20 00:01:00,920 --> 00:01:04,800 Speaker 1: Yeah, yes too. It was fun, all right. But my 21 00:01:04,920 --> 00:01:08,720 Speaker 1: point is it's been a while since we've spoken to 22 00:01:08,800 --> 00:01:09,600 Speaker 1: Sultan Posar. 23 00:01:10,360 --> 00:01:13,240 Speaker 2: It has been a while, and it's unfortunate because he 24 00:01:13,360 --> 00:01:15,720 Speaker 2: is one of our most requested guests. People would listen 25 00:01:15,720 --> 00:01:17,680 Speaker 2: to him every month if we interviewed him. 26 00:01:18,240 --> 00:01:21,560 Speaker 1: I agree, in fact, I think we should do monthly 27 00:01:21,720 --> 00:01:25,680 Speaker 1: or even quarterly interviews with Sultan. But I am very 28 00:01:25,720 --> 00:01:29,400 Speaker 1: happy to say without further ado that Sultan is he's back. 29 00:01:29,640 --> 00:01:32,720 Speaker 2: He's back and so right. So he was at Credit Sweeze, 30 00:01:32,800 --> 00:01:35,520 Speaker 2: he left Credit Sweeze. He's been kind of silent. There 31 00:01:35,560 --> 00:01:38,440 Speaker 2: has been this incredible mystery about what he's going to 32 00:01:38,520 --> 00:01:41,720 Speaker 2: do next, and uh, we don't know. But he's coming 33 00:01:41,720 --> 00:01:43,680 Speaker 2: out on the Odd Lots podcast, so let's find out. 34 00:01:43,760 --> 00:01:46,720 Speaker 1: He's gonna tell us. Now, Sultan, welcome back to the show. 35 00:01:46,720 --> 00:01:48,080 Speaker 1: We're so glad to have you back on. 36 00:01:48,360 --> 00:01:52,720 Speaker 2: This is like when Lebron James announced on ESPN all 37 00:01:52,760 --> 00:01:54,880 Speaker 2: those years ago what he was going to do next. 38 00:01:55,040 --> 00:01:58,880 Speaker 1: So very nice, thanks for having all right, so what 39 00:01:59,000 --> 00:02:02,280 Speaker 1: are you doing? Just jump right into it. Yeah, you 40 00:02:02,360 --> 00:02:05,360 Speaker 1: were strategistic credits us as everyone knows at this point, 41 00:02:05,480 --> 00:02:06,800 Speaker 1: and now what are you up to? 42 00:02:07,200 --> 00:02:10,400 Speaker 3: Well, the next steps is I have founded my own 43 00:02:10,639 --> 00:02:16,280 Speaker 3: macroeconomic consultancy. The name of the firm is Exlunoplurus, and 44 00:02:16,360 --> 00:02:21,000 Speaker 3: I will be providing research to institutional investors and consult 45 00:02:21,080 --> 00:02:25,360 Speaker 3: institutional investors about plumbing as I always have. 46 00:02:25,800 --> 00:02:29,040 Speaker 2: Okay, meny questions, Well let's just start simple. What is 47 00:02:29,280 --> 00:02:29,720 Speaker 2: X you know? 48 00:02:29,880 --> 00:02:35,800 Speaker 3: Plurist man exlunopluris is the opposite of a plural busulum, 49 00:02:35,880 --> 00:02:38,200 Speaker 3: which is this little motto that we can find on 50 00:02:38,240 --> 00:02:40,079 Speaker 3: a great seal of the United States and on the 51 00:02:40,200 --> 00:02:44,760 Speaker 3: dollar bill. It means in English, out of one many. 52 00:02:45,000 --> 00:02:47,720 Speaker 3: It's meant to capture two ideas. The first idea is, 53 00:02:47,760 --> 00:02:50,680 Speaker 3: you know that my retrospective on what I've been doing 54 00:02:50,760 --> 00:02:55,760 Speaker 3: for a strategies for a decade is basically anticipating moments 55 00:02:55,800 --> 00:02:59,359 Speaker 3: when prices fall apart in funding and rates markets. So 56 00:02:59,400 --> 00:03:02,800 Speaker 3: the basic idea is that most of the time things 57 00:03:02,800 --> 00:03:05,120 Speaker 3: straight on top of each other, you know, the industry 58 00:03:05,160 --> 00:03:08,680 Speaker 3: structure is orderly, and then then something bad happens, whether 59 00:03:08,720 --> 00:03:12,440 Speaker 3: it's panic or a pandemic or a balance sheet constraint 60 00:03:12,560 --> 00:03:16,560 Speaker 3: or liquidity constraint, prices fall apart. So out of one price, 61 00:03:17,240 --> 00:03:19,960 Speaker 3: you are dealing with many prices. And so that's basically 62 00:03:20,080 --> 00:03:22,920 Speaker 3: the bread and butter of what a rate strategist and 63 00:03:22,960 --> 00:03:26,359 Speaker 3: a rate strater is doing, anticipating those moments and being 64 00:03:26,400 --> 00:03:27,040 Speaker 3: on the right. 65 00:03:26,880 --> 00:03:27,840 Speaker 4: Side of those movements. 66 00:03:28,520 --> 00:03:32,440 Speaker 3: And then the other idea is that you know global 67 00:03:32,480 --> 00:03:35,040 Speaker 3: macro as such, I think it grew up as a 68 00:03:35,080 --> 00:03:38,120 Speaker 3: concept and an asset price, if you will in the 69 00:03:38,240 --> 00:03:43,080 Speaker 3: unicorn or moment where globalization was moving forward, the dollar 70 00:03:44,120 --> 00:03:49,480 Speaker 3: was the undisputed global hegemonic currency, and so we were 71 00:03:49,520 --> 00:03:52,920 Speaker 3: all kind of creating the global dollar cycle and going forward. 72 00:03:53,320 --> 00:03:55,320 Speaker 3: As we discussed this in the context of bread in 73 00:03:55,520 --> 00:03:57,880 Speaker 3: was three, that's no longer going to be the case. 74 00:03:57,920 --> 00:04:01,320 Speaker 3: So it's kind of capturing the site PST. You know, 75 00:04:01,440 --> 00:04:07,480 Speaker 3: China is trying to extract itself from the Western financial system, 76 00:04:07,560 --> 00:04:10,800 Speaker 3: much like the Western real economy is trying to extract 77 00:04:10,800 --> 00:04:12,960 Speaker 3: itself out of supply chains that. 78 00:04:12,880 --> 00:04:13,920 Speaker 4: Are running through China. 79 00:04:13,960 --> 00:04:16,400 Speaker 3: And so we are I think at the beginning of 80 00:04:16,440 --> 00:04:19,520 Speaker 3: this era the next five ten years. 81 00:04:19,279 --> 00:04:21,480 Speaker 4: At least, where we are going to go through this. 82 00:04:21,480 --> 00:04:24,920 Speaker 3: Monitory divorce and you know, the dollars hegemony is going 83 00:04:24,920 --> 00:04:28,480 Speaker 3: to be challenged by some geo financial moves that the 84 00:04:28,600 --> 00:04:33,679 Speaker 3: chain is blooding, So out of one dominant reserve currency, 85 00:04:33,720 --> 00:04:36,080 Speaker 3: we will have the world where we will have. 86 00:04:36,120 --> 00:04:37,920 Speaker 2: Met That's a great name. 87 00:04:38,240 --> 00:04:42,719 Speaker 1: So, you know, you mentioned moments in macro and I 88 00:04:42,760 --> 00:04:46,400 Speaker 1: think last year when you released that Breton Woods three 89 00:04:46,520 --> 00:04:49,480 Speaker 1: thesis that you talked about on the show and wrote 90 00:04:49,520 --> 00:04:54,440 Speaker 1: a number of research notes about it, definitely demarketed a 91 00:04:54,640 --> 00:04:57,960 Speaker 1: thing that seemed to be, you know, floating out there 92 00:04:58,000 --> 00:05:02,080 Speaker 1: in people's minds, this idea that maybe finally some things 93 00:05:02,120 --> 00:05:06,520 Speaker 1: were changing around dollar hegemony, as you just mentioned. Talk 94 00:05:06,560 --> 00:05:09,880 Speaker 1: to us about that original thesis a little bit more 95 00:05:10,160 --> 00:05:13,080 Speaker 1: and whether or not you think it's been born out 96 00:05:13,200 --> 00:05:17,160 Speaker 1: over the course of the last I guess twelve to 97 00:05:17,200 --> 00:05:18,479 Speaker 1: fifteen months or so. 98 00:05:19,440 --> 00:05:21,960 Speaker 3: I think the concept is very healthy and it's alive. 99 00:05:22,279 --> 00:05:25,919 Speaker 3: I personally see more and more signs that some of 100 00:05:25,960 --> 00:05:28,800 Speaker 3: these teams that we have discussed on that first show 101 00:05:28,880 --> 00:05:31,840 Speaker 3: when we talked about Bretton Woodstree or computer fruition, and 102 00:05:31,880 --> 00:05:34,560 Speaker 3: also the conversation with bit Perry, I think we did 103 00:05:34,600 --> 00:05:37,560 Speaker 3: a quick temperature check on the idea and at the 104 00:05:37,640 --> 00:05:40,880 Speaker 3: conclusion I had there was that, you know, Bretton wood 105 00:05:40,920 --> 00:05:43,440 Speaker 3: Tree is a healthy baby boy, so to speak. So 106 00:05:43,560 --> 00:05:47,280 Speaker 3: it's throwing and development rapidly. Look a couple of things. 107 00:05:47,480 --> 00:05:52,160 Speaker 3: The frame that my answer to that question is, I 108 00:05:52,240 --> 00:05:55,680 Speaker 3: think it's becoming very obvious that when you talk to 109 00:05:55,800 --> 00:05:59,280 Speaker 3: policy circles and investors in the West, I think the 110 00:06:00,080 --> 00:06:03,719 Speaker 3: primary focus is on how do we, so to speak, 111 00:06:03,760 --> 00:06:07,280 Speaker 3: de risk supply chains that are running through China. How 112 00:06:07,360 --> 00:06:11,120 Speaker 3: do we become more you know self sufficient in terms 113 00:06:11,160 --> 00:06:13,720 Speaker 3: of rare or the capital goods we need for energy, 114 00:06:13,760 --> 00:06:15,159 Speaker 3: transition ships and so. 115 00:06:15,200 --> 00:06:15,920 Speaker 4: On and support. 116 00:06:16,680 --> 00:06:19,559 Speaker 3: And so the focus in the West is on making 117 00:06:19,640 --> 00:06:23,640 Speaker 3: sure that the real economy is decoupled from the East, 118 00:06:23,760 --> 00:06:27,280 Speaker 3: so to speak. And when you speak to market participants 119 00:06:27,279 --> 00:06:30,360 Speaker 3: and policy makers in the East, the primary focus. 120 00:06:30,160 --> 00:06:32,480 Speaker 4: There because they have all the supply chains and so 121 00:06:32,600 --> 00:06:34,520 Speaker 4: they are in control of that part of the equation. 122 00:06:34,680 --> 00:06:37,560 Speaker 3: There, the primary focus is on how do you expect 123 00:06:37,600 --> 00:06:40,440 Speaker 3: yourself from the Western financial system and how do you 124 00:06:40,560 --> 00:06:44,120 Speaker 3: de risk this relationship that you have financially with the 125 00:06:44,279 --> 00:06:49,279 Speaker 3: US dollar and Western national institutions and financial centers in general. 126 00:06:49,880 --> 00:06:52,320 Speaker 3: And I would say that since we last spoke about 127 00:06:52,320 --> 00:06:55,359 Speaker 3: this topic, there have been a number of news headlines 128 00:06:56,160 --> 00:06:58,760 Speaker 3: you know, read out from state visits, what have you, 129 00:06:58,960 --> 00:07:02,320 Speaker 3: where you know things like the rendmen b invoicing of 130 00:07:02,400 --> 00:07:06,200 Speaker 3: commodities is moving ahead. We are reading about more and 131 00:07:06,360 --> 00:07:09,320 Speaker 3: more stories where natural gas deals and oil deals are 132 00:07:09,400 --> 00:07:10,040 Speaker 3: invoiced in. 133 00:07:10,640 --> 00:07:13,000 Speaker 4: Redmond and not equest dollar. 134 00:07:13,760 --> 00:07:16,720 Speaker 3: I have not talked about this aspect of breaton Woodstree, 135 00:07:16,800 --> 00:07:18,800 Speaker 3: but I kind of uncovered the new aspect of it, 136 00:07:18,880 --> 00:07:22,160 Speaker 3: which is the whole Central Bank digital currency topic and 137 00:07:22,280 --> 00:07:26,320 Speaker 3: how all that fits into breadon wood tree. And you know, 138 00:07:26,360 --> 00:07:28,600 Speaker 3: when you start digging in that domain, I think you 139 00:07:28,720 --> 00:07:32,160 Speaker 3: uncover several things that are kind of eye opening. So 140 00:07:32,520 --> 00:07:35,200 Speaker 3: let me just offer one for example, the real economy 141 00:07:35,240 --> 00:07:38,800 Speaker 3: and real economy analog again is you know, in the US, 142 00:07:38,880 --> 00:07:41,080 Speaker 3: for example, they don't allow Huawei. 143 00:07:40,800 --> 00:07:43,760 Speaker 4: To build cell phone towers for obvious reasons. 144 00:07:43,800 --> 00:07:46,760 Speaker 3: You know, there's a risk of beevesdropping and spionage, and 145 00:07:47,200 --> 00:07:50,840 Speaker 3: you know, the Central Bank digital currencies are basically the 146 00:07:50,960 --> 00:07:55,040 Speaker 3: same story. I have been kind of cursorially following CBDCs, 147 00:07:55,080 --> 00:07:58,200 Speaker 3: but I couldn't truly put into an overall macro picture 148 00:07:58,200 --> 00:08:01,240 Speaker 3: as to what are CBDCs about. You know, if you 149 00:08:01,320 --> 00:08:05,120 Speaker 3: think about it, China has been quite busy trying to 150 00:08:05,240 --> 00:08:09,240 Speaker 3: internationalize the rent, being it more for trade settlement purposes 151 00:08:10,040 --> 00:08:13,240 Speaker 3: since the middle of the last decades. Around twenty fifteen 152 00:08:13,320 --> 00:08:16,120 Speaker 3: is when they started, and then that process somehow stalled. 153 00:08:16,160 --> 00:08:18,600 Speaker 3: And I think the reason why that process talled is 154 00:08:18,680 --> 00:08:22,960 Speaker 3: that they recognize that it's pointless to internationalize your currency 155 00:08:23,080 --> 00:08:26,480 Speaker 3: through a Western financial system, through London, through New York, 156 00:08:26,920 --> 00:08:30,320 Speaker 3: and through the balance sheets of Western finational institutions when 157 00:08:30,360 --> 00:08:33,640 Speaker 3: you basically do not control that network of institutions that 158 00:08:33,960 --> 00:08:36,760 Speaker 3: your currency is running through for you to do something 159 00:08:36,880 --> 00:08:39,920 Speaker 3: like that to basically knewed out a whole new correspondent 160 00:08:40,000 --> 00:08:43,680 Speaker 3: banking system, Okay. And so you know, this is also 161 00:08:43,760 --> 00:08:47,520 Speaker 3: the time when Russia annexed Ukraine, so the financial sanctions 162 00:08:47,679 --> 00:08:51,160 Speaker 3: became a much more dominant topic in the financial press. 163 00:08:51,160 --> 00:08:52,520 Speaker 3: So I think that was a wake up role for 164 00:08:52,679 --> 00:08:55,800 Speaker 3: China that if they want to indeed internationalized rent fee, 165 00:08:56,360 --> 00:08:58,880 Speaker 3: they need to start from scratch and they need to 166 00:08:58,920 --> 00:09:02,199 Speaker 3: build a the noblestial network that they control. And so 167 00:09:02,320 --> 00:09:04,559 Speaker 3: this is also the time when CBDC has become a 168 00:09:04,600 --> 00:09:08,280 Speaker 3: hot topic. You know, CBDCs started in China, you know 169 00:09:08,360 --> 00:09:10,760 Speaker 3: the ec and y. And the way I think about 170 00:09:10,840 --> 00:09:15,000 Speaker 3: CBDCs and developments in net space today is that you 171 00:09:15,160 --> 00:09:19,000 Speaker 3: basically need to imagine a world where five ten years 172 00:09:19,040 --> 00:09:22,000 Speaker 3: from now, we are going to have the renmnty that's 173 00:09:22,080 --> 00:09:27,120 Speaker 3: far more internationally used than today, but the settlement of 174 00:09:27,320 --> 00:09:30,400 Speaker 3: international R and B transactions are going to happen on 175 00:09:30,520 --> 00:09:33,360 Speaker 3: the balance sheets of central banks. So instead of having 176 00:09:33,400 --> 00:09:37,480 Speaker 3: a network of correspondent banks, we should be thinking about 177 00:09:37,640 --> 00:09:41,560 Speaker 3: a network of correspondent central banks and a world where 178 00:09:41,840 --> 00:09:43,920 Speaker 3: you have a number of different countries. In each of 179 00:09:44,000 --> 00:09:47,320 Speaker 3: those different countries have their banking systems using the local currency. 180 00:09:47,840 --> 00:09:50,439 Speaker 3: But when country A wants to trade the country B 181 00:09:51,160 --> 00:09:55,120 Speaker 3: you know, Thailand with China, for example, the effects needs 182 00:09:55,160 --> 00:09:58,280 Speaker 3: of those two local banking systems are going to be 183 00:09:58,480 --> 00:10:01,439 Speaker 3: met by dealings between two central banks. 184 00:10:01,800 --> 00:10:03,440 Speaker 4: And so when you reimagine a. 185 00:10:03,480 --> 00:10:06,160 Speaker 3: System like this, it's basically a state the state, and 186 00:10:06,200 --> 00:10:10,120 Speaker 3: a central bank to central bank network that is completely 187 00:10:10,240 --> 00:10:14,840 Speaker 3: independent of Western financial centers and the dollar. So there's 188 00:10:14,880 --> 00:10:17,040 Speaker 3: a ton of development we can develop some time liter 189 00:10:17,160 --> 00:10:19,599 Speaker 3: and show talk about this. So there's a ton of 190 00:10:19,640 --> 00:10:22,959 Speaker 3: development on NetFront. And also the context here is that 191 00:10:23,880 --> 00:10:27,120 Speaker 3: if you want to imagine an alternative to a dollar 192 00:10:27,160 --> 00:10:29,520 Speaker 3: based system, you know, the single most important thing that 193 00:10:29,720 --> 00:10:32,319 Speaker 3: makes the dollar so important is that ninety percent of 194 00:10:32,400 --> 00:10:36,199 Speaker 3: ethics transactions any given day in the world use the 195 00:10:36,320 --> 00:10:40,040 Speaker 3: US dollar as one leg of the transaction. Okay, So 196 00:10:40,720 --> 00:10:44,920 Speaker 3: basically that's because we inherited the system where if you 197 00:10:45,120 --> 00:10:48,480 Speaker 3: want to sell you know, if you want to settle 198 00:10:48,920 --> 00:10:52,160 Speaker 3: a transaction between someone in Hungary in Thailand, okay, the 199 00:10:52,240 --> 00:10:54,240 Speaker 3: way you will do that today is you would sell 200 00:10:54,240 --> 00:10:56,360 Speaker 3: your Hungarian for it buy. 201 00:10:56,320 --> 00:10:59,480 Speaker 4: Euros, sell the euro and buy the dollar and sell 202 00:10:59,520 --> 00:11:00,800 Speaker 4: the US iBOT. 203 00:11:01,280 --> 00:11:04,720 Speaker 3: So that's basically three different currency pairers, three market makers, 204 00:11:04,800 --> 00:11:09,559 Speaker 3: three bid ask spreads. Incredibly inefficient. But again, if you 205 00:11:09,640 --> 00:11:13,040 Speaker 3: go back to this concept of correspondent central banks as 206 00:11:13,040 --> 00:11:16,920 Speaker 3: opposed to correspondent banks, this transaction just can settle between 207 00:11:17,200 --> 00:11:20,760 Speaker 3: the local Bagarian banking system and the local tie banking system. 208 00:11:20,760 --> 00:11:24,280 Speaker 3: We have to do central banks as dealers of less 209 00:11:24,320 --> 00:11:26,400 Speaker 3: resorts in the FX markets. 210 00:11:26,600 --> 00:11:29,120 Speaker 4: And so that that's the last piece I want to mention. 211 00:11:29,280 --> 00:11:31,559 Speaker 3: In this part, which is that you know, in the 212 00:11:31,640 --> 00:11:34,480 Speaker 3: West we are talking about this dealer of less resort 213 00:11:34,559 --> 00:11:36,839 Speaker 3: thing a lot. And the context in which we talk 214 00:11:36,840 --> 00:11:39,160 Speaker 3: about dealer of less resort in the West and in 215 00:11:39,240 --> 00:11:42,160 Speaker 3: the US case specific, is that we need a dealer 216 00:11:42,200 --> 00:11:44,560 Speaker 3: of less resort for the treasury market because the treasuring 217 00:11:44,640 --> 00:11:45,520 Speaker 3: market is not liquid. 218 00:11:45,760 --> 00:11:46,800 Speaker 4: That's where the focus is. 219 00:11:46,840 --> 00:11:48,559 Speaker 3: And of course we need a dealer of less resort 220 00:11:48,640 --> 00:11:51,480 Speaker 3: and the repo market and the FX pop market, but 221 00:11:51,600 --> 00:11:55,240 Speaker 3: I think it's also time to start thinking about dealers 222 00:11:55,320 --> 00:11:58,839 Speaker 3: of first resorts in terms of FX market making for 223 00:11:59,000 --> 00:12:02,000 Speaker 3: the global East, and which is the Central Bank Salfurence, 224 00:12:02,000 --> 00:12:04,840 Speaker 3: the Central Bank correspondent system that I'm describing. 225 00:12:21,400 --> 00:12:23,640 Speaker 2: This is so interesting because I don't think i'd ever 226 00:12:23,840 --> 00:12:29,400 Speaker 2: heard anyone talk about cbdc's within the context of like 227 00:12:29,600 --> 00:12:33,920 Speaker 2: a new kind of plumbing, and you hear stuff about, Okay, well, 228 00:12:33,960 --> 00:12:36,240 Speaker 2: you know, it's the twenty twenty first century and we 229 00:12:36,360 --> 00:12:38,000 Speaker 2: need to be able to pay our stuff on our phones, 230 00:12:38,040 --> 00:12:40,280 Speaker 2: which we already can do, or sometimes you hear about 231 00:12:40,280 --> 00:12:43,760 Speaker 2: it in the context of privacy. I've always had this 232 00:12:43,960 --> 00:12:46,680 Speaker 2: theory that CBDCs are just a way for central bankers 233 00:12:46,720 --> 00:12:49,640 Speaker 2: to get invited to panels and yet and get really 234 00:12:49,760 --> 00:12:52,880 Speaker 2: plush jobs after they leave the central banking world, like 235 00:12:53,080 --> 00:12:55,400 Speaker 2: doing digital money for visa or something like that. So 236 00:12:55,600 --> 00:12:57,920 Speaker 2: but this is like actually sort of like an interesting 237 00:12:58,040 --> 00:13:00,079 Speaker 2: theory before we go a little bit further down on 238 00:13:00,120 --> 00:13:02,079 Speaker 2: this road, because I want to talk more about it, 239 00:13:02,520 --> 00:13:04,439 Speaker 2: but I'm still curious about the business. You know, you're 240 00:13:04,440 --> 00:13:07,040 Speaker 2: going to be going out to, you know, be independent. 241 00:13:07,679 --> 00:13:10,520 Speaker 2: What is your sort of vision for X you know pluris, 242 00:13:10,760 --> 00:13:12,839 Speaker 2: which is again I think is a really clever name, 243 00:13:13,000 --> 00:13:15,640 Speaker 2: the opposite of e plurbus union. What is your vision 244 00:13:15,679 --> 00:13:17,400 Speaker 2: for like what kind of business who it will be? 245 00:13:17,679 --> 00:13:20,480 Speaker 2: Is it going to be who are your clients like, 246 00:13:20,720 --> 00:13:22,280 Speaker 2: talk to us a little bit about what your vision 247 00:13:22,400 --> 00:13:24,200 Speaker 2: for your your firmat. 248 00:13:25,280 --> 00:13:28,200 Speaker 4: Well, thanks for coming back to that. I mean, look, 249 00:13:28,360 --> 00:13:29,120 Speaker 4: I figure you're. 250 00:13:28,960 --> 00:13:31,559 Speaker 2: Going to announce the decision, the big decision here on 251 00:13:31,679 --> 00:13:34,240 Speaker 2: odd lots happy, I like, I'm actually also just I'm 252 00:13:34,320 --> 00:13:35,720 Speaker 2: very curious about how this world works. 253 00:13:35,880 --> 00:13:37,679 Speaker 3: Okay, So look, I have a lot for two streams 254 00:13:37,720 --> 00:13:40,920 Speaker 3: of publications in terms of research. The first one there 255 00:13:40,960 --> 00:13:44,360 Speaker 3: will be money, Banks and Bases. This would be the 256 00:13:44,440 --> 00:13:48,079 Speaker 3: publication that that most people kind of you know, identify 257 00:13:48,200 --> 00:13:50,480 Speaker 3: me with. So I'd be looking at the fifty largest 258 00:13:50,520 --> 00:13:52,600 Speaker 3: balan hips in the world with a lot of attention, 259 00:13:52,720 --> 00:13:54,120 Speaker 3: you know that what the big banks are up to, 260 00:13:54,240 --> 00:13:55,920 Speaker 3: what the gesips are up to, what are they doing 261 00:13:55,960 --> 00:13:59,400 Speaker 3: in their portfolios or the balanceships constraints. And it's going 262 00:13:59,480 --> 00:14:02,439 Speaker 3: to be based on a research piece about the day 263 00:14:02,480 --> 00:14:05,280 Speaker 3: to day working of the dollar system as we know 264 00:14:05,400 --> 00:14:09,400 Speaker 3: it today. And then the parallel publication will be Money 265 00:14:09,480 --> 00:14:12,439 Speaker 3: and World Order, which is going to keep track of 266 00:14:12,840 --> 00:14:16,920 Speaker 3: how Breton Bookstree is evolving because you know these topics 267 00:14:17,000 --> 00:14:22,080 Speaker 3: of the dollarization, the remodetization of gold, you know, using 268 00:14:22,160 --> 00:14:25,680 Speaker 3: central bank digital currencies to build out to knit out, 269 00:14:25,920 --> 00:14:29,240 Speaker 3: you know, the novo financial system, you know, the petrol 270 00:14:29,360 --> 00:14:32,040 Speaker 3: you want, and the rending be invoicing of commodities and 271 00:14:32,240 --> 00:14:33,800 Speaker 3: created goods going forward. 272 00:14:33,880 --> 00:14:36,040 Speaker 4: I think these are basically. 273 00:14:35,720 --> 00:14:40,160 Speaker 3: The two lenses through which one should be following dollar 274 00:14:40,240 --> 00:14:43,560 Speaker 3: funding and dollar rates markets going forward, because you know, 275 00:14:43,720 --> 00:14:45,280 Speaker 3: the day to day we just have to live with, 276 00:14:45,480 --> 00:14:49,640 Speaker 3: but then we absolutely cannot lift our eyes off all 277 00:14:49,680 --> 00:14:53,280 Speaker 3: the geopolitical realities and challenges that that the dollar will 278 00:14:53,320 --> 00:14:56,320 Speaker 3: be facing. So these will be the two publications that 279 00:14:56,400 --> 00:14:59,360 Speaker 3: subscribers will get. As I said, you know, it's a 280 00:14:59,600 --> 00:15:02,200 Speaker 3: it's a price side, so you know, the target audiences 281 00:15:02,320 --> 00:15:06,520 Speaker 3: institutional investors exclusively and that and not retail investors, and 282 00:15:06,560 --> 00:15:10,200 Speaker 3: so I will be completely behind the paywall and subscribers 283 00:15:10,240 --> 00:15:13,360 Speaker 3: will be able to chat with me and the conference 284 00:15:13,400 --> 00:15:15,880 Speaker 3: calls and meetings, And that's basically the simple vision. 285 00:15:16,880 --> 00:15:19,960 Speaker 1: I was actually going to circle back to that towards 286 00:15:20,040 --> 00:15:24,440 Speaker 1: the ends, but since you guzumped me, let me ask 287 00:15:24,520 --> 00:15:27,360 Speaker 1: a question that sort of squares these two thoughts, like 288 00:15:27,440 --> 00:15:31,320 Speaker 1: the new business and the Breton Woods three vision. So 289 00:15:31,560 --> 00:15:34,560 Speaker 1: one of the criticisms that we sometimes hear about, you know, 290 00:15:35,280 --> 00:15:40,720 Speaker 1: big bold predictions about changes in the overall financial system 291 00:15:40,960 --> 00:15:45,040 Speaker 1: is that it's hard to actually invest money based on them. 292 00:15:45,360 --> 00:15:47,440 Speaker 1: So I guess the question is, you know, if someone 293 00:15:47,480 --> 00:15:52,840 Speaker 1: hears Breton Wood's three new central bank digital currencies, four 294 00:15:53,000 --> 00:15:57,880 Speaker 1: x lenders of first resort, things like that, what's actionable 295 00:15:58,120 --> 00:16:01,200 Speaker 1: about those ideas? What is it actually mean for investors? 296 00:16:02,520 --> 00:16:03,440 Speaker 4: I think it means a lot. 297 00:16:03,600 --> 00:16:05,880 Speaker 3: So Number one, I think if you are looking at 298 00:16:05,920 --> 00:16:11,600 Speaker 3: a whole new plumbing where you know, let's back up 299 00:16:11,640 --> 00:16:13,680 Speaker 3: for example, I mean we are used to thinking about 300 00:16:13,720 --> 00:16:17,000 Speaker 3: a world where there is either a dollar shortage in 301 00:16:17,120 --> 00:16:19,680 Speaker 3: some regions or dollar surplus in other regions, and then 302 00:16:19,720 --> 00:16:22,920 Speaker 3: these surfaces get recycled either in the FX swap market 303 00:16:23,680 --> 00:16:27,960 Speaker 3: or in the rate market. And you know, I think 304 00:16:28,040 --> 00:16:31,640 Speaker 3: if we end up in a world where countries are 305 00:16:31,680 --> 00:16:35,600 Speaker 3: now going to have several options, for example, as to 306 00:16:36,040 --> 00:16:40,800 Speaker 3: how they pay for commodities, and let's take oil for 307 00:16:40,920 --> 00:16:45,320 Speaker 3: an example. You know, people hold dollars many reasons. One 308 00:16:45,680 --> 00:16:48,320 Speaker 3: reason why people hold dollars is because oil it has 309 00:16:48,400 --> 00:16:52,000 Speaker 3: been historically priced in dollars. So if you are a 310 00:16:52,120 --> 00:16:55,320 Speaker 3: poor country that needs to import oil on the margin, 311 00:16:55,400 --> 00:16:58,160 Speaker 3: you need to have dollars to be able. 312 00:16:58,000 --> 00:16:58,320 Speaker 4: To do that. 313 00:16:58,480 --> 00:17:00,880 Speaker 3: Now, if you are going to live a world where 314 00:17:02,280 --> 00:17:05,840 Speaker 3: you can pay dollars for oil, but you can also 315 00:17:05,960 --> 00:17:09,240 Speaker 3: pay rendmin b or oil. But if you are a 316 00:17:09,320 --> 00:17:12,280 Speaker 3: gold miner, you can also pay for oil to gold 317 00:17:12,960 --> 00:17:16,879 Speaker 3: like Gone for example. You know, that's basically three options 318 00:17:16,920 --> 00:17:20,040 Speaker 3: you're looking on at a screen, and so you will 319 00:17:20,119 --> 00:17:24,560 Speaker 3: just choose whichever one is cheaper. And that picture gets, 320 00:17:24,680 --> 00:17:27,399 Speaker 3: you know, further complicated by the fact that there is 321 00:17:27,640 --> 00:17:31,320 Speaker 3: oil blowing west, which is one price, and oil blowing east, which. 322 00:17:31,200 --> 00:17:32,119 Speaker 4: Is another price. 323 00:17:32,240 --> 00:17:36,400 Speaker 3: So it's not just again out of one many it's 324 00:17:36,480 --> 00:17:38,359 Speaker 3: not just one price anymore, but it's a bunch of 325 00:17:38,440 --> 00:17:41,560 Speaker 3: prices and a bunch of currencies, and choose whichever works 326 00:17:41,680 --> 00:17:44,040 Speaker 3: best for you. So and also if you go into 327 00:17:44,080 --> 00:17:48,040 Speaker 3: a world where trade is not dominantly invoiced in dollars, 328 00:17:48,240 --> 00:17:51,280 Speaker 3: so people don't have to borrow dollars to import stuff 329 00:17:51,320 --> 00:17:55,680 Speaker 3: and the exporters don't earn dollars exclusively, then it's no 330 00:17:55,840 --> 00:17:58,840 Speaker 3: longer a machinery where you know the dollars are getting 331 00:17:58,880 --> 00:18:01,440 Speaker 3: created on the margin, that dollars are getting accumulated on 332 00:18:01,520 --> 00:18:04,000 Speaker 3: the margin, and the question is how do you recycle 333 00:18:04,119 --> 00:18:07,920 Speaker 3: the earned dollars back into funding and rates markets. So 334 00:18:08,040 --> 00:18:11,119 Speaker 3: if that world splits into you know, we are now 335 00:18:11,200 --> 00:18:13,080 Speaker 3: doing half of this in rendment B and the other 336 00:18:13,200 --> 00:18:16,600 Speaker 3: half we are doing it in dollars, then naturally, for 337 00:18:16,720 --> 00:18:19,720 Speaker 3: example the fxplop market, the landscape of the fx pop 338 00:18:19,800 --> 00:18:21,320 Speaker 3: market is going to get redrawn. 339 00:18:22,000 --> 00:18:22,800 Speaker 4: The following way. 340 00:18:23,320 --> 00:18:26,000 Speaker 3: There will be regions that used to be short dollars, 341 00:18:26,760 --> 00:18:29,119 Speaker 3: but now they are not because they can you know, 342 00:18:29,560 --> 00:18:32,640 Speaker 3: source rendmen be through the rentman b spoplanes from the PBOC, 343 00:18:33,200 --> 00:18:36,200 Speaker 3: So dollars shortages and certain regions are going to disappear. 344 00:18:36,720 --> 00:18:39,920 Speaker 3: Then there will be regions that used to recycle dollar 345 00:18:40,040 --> 00:18:42,840 Speaker 3: surpluses into the fx splop market. You know, maybe the 346 00:18:43,440 --> 00:18:46,560 Speaker 3: Reserve Bank of Australia putting in the fx pop market 347 00:18:46,600 --> 00:18:50,080 Speaker 3: and then you know, some Japanese investor picking those dollars 348 00:18:50,200 --> 00:18:53,560 Speaker 3: up in the fx pop market. You has their treasury portfolios, 349 00:18:53,600 --> 00:18:56,200 Speaker 3: but have you you know, if Australia ends up, you know, 350 00:18:56,320 --> 00:18:59,600 Speaker 3: earning only half as much dollars then as they used 351 00:18:59,600 --> 00:19:01,640 Speaker 3: to in the past, and the other half is now 352 00:19:02,240 --> 00:19:04,880 Speaker 3: in renomn B, then the dollar recycling is going. 353 00:19:04,760 --> 00:19:05,560 Speaker 4: To suffer as well. 354 00:19:05,640 --> 00:19:09,000 Speaker 3: So you know, the supply of dollars in fx pop 355 00:19:09,080 --> 00:19:11,440 Speaker 3: markets and the demand for dollars in the fx pop 356 00:19:11,520 --> 00:19:14,200 Speaker 3: market is going to get redrawn, and I think there 357 00:19:14,280 --> 00:19:16,359 Speaker 3: will be some regions that are going to turn that 358 00:19:16,440 --> 00:19:18,359 Speaker 3: are going to be turned on their head, you know. 359 00:19:18,560 --> 00:19:22,040 Speaker 3: So there will be positive trust currency bases that will 360 00:19:22,119 --> 00:19:24,679 Speaker 3: turn negative, and there will be negative trust currency bases 361 00:19:24,760 --> 00:19:27,440 Speaker 3: that will turn positives. So it's just one example for 362 00:19:27,560 --> 00:19:30,399 Speaker 3: example in terms of fxpops, and then in terms of 363 00:19:30,800 --> 00:19:33,080 Speaker 3: you know, the rest of the world's demand for treasuries, 364 00:19:33,119 --> 00:19:36,280 Speaker 3: which is a big question again. Dollars you historically need 365 00:19:36,359 --> 00:19:38,680 Speaker 3: because you need to import a bunch of things which 366 00:19:38,760 --> 00:19:42,000 Speaker 3: have been exclusively invoiced in dollars. But if you have 367 00:19:42,119 --> 00:19:45,000 Speaker 3: a world where things are being invoiced half in dollars 368 00:19:45,040 --> 00:19:48,640 Speaker 3: and have rende, you know, that need to accumulate dollar. 369 00:19:48,560 --> 00:19:50,120 Speaker 4: Reserves doesn't exist there. 370 00:19:50,760 --> 00:19:52,800 Speaker 3: China, I think is a very important example in this 371 00:19:52,960 --> 00:19:56,080 Speaker 3: regard because one reason why China has so many fex 372 00:19:56,119 --> 00:19:59,280 Speaker 3: reserves because that's kind of like your life insurance policy, 373 00:19:59,400 --> 00:20:03,800 Speaker 3: because all the commodities and foodstuffs that they need to import. 374 00:20:04,080 --> 00:20:05,840 Speaker 3: I mean, I think the big five commodities that the 375 00:20:05,920 --> 00:20:10,440 Speaker 3: import is natural gas, oil, soybeans, copper, gut knows what 376 00:20:10,600 --> 00:20:13,640 Speaker 3: else but you know, the annual bill for those imports 377 00:20:13,720 --> 00:20:16,360 Speaker 3: is running the five hundred billions, you know, so if 378 00:20:16,359 --> 00:20:20,560 Speaker 3: you don't have the dollars to pay for those, your toast. 379 00:20:20,640 --> 00:20:22,320 Speaker 4: So you have to have a lot of dollar reserves. 380 00:20:22,440 --> 00:20:25,240 Speaker 3: But if you end up in a world where you 381 00:20:25,320 --> 00:20:29,760 Speaker 3: can now force commodity exporters to accept your currency for 382 00:20:29,960 --> 00:20:33,120 Speaker 3: those commodity imports and not the US dollar, you basically 383 00:20:33,200 --> 00:20:37,040 Speaker 3: have gained sovereignty from a monetary perspective, and so again 384 00:20:37,560 --> 00:20:39,760 Speaker 3: you will not have to run with as much effects reserves. 385 00:20:39,800 --> 00:20:41,920 Speaker 3: And so you know, this is going to have feedback 386 00:20:41,960 --> 00:20:45,520 Speaker 3: effect on you know, demand for treasuries in general and 387 00:20:45,640 --> 00:20:47,639 Speaker 3: on the margin. You know, things are always in the 388 00:20:47,680 --> 00:20:50,480 Speaker 3: margin devidance. So I think if these teams are going 389 00:20:50,520 --> 00:20:52,400 Speaker 3: to play out over the next five to ten years 390 00:20:52,440 --> 00:20:55,240 Speaker 3: on the margin, you know, demand for treasuries and the 391 00:20:55,320 --> 00:20:58,919 Speaker 3: recycling of dollars in the front end, then an affect 392 00:20:59,000 --> 00:21:00,919 Speaker 3: and the upgrades market, I think, is going to get 393 00:21:00,960 --> 00:21:01,560 Speaker 3: pushed around. 394 00:21:02,200 --> 00:21:04,680 Speaker 2: Would you anticipate in you know, or do you have 395 00:21:04,760 --> 00:21:06,920 Speaker 2: some timing Like we talked about this on a recent 396 00:21:06,960 --> 00:21:10,600 Speaker 2: episode with Karthik centerund But they will see, you know, 397 00:21:10,720 --> 00:21:13,119 Speaker 2: there are a lot of countries around the world that 398 00:21:13,280 --> 00:21:16,320 Speaker 2: float dollar bonds for one reason or another. Do you 399 00:21:16,359 --> 00:21:21,680 Speaker 2: anticipate that we'll see if rinmand B internationalization continues, that 400 00:21:21,840 --> 00:21:25,760 Speaker 2: we will see various ems float more rinman B bonds 401 00:21:25,920 --> 00:21:29,080 Speaker 2: or would that be a crucial aspect towards a successful 402 00:21:29,359 --> 00:21:31,320 Speaker 2: internationalization of R and B. 403 00:21:32,840 --> 00:21:35,560 Speaker 3: I think it can be a part of our MBA internationalization. 404 00:21:35,680 --> 00:21:38,720 Speaker 3: I mean, you know, it's just the way of kind 405 00:21:38,760 --> 00:21:41,200 Speaker 3: of raising offshore R and B that's out there, and 406 00:21:41,440 --> 00:21:44,920 Speaker 3: you can either tap swaplights with the PBOC. You know, 407 00:21:45,000 --> 00:21:47,200 Speaker 3: that's a very important aspect of it. I mean, BBOC 408 00:21:47,320 --> 00:21:50,040 Speaker 3: has swap lined with way more countries than the USA 409 00:21:50,080 --> 00:21:53,000 Speaker 3: swop lines for example, So there is you know, when 410 00:21:53,040 --> 00:21:55,600 Speaker 3: you kind of look at the topography of that EBOC 411 00:21:55,720 --> 00:21:58,280 Speaker 3: spopline network and when you look at the topography of 412 00:21:58,320 --> 00:22:02,720 Speaker 3: the central banks that are actively planning to have a 413 00:22:02,800 --> 00:22:05,639 Speaker 3: CBDC or they actually have a CBDC pilot up and 414 00:22:05,760 --> 00:22:07,760 Speaker 3: running already, I mean, there's a perfect overlap. 415 00:22:07,840 --> 00:22:07,960 Speaker 4: You know. 416 00:22:08,119 --> 00:22:10,639 Speaker 3: So if you think about the swaps as the funding 417 00:22:10,680 --> 00:22:13,240 Speaker 3: angle to the RENVP that you don't have in the 418 00:22:13,320 --> 00:22:16,080 Speaker 3: system get and then if you look at the CBDC 419 00:22:16,280 --> 00:22:19,359 Speaker 3: as the kind of swapping and clearing of existing local 420 00:22:19,480 --> 00:22:21,760 Speaker 3: currencies in the system. I mean you basically have a 421 00:22:21,800 --> 00:22:25,879 Speaker 3: spot effects market and a funding market infrastructure around it. 422 00:22:26,000 --> 00:22:28,600 Speaker 3: So you know, you can internationalize the rendom be that way, 423 00:22:29,080 --> 00:22:32,560 Speaker 3: you can internet nationalize it by you know, em compries 424 00:22:32,640 --> 00:22:37,640 Speaker 3: raising r and bonds to raise term RMB liquidity. But again, 425 00:22:37,840 --> 00:22:40,000 Speaker 3: I think the most important thing here is that we 426 00:22:40,119 --> 00:22:44,400 Speaker 3: are starting to see evidence that more and more commodity 427 00:22:44,480 --> 00:22:49,240 Speaker 3: trades are being settled in rendmen b. And also over 428 00:22:49,280 --> 00:22:52,360 Speaker 3: the past year, the renminb's share of trade and ends 429 00:22:53,240 --> 00:22:56,639 Speaker 3: has increased tremendously. I think it has increased from barely 430 00:22:56,720 --> 00:22:59,320 Speaker 3: one percent to five percent in a twelve month period 431 00:22:59,800 --> 00:23:03,159 Speaker 3: and now it's at far with the euro's share of tradements. 432 00:23:03,480 --> 00:23:06,160 Speaker 3: And again, if that one twelve month period is any sign, 433 00:23:06,240 --> 00:23:08,800 Speaker 3: you know, you project that five ten years out you 434 00:23:08,920 --> 00:23:09,879 Speaker 3: can have a lot of ground. 435 00:23:09,960 --> 00:23:12,399 Speaker 4: That's the rent if you can gain you know. 436 00:23:12,480 --> 00:23:17,240 Speaker 1: Sultan, you mentioned changes in structural demand for treasuries and 437 00:23:17,359 --> 00:23:19,440 Speaker 1: I wanted to ask you about this because this is 438 00:23:19,520 --> 00:23:22,639 Speaker 1: one of the I guess the last research notes that 439 00:23:22,760 --> 00:23:25,800 Speaker 1: you wrote at Credit Swiss. I think it was in January, 440 00:23:25,880 --> 00:23:28,399 Speaker 1: so definitely not the final one. But you were talking 441 00:23:28,440 --> 00:23:31,240 Speaker 1: about at some point the Fed's going to need to 442 00:23:31,400 --> 00:23:36,160 Speaker 1: come in and support the treasury market once again because 443 00:23:36,520 --> 00:23:39,159 Speaker 1: you have all these natural buyers of bonds who are 444 00:23:39,800 --> 00:23:43,040 Speaker 1: starting to step away. And I think you talked about 445 00:23:43,080 --> 00:23:46,720 Speaker 1: potentially the FED having to restart asset purchases as soon 446 00:23:46,760 --> 00:23:49,640 Speaker 1: as the summer. Is that something that you still see. 447 00:23:49,640 --> 00:23:54,480 Speaker 3: On the table, Well, it's the summer. Yeah, So let's 448 00:23:54,480 --> 00:23:56,520 Speaker 3: put it this way. I mean, we have now the 449 00:23:56,640 --> 00:23:59,280 Speaker 3: offer on buyback program that's up and running. You can 450 00:23:59,320 --> 00:24:02,960 Speaker 3: find that mistake and correct yep, you're right, yeap, Okay, 451 00:24:03,040 --> 00:24:05,639 Speaker 3: so there is that, and then we had, you know, 452 00:24:05,720 --> 00:24:08,800 Speaker 3: the problems around SVP and some other banks. 453 00:24:08,840 --> 00:24:10,200 Speaker 4: So let's just put it this way. 454 00:24:10,400 --> 00:24:13,280 Speaker 3: I think that when we think about these what is 455 00:24:13,320 --> 00:24:15,119 Speaker 3: the government going to have to do to step in 456 00:24:15,200 --> 00:24:17,720 Speaker 3: on the margin to calm things down? You know, I 457 00:24:17,840 --> 00:24:20,400 Speaker 3: always tell you that the answer is always the longest spectrum. 458 00:24:20,640 --> 00:24:23,000 Speaker 3: So I think we are in the ante room of something. 459 00:24:23,560 --> 00:24:26,679 Speaker 3: You know, we are dealing with illiquidity with the buybacks. 460 00:24:27,359 --> 00:24:32,920 Speaker 3: So far, so good. We have dealt with underwater bank portfolios. 461 00:24:33,119 --> 00:24:37,640 Speaker 3: I mean the bank term funding program effectively your ability 462 00:24:37,760 --> 00:24:41,919 Speaker 3: to raise at you know, to value underwater bonds at 463 00:24:41,960 --> 00:24:45,280 Speaker 3: the FED at bar and raise liquidity that way if 464 00:24:45,320 --> 00:24:47,840 Speaker 3: you have to. I think that's a pretty that's a 465 00:24:48,160 --> 00:24:51,480 Speaker 3: pretty big support to market functioning. 466 00:24:51,560 --> 00:24:53,600 Speaker 4: So I think, you know, things are happening on the. 467 00:24:53,640 --> 00:24:56,639 Speaker 3: Margin, which kind of points to the FED and the 468 00:24:56,720 --> 00:25:01,600 Speaker 3: Treasury building scaffolding around the treasury market to deal with 469 00:25:02,440 --> 00:25:05,960 Speaker 3: the illiquidity issues and this lack of marginal buyer issues 470 00:25:06,040 --> 00:25:07,280 Speaker 3: that we have been talking about. 471 00:25:07,720 --> 00:25:07,879 Speaker 4: You know. 472 00:25:08,000 --> 00:25:10,040 Speaker 3: The other point here is that you know, in the 473 00:25:10,080 --> 00:25:11,920 Speaker 3: front end there is a ton of liquidity, and so 474 00:25:12,240 --> 00:25:15,000 Speaker 3: all these issue and that the Treasury has been doing 475 00:25:15,080 --> 00:25:17,359 Speaker 3: and will be doing is going to be front and heavy, 476 00:25:18,040 --> 00:25:21,240 Speaker 3: you know. So that's another way of dealing with treasury 477 00:25:21,320 --> 00:25:23,680 Speaker 3: market functioning. I mean, you have two trillion dollars in 478 00:25:23,760 --> 00:25:26,920 Speaker 3: our fy viacility. You're just going to issue where you 479 00:25:27,040 --> 00:25:29,320 Speaker 3: can most likely soak up a lot of liquidity without 480 00:25:29,359 --> 00:25:29,960 Speaker 3: any glitches. 481 00:25:30,320 --> 00:25:34,080 Speaker 4: But again, I think this underlying issue that we are talking. 482 00:25:33,880 --> 00:25:36,320 Speaker 3: About that the world is probably going through a split 483 00:25:36,440 --> 00:25:39,359 Speaker 3: where demand for treasuries from the rest of the world 484 00:25:40,040 --> 00:25:42,840 Speaker 3: is probably not going to be what it wants was. 485 00:25:43,400 --> 00:25:45,280 Speaker 3: It's going to be an issue and as these issues 486 00:25:45,320 --> 00:25:47,400 Speaker 3: pop up, we are going to be dealing with them 487 00:25:48,080 --> 00:25:50,040 Speaker 3: in a step by step passion. But again, I think 488 00:25:50,119 --> 00:25:53,040 Speaker 3: these illiquidity problems are present and we are dealing with 489 00:25:53,200 --> 00:25:54,560 Speaker 3: them as they pop up. 490 00:26:11,560 --> 00:26:14,320 Speaker 2: I want to get you know, your take further on 491 00:26:14,440 --> 00:26:16,480 Speaker 2: like some of the banks and particularly the aftermath of 492 00:26:16,680 --> 00:26:18,560 Speaker 2: SVB et cetera. But before we do, you know, going 493 00:26:18,640 --> 00:26:22,600 Speaker 2: with thinking back a year ago, this conversation or versions 494 00:26:22,640 --> 00:26:26,000 Speaker 2: of this conversation might have been much more commodity centric. 495 00:26:26,600 --> 00:26:30,080 Speaker 2: And obviously oil has fallen quite a little bit. There 496 00:26:30,160 --> 00:26:32,920 Speaker 2: was a lot of stress a year ago about the 497 00:26:33,440 --> 00:26:37,320 Speaker 2: European electricity costs, which have come down significantly. Generally, there's 498 00:26:37,359 --> 00:26:39,920 Speaker 2: been a lot of easing there. But I'm curious, like, 499 00:26:40,840 --> 00:26:43,520 Speaker 2: was that just a sort of like a one time 500 00:26:44,000 --> 00:26:47,280 Speaker 2: reset in terms of maybe post pandemic shocks and of 501 00:26:47,359 --> 00:26:51,040 Speaker 2: course the invasion of Ukraine and that things are settled 502 00:26:51,240 --> 00:26:56,840 Speaker 2: or will sort of like commodity fragility, commodity volatility, anxiety 503 00:26:56,880 --> 00:27:00,600 Speaker 2: about sourcing energy be sort of a permanent or semi 504 00:27:00,680 --> 00:27:04,040 Speaker 2: permanent condition over the next several years as part of 505 00:27:04,119 --> 00:27:06,400 Speaker 2: this sort of Bretton Wood's three point zero vision. 506 00:27:07,840 --> 00:27:10,520 Speaker 3: Yeah, so, you know, to be intellectually honest to ourselves 507 00:27:10,560 --> 00:27:12,680 Speaker 3: and to the listeners, yes, we did talk about you know, 508 00:27:12,760 --> 00:27:18,920 Speaker 3: commodities creating a bigger goal in you know, reserve management practices. 509 00:27:18,760 --> 00:27:21,919 Speaker 4: And whatnot, among many other teams. So I would say that. 510 00:27:23,640 --> 00:27:27,480 Speaker 3: For me, what survives that commodity aspect of the Breton 511 00:27:27,520 --> 00:27:31,800 Speaker 3: would three pieces is that I think gold is definitely 512 00:27:32,640 --> 00:27:35,879 Speaker 3: something that's coming back as a theme. I mean, just 513 00:27:35,960 --> 00:27:37,800 Speaker 3: to give you a very good example, when I saw 514 00:27:38,440 --> 00:27:41,600 Speaker 3: I think Barry Ikagreen was a co author on that paper. 515 00:27:41,960 --> 00:27:45,960 Speaker 3: The IM published a paper about gold and the title 516 00:27:46,000 --> 00:27:50,000 Speaker 3: I think was a barbarous relic no More and it 517 00:27:50,119 --> 00:27:52,960 Speaker 3: was co authored by Barry Ikongreen. So I'll hide behind 518 00:27:53,000 --> 00:27:57,840 Speaker 3: it a little bit, but I think it's noteworthy when 519 00:27:57,920 --> 00:28:02,639 Speaker 3: someone like Barry ikongreenews probably the official biographer of the dollar, 520 00:28:03,359 --> 00:28:05,359 Speaker 3: rites of paper like that, and I think we are 521 00:28:05,400 --> 00:28:07,760 Speaker 3: seeing the more and more in the data that especially 522 00:28:07,880 --> 00:28:12,080 Speaker 3: the countries that are not geopolitically aligned to the US 523 00:28:12,280 --> 00:28:16,040 Speaker 3: are shunning treasuries and shunning the dollar and they are 524 00:28:16,119 --> 00:28:18,960 Speaker 3: buying gold instead. I think there is also a number 525 00:28:19,000 --> 00:28:21,680 Speaker 3: of other headlines which I think are important to keep 526 00:28:21,680 --> 00:28:24,760 Speaker 3: an eye on because individually they might not sum up 527 00:28:24,800 --> 00:28:27,200 Speaker 3: too much. But I think in the fatality of these 528 00:28:27,280 --> 00:28:32,520 Speaker 3: things probably point a trend. You know, Ghana and Russia 529 00:28:32,600 --> 00:28:37,600 Speaker 3: basically had an oil for gold deal whereby Russia ships 530 00:28:37,880 --> 00:28:41,200 Speaker 3: oil to Ghana and Ghana pays gold for. 531 00:28:41,360 --> 00:28:42,720 Speaker 4: The oil that they receive. 532 00:28:42,760 --> 00:28:44,640 Speaker 3: I mean, the basic idea was that a country that 533 00:28:44,680 --> 00:28:49,120 Speaker 3: has prepidy and offex reserves US dollars mostly that also 534 00:28:49,280 --> 00:28:51,200 Speaker 3: minds a lot of gold is going to pointless for 535 00:28:51,320 --> 00:28:55,280 Speaker 3: them to spend their precious dollars on oil when they 536 00:28:55,360 --> 00:28:58,200 Speaker 3: can just swap gold for oil and kind of get 537 00:28:58,240 --> 00:29:00,400 Speaker 3: their oil de band and they have you know, effects 538 00:29:00,440 --> 00:29:06,160 Speaker 3: reserves left for other stuff pharmaceuticals for example. Again, geopolitics 539 00:29:06,240 --> 00:29:08,280 Speaker 3: is at the angle here, but you know, Russia and 540 00:29:08,400 --> 00:29:12,080 Speaker 3: Iran are establishing a special economic zone along the CASP 541 00:29:12,240 --> 00:29:14,920 Speaker 3: and c where the trade is going to be settled 542 00:29:15,480 --> 00:29:19,960 Speaker 3: in a gold act digital token. Forget which country it was, 543 00:29:20,040 --> 00:29:22,840 Speaker 3: but you know there's another gold rich African country which 544 00:29:22,880 --> 00:29:26,960 Speaker 3: is playing with this idea of a gold bag digital token. Again, 545 00:29:27,160 --> 00:29:30,120 Speaker 3: I think these are interesting developments, but again some of 546 00:29:30,200 --> 00:29:32,560 Speaker 3: the last ones that I mentioned are probably on the fringes. 547 00:29:32,600 --> 00:29:34,800 Speaker 3: But again you know in the IMF data and in 548 00:29:34,880 --> 00:29:38,560 Speaker 3: the data Gold Council, we see this massive increase in 549 00:29:38,720 --> 00:29:42,400 Speaker 3: foreign central banks purchases of gold, so that gold aspect 550 00:29:42,520 --> 00:29:45,960 Speaker 3: definitely survives. And yes, you know, energy markets have gone 551 00:29:46,040 --> 00:29:48,040 Speaker 3: up and they have come down, but again I think 552 00:29:48,080 --> 00:29:50,840 Speaker 3: it's just hard to escape the reality that you know, 553 00:29:50,960 --> 00:29:55,000 Speaker 3: Saudi Arabia is not exactly falling over backwards to increase 554 00:29:55,040 --> 00:29:57,280 Speaker 3: oil production, but in fact that there is this stug 555 00:29:57,360 --> 00:29:59,840 Speaker 3: of war where I think the Cran Prince has the 556 00:30:00,080 --> 00:30:03,280 Speaker 3: stic economic agenda. It needs oil prices to trade between 557 00:30:03,560 --> 00:30:06,000 Speaker 3: one hundred dollars a barrel for them to pull up 558 00:30:06,040 --> 00:30:10,440 Speaker 3: that quite ambitious domestic and regional and also geopolitical agenda. 559 00:30:11,000 --> 00:30:13,120 Speaker 3: And I think there is a stug of war between 560 00:30:13,600 --> 00:30:17,000 Speaker 3: the oil consumers and the oil producers where you know, 561 00:30:17,080 --> 00:30:19,600 Speaker 3: things haven't really breaken out into either side, but I 562 00:30:19,680 --> 00:30:22,480 Speaker 3: think that pullback is basically given us a body language 563 00:30:22,480 --> 00:30:25,280 Speaker 3: where you know, if there's not enough demand for oil 564 00:30:25,320 --> 00:30:28,200 Speaker 3: and oil prices are falling, we need our revenue, so 565 00:30:28,280 --> 00:30:30,760 Speaker 3: we're just going to not supply such that prices don't 566 00:30:30,800 --> 00:30:33,520 Speaker 3: pull too much. So again I think the commodity shortage 567 00:30:33,520 --> 00:30:35,080 Speaker 3: and this, you know, I think the team that I 568 00:30:35,200 --> 00:30:38,440 Speaker 3: used was our commodity your problem. I think it's definitely 569 00:30:38,520 --> 00:30:42,520 Speaker 3: there in oil again, you know, Russian oil. Surprisingly, I 570 00:30:42,600 --> 00:30:45,360 Speaker 3: think it all found a way to alternative markets. So 571 00:30:46,040 --> 00:30:48,120 Speaker 3: you know, tanker rates are up. You know, we talked 572 00:30:48,120 --> 00:30:50,520 Speaker 3: about this a year ago, that tanker rates being the 573 00:30:50,600 --> 00:30:53,800 Speaker 3: balance sheet for you know, the real economy balance sheet 574 00:30:53,840 --> 00:30:56,280 Speaker 3: equivalents in the oil market, and the tanker rates are 575 00:30:56,320 --> 00:30:58,720 Speaker 3: through the rule because these shadow fleets had to be 576 00:30:58,800 --> 00:31:01,160 Speaker 3: a sampled to find those pternative markets. 577 00:31:00,880 --> 00:31:03,000 Speaker 4: For Russian oil. And I think, you know, the supply 578 00:31:03,160 --> 00:31:04,320 Speaker 4: chains are probably. 579 00:31:04,040 --> 00:31:06,880 Speaker 3: Getting more caught up in this team involving you know, 580 00:31:07,160 --> 00:31:09,880 Speaker 3: energy transition, you know, getting the lifting and all these 581 00:31:09,920 --> 00:31:10,560 Speaker 3: things that are. 582 00:31:10,480 --> 00:31:12,560 Speaker 4: Needed for that. So I would say that the commodity 583 00:31:13,160 --> 00:31:15,720 Speaker 4: aspect is a mixed bag, except for goal. 584 00:31:16,120 --> 00:31:18,720 Speaker 1: That other African country I think it was Zimbabwe doing 585 00:31:18,880 --> 00:31:22,440 Speaker 1: all digital token So I guess make of that what 586 00:31:22,600 --> 00:31:22,920 Speaker 1: you will. 587 00:31:23,080 --> 00:31:25,760 Speaker 5: But I wanted to go back, well, make makeup well, 588 00:31:25,800 --> 00:31:27,080 Speaker 5: I just wanted to say, you can make up that, 589 00:31:27,160 --> 00:31:29,280 Speaker 5: but you Bill and perhaps a lot of countries that 590 00:31:29,320 --> 00:31:32,600 Speaker 5: people mention on this conversation are going to be the 591 00:31:32,720 --> 00:31:33,760 Speaker 5: sanctioned countries. 592 00:31:33,520 --> 00:31:35,880 Speaker 4: Let's put it that way. But I think that's precisely 593 00:31:36,200 --> 00:31:37,480 Speaker 4: I mean, you know, these are not not. 594 00:31:37,600 --> 00:31:40,320 Speaker 3: The countries that you think about when you're talking on 595 00:31:40,400 --> 00:31:43,000 Speaker 3: the financial press about things. But I think the underlying 596 00:31:43,080 --> 00:31:46,200 Speaker 3: team here is very much one where if you look 597 00:31:46,360 --> 00:31:49,400 Speaker 3: look at this unicorn or world that we are, you know, 598 00:31:49,960 --> 00:31:52,760 Speaker 3: talking about whether it's supply chains or whether it's the 599 00:31:52,840 --> 00:31:57,160 Speaker 3: monster regimes, whether it's you know, foreign policy alignments between 600 00:31:57,200 --> 00:31:59,560 Speaker 3: East and West, you know, two great powers and a 601 00:31:59,600 --> 00:32:02,800 Speaker 3: bunch of on a life, non alive countries. I think 602 00:32:02,840 --> 00:32:06,000 Speaker 3: it's important to pull in these fringe countries because you know, 603 00:32:06,680 --> 00:32:09,640 Speaker 3: there is powering numbers and like, yeah, one country's GDP 604 00:32:09,800 --> 00:32:11,480 Speaker 3: is not much, but you know when you kind of 605 00:32:11,920 --> 00:32:14,640 Speaker 3: plump them all together and they kind of sign into 606 00:32:14,720 --> 00:32:17,600 Speaker 3: one system as opposed to another system, these things are 607 00:32:17,640 --> 00:32:19,520 Speaker 3: going to be meaningful on the market. So I think 608 00:32:19,920 --> 00:32:23,120 Speaker 3: that's why it's important to think about best case countries, 609 00:32:23,240 --> 00:32:26,440 Speaker 3: so to speak. But that's why that's why we mentioned Yeah. 610 00:32:26,320 --> 00:32:29,160 Speaker 1: And I mean US dollar transactions I think are a 611 00:32:29,240 --> 00:32:33,240 Speaker 1: pretty big thing in Zimbabwe, so you know the fact 612 00:32:33,240 --> 00:32:36,920 Speaker 1: that they're experimenting with a new type of thing to 613 00:32:37,120 --> 00:32:40,720 Speaker 1: try to maybe get away from that is interesting. But 614 00:32:40,840 --> 00:32:43,000 Speaker 1: I wanted to go back to what we saw in 615 00:32:43,080 --> 00:32:47,640 Speaker 1: the banking system because everyone who knows your origin story, 616 00:32:47,880 --> 00:32:51,440 Speaker 1: probably knows that you know, started out working at the 617 00:32:51,520 --> 00:32:54,760 Speaker 1: New York FED. There was the famous shadow banking chart 618 00:32:55,320 --> 00:32:58,520 Speaker 1: that you did before the financial crisis, sort of laying 619 00:32:58,640 --> 00:33:03,080 Speaker 1: out how this is entire system actually worked. What do 620 00:33:03,160 --> 00:33:07,680 Speaker 1: you make of the most recent banking crisis? And I 621 00:33:07,800 --> 00:33:10,520 Speaker 1: know some people take issue with actually labeling a crisis. 622 00:33:10,720 --> 00:33:13,640 Speaker 1: We can call it a banking drama or whatever. But 623 00:33:14,000 --> 00:33:16,000 Speaker 1: is the drama over for now? 624 00:33:16,920 --> 00:33:19,040 Speaker 3: Well, it feels like, let me tell you this, It 625 00:33:19,120 --> 00:33:22,560 Speaker 3: feels very different from two thousand and eight. Obviously, I 626 00:33:22,640 --> 00:33:25,840 Speaker 3: mean there it was an existential moment and you know, 627 00:33:26,000 --> 00:33:29,280 Speaker 3: the central nervous system of the global dollar system was 628 00:33:30,360 --> 00:33:32,080 Speaker 3: at risk, you know, the big banks, So the big 629 00:33:32,120 --> 00:33:36,280 Speaker 3: banks were a source of strength this time rapping. I 630 00:33:36,320 --> 00:33:40,000 Speaker 3: would say that we basically have three institutions that became 631 00:33:40,120 --> 00:33:45,160 Speaker 3: collateral damage either to crypto or the tech inclosion or 632 00:33:45,960 --> 00:33:48,760 Speaker 3: you know, your inability to make to underpride you know 633 00:33:48,880 --> 00:33:53,000 Speaker 3: mortgages intelligently, so you know, signature bank is crypto related. 634 00:33:53,280 --> 00:33:56,360 Speaker 3: SPB I think is a very unique case because what 635 00:33:56,480 --> 00:33:58,920 Speaker 3: it kind of tells you is that it is important 636 00:33:59,040 --> 00:34:02,320 Speaker 3: for a bank to be diversified both in terms of 637 00:34:02,400 --> 00:34:04,520 Speaker 3: its lending portfolio and also. 638 00:34:04,360 --> 00:34:08,400 Speaker 4: Its deposit mixed. You know, when I was following the 639 00:34:08,560 --> 00:34:11,239 Speaker 4: SVV the backle the. 640 00:34:12,840 --> 00:34:14,719 Speaker 3: Thing that came to mind for me was, I don't 641 00:34:14,760 --> 00:34:17,120 Speaker 3: know if you remember his tracy, but bear Sterns used 642 00:34:17,120 --> 00:34:20,040 Speaker 3: to have to hatch funds, which were the first hetch 643 00:34:20,080 --> 00:34:20,440 Speaker 3: funds to. 644 00:34:20,440 --> 00:34:22,520 Speaker 4: Blow up in Yeah. 645 00:34:23,360 --> 00:34:25,680 Speaker 3: I forget what they were called, but they had I 646 00:34:25,719 --> 00:34:28,799 Speaker 3: think the bear Sterns Enhanced Leverage fund or whatever they 647 00:34:28,840 --> 00:34:31,839 Speaker 3: were called. You know, those hedge funds were the first 648 00:34:31,880 --> 00:34:34,560 Speaker 3: ones to blow up because they had the worst assets 649 00:34:34,600 --> 00:34:39,200 Speaker 3: imaginable and they had the worst live of the structure imaginable. 650 00:34:39,440 --> 00:34:39,640 Speaker 5: Yeah. 651 00:34:39,640 --> 00:34:43,080 Speaker 1: I think they were like really high yield structured credit 652 00:34:43,320 --> 00:34:43,960 Speaker 1: or something like that. 653 00:34:44,800 --> 00:34:48,040 Speaker 3: Yes, high yield structure credit, you know cdo so that 654 00:34:48,200 --> 00:34:51,600 Speaker 3: stuff on the asset side, you know, overnight funding, so 655 00:34:51,760 --> 00:34:52,480 Speaker 3: pickled funding. 656 00:34:53,080 --> 00:34:53,239 Speaker 4: You know. 657 00:34:53,640 --> 00:34:56,680 Speaker 3: SVB, I would say, is a case where on the 658 00:34:56,719 --> 00:34:59,920 Speaker 3: liability decide. I mean, we know who the big deposit 659 00:35:00,040 --> 00:35:02,360 Speaker 3: the school, the clients were. They were reading about some 660 00:35:02,520 --> 00:35:05,400 Speaker 3: of them in the financial press. But basically, you know, 661 00:35:05,440 --> 00:35:08,760 Speaker 3: if you think about the tech sector, venture capital sector, 662 00:35:08,800 --> 00:35:11,600 Speaker 3: where all the valuations have basically taken a big nose 663 00:35:11,680 --> 00:35:15,960 Speaker 3: dive after tech stocks corrected. You basically had a depositor 664 00:35:16,040 --> 00:35:19,600 Speaker 3: base that was liquidity constraints. So they basically pulled money 665 00:35:20,080 --> 00:35:23,359 Speaker 3: from one bank where a lot of tech entrepreneurs kept 666 00:35:23,560 --> 00:35:26,400 Speaker 3: their cash and so that's a liquidity drain and it 667 00:35:26,520 --> 00:35:31,680 Speaker 3: wasn't diversified on the asset side. SVB had a lot 668 00:35:31,719 --> 00:35:35,160 Speaker 3: of duration. I mean, you know, you guys know that 669 00:35:35,280 --> 00:35:37,000 Speaker 3: my bread and butter is you know, going through all 670 00:35:37,040 --> 00:35:40,040 Speaker 3: the cold reports of the biggest institutions and you know, 671 00:35:40,080 --> 00:35:43,120 Speaker 3: I mean, very few banks have as big a share 672 00:35:43,160 --> 00:35:47,680 Speaker 3: of their agebre a portfolio in strips stripped port respect 673 00:35:47,680 --> 00:35:49,719 Speaker 3: securities as they did. But you know, they had a 674 00:35:49,760 --> 00:35:51,640 Speaker 3: lot of coupon explore, they had a lot of principal 675 00:35:51,680 --> 00:35:53,920 Speaker 3: exposure there. They had a lot of duration in these 676 00:35:53,960 --> 00:35:57,239 Speaker 3: portfolios and they didn't hedge them properly. They also had 677 00:35:57,280 --> 00:36:00,640 Speaker 3: a lending book where they were lending to the same 678 00:36:01,080 --> 00:36:03,319 Speaker 3: you know, customers that were pulling funds away from them. 679 00:36:03,400 --> 00:36:06,600 Speaker 3: But again, the collaboral on that landing book was tex related, 680 00:36:06,760 --> 00:36:08,879 Speaker 3: so you had valuation issues. So that was just kind 681 00:36:08,880 --> 00:36:12,359 Speaker 3: of a perfect storm. Systemic absolutely not, but it's hurt them. 682 00:36:12,440 --> 00:36:14,680 Speaker 3: And you know, first Republic, I mean, I have to 683 00:36:14,719 --> 00:36:16,759 Speaker 3: say I. I have a friend in New York who 684 00:36:16,920 --> 00:36:20,279 Speaker 3: once texted me when First Public was going under, saying, 685 00:36:20,920 --> 00:36:22,800 Speaker 3: I didn't realize I got such a great deal on 686 00:36:22,880 --> 00:36:26,040 Speaker 3: my mortgage that it's the end the first problem. And 687 00:36:26,080 --> 00:36:27,560 Speaker 3: I said, you know, I told him that, Well, next 688 00:36:27,600 --> 00:36:29,399 Speaker 3: time you get a mortgage that's too good to be true, 689 00:36:29,400 --> 00:36:33,520 Speaker 3: you should also short the bank. Maybe the mortgage is 690 00:36:33,520 --> 00:36:36,320 Speaker 3: going to pay it stuff up faster then you anticipate. 691 00:36:36,440 --> 00:36:38,960 Speaker 3: So so again, I think this is basically the story 692 00:36:39,040 --> 00:36:41,880 Speaker 3: of these three the three banks that got into difficulties. 693 00:36:42,160 --> 00:36:44,759 Speaker 3: The solution that the FAT crafted for some of these 694 00:36:44,840 --> 00:36:48,400 Speaker 3: licurity problems, I think they were extremely powerful. I was surprised, 695 00:36:48,480 --> 00:36:51,440 Speaker 3: even shocked when I saw the terms of the BDFP. 696 00:36:52,200 --> 00:36:54,400 Speaker 3: When I talked to my context. You know, there were 697 00:36:54,480 --> 00:36:58,160 Speaker 3: two types of responses to this BDFP program. Number one, yes, 698 00:36:58,320 --> 00:37:01,440 Speaker 3: that's the right move, because the letter and spirit of 699 00:37:01,520 --> 00:37:05,719 Speaker 3: Basal Tree says that treasuries and Genie Maison reserves are 700 00:37:05,840 --> 00:37:07,760 Speaker 3: level one assets, no haircut. 701 00:37:08,320 --> 00:37:11,000 Speaker 4: But again that assumes that you also have the brains 702 00:37:11,080 --> 00:37:13,080 Speaker 4: to hedge the interstraight exposure there. 703 00:37:13,480 --> 00:37:15,360 Speaker 3: And also, I mean, you know, you can put some 704 00:37:15,480 --> 00:37:17,920 Speaker 3: of these bonds that are underwater into a whole maturity 705 00:37:18,000 --> 00:37:21,760 Speaker 3: portfolio where if you are sitting on huge market market losses, 706 00:37:21,800 --> 00:37:23,800 Speaker 3: it doesn't hit your bank's activity and you don't have 707 00:37:23,880 --> 00:37:25,160 Speaker 3: to book those losses. 708 00:37:24,920 --> 00:37:26,640 Speaker 4: And it doesn't hit your capital. 709 00:37:26,920 --> 00:37:30,480 Speaker 3: But again, that assumes that your deposit base is sticky 710 00:37:30,880 --> 00:37:33,200 Speaker 3: and so you're not going to lose deposits in the 711 00:37:33,239 --> 00:37:35,560 Speaker 3: aggregate to the point where you actually have to liquidate 712 00:37:35,920 --> 00:37:38,440 Speaker 3: these underwater bonds. And you know, it was not the 713 00:37:38,520 --> 00:37:42,279 Speaker 3: case for SVV, its case for other banks like Bank 714 00:37:42,320 --> 00:37:45,120 Speaker 3: of America for example. You know, and the other response 715 00:37:45,160 --> 00:37:47,920 Speaker 3: to the BTFB is that you know this is this 716 00:37:48,000 --> 00:37:52,239 Speaker 3: should not have happened because it basically euthanizes the need 717 00:37:52,440 --> 00:37:55,680 Speaker 3: for interest rate risk management in bank portfolio. So it 718 00:37:55,800 --> 00:37:58,439 Speaker 3: was a kind of a polar response. But again, what's 719 00:37:58,480 --> 00:38:00,880 Speaker 3: done is done. I think it's a part of the system. 720 00:38:01,000 --> 00:38:01,200 Speaker 4: Now. 721 00:38:01,280 --> 00:38:03,680 Speaker 3: I think the BTFB is going to be there as 722 00:38:03,719 --> 00:38:07,240 Speaker 3: a standard feature of the system, much like standing people 723 00:38:07,320 --> 00:38:10,680 Speaker 3: facility and spoplanes are there. So you know, these facilities 724 00:38:10,800 --> 00:38:14,520 Speaker 3: tend to be born and slip around. But it's again 725 00:38:14,560 --> 00:38:17,440 Speaker 3: it's the part of the scaffoldings that we have. I mean, imagine, 726 00:38:18,000 --> 00:38:20,759 Speaker 3: imagine the treasury market coming under strain because some of 727 00:38:20,840 --> 00:38:23,320 Speaker 3: these banks have to meet, you know, bitterly short balls, 728 00:38:23,320 --> 00:38:27,520 Speaker 3: and then instead of pledging to the fat off market 729 00:38:28,200 --> 00:38:30,400 Speaker 3: to be at liquidity, you basically have to dump it 730 00:38:30,480 --> 00:38:33,560 Speaker 3: on the dealers. And imagine what that would have done 731 00:38:33,600 --> 00:38:37,360 Speaker 3: the treasury market. Nothing, So we just basically kept this 732 00:38:37,520 --> 00:38:39,040 Speaker 3: treasure is off the great so to speak. 733 00:38:39,360 --> 00:38:42,680 Speaker 2: When when SVB failed, there were sort of two conversations 734 00:38:42,760 --> 00:38:45,800 Speaker 2: that sprung up right afterwards. One had to do with 735 00:38:46,040 --> 00:38:49,000 Speaker 2: like the sort of like, okay, all deposits in the 736 00:38:49,120 --> 00:38:52,160 Speaker 2: US are do we just accept that they're all implicitly 737 00:38:52,560 --> 00:38:56,279 Speaker 2: guaranteed regardless of what the formal FDI C cap is. 738 00:38:56,640 --> 00:38:58,680 Speaker 2: And then there's also a conversation about, you know, five 739 00:38:58,760 --> 00:39:00,680 Speaker 2: thousand banks in the US would which is like I think, 740 00:39:00,719 --> 00:39:03,400 Speaker 2: probably the most banked country in the world. Do we 741 00:39:03,560 --> 00:39:06,880 Speaker 2: just sort of, you know, does anything change with the 742 00:39:06,960 --> 00:39:09,520 Speaker 2: business model of banking or do we just sort of 743 00:39:09,640 --> 00:39:13,400 Speaker 2: accept that there are these contradictions and these tensions but 744 00:39:13,520 --> 00:39:15,800 Speaker 2: we sort of we don't talk about them, and we 745 00:39:15,920 --> 00:39:19,319 Speaker 2: just sort of let these issues go on and occasionally 746 00:39:19,440 --> 00:39:22,200 Speaker 2: we have to clean up a mess. But by and large, 747 00:39:22,440 --> 00:39:24,760 Speaker 2: there's some of these structural questions about the banking system. 748 00:39:24,800 --> 00:39:27,520 Speaker 2: We just sort of kicked the can and let them persist. 749 00:39:28,800 --> 00:39:31,200 Speaker 3: Well, look, I mean I don't think the blanket deposit 750 00:39:31,320 --> 00:39:34,440 Speaker 3: insurances in the cards, but I think again, you know, 751 00:39:34,600 --> 00:39:37,279 Speaker 3: other than the BTFB, we have this other tool, which 752 00:39:37,400 --> 00:39:40,080 Speaker 3: is the FDIC steps in between the PLAT and the 753 00:39:40,160 --> 00:39:41,600 Speaker 3: troubled institution. 754 00:39:41,719 --> 00:39:43,200 Speaker 4: And so there's a capital buffer. 755 00:39:43,280 --> 00:39:45,840 Speaker 3: So you know, it's some of the it's some of 756 00:39:45,960 --> 00:39:49,120 Speaker 3: the same playbooks in a different fashion that we have 757 00:39:49,239 --> 00:39:51,279 Speaker 3: seen in two thousand. You know that that always has 758 00:39:51,320 --> 00:39:54,239 Speaker 3: to be secure through its satisfaction that it's planting, you know, 759 00:39:54,560 --> 00:39:57,040 Speaker 3: but always wants to eliminate credit risk. And you know, 760 00:39:57,080 --> 00:39:59,839 Speaker 3: the FDIC standing has it been plus a special loan 761 00:40:00,640 --> 00:40:03,400 Speaker 3: that the FAT extends. Trouble institutions serve exactly that purpose. 762 00:40:03,440 --> 00:40:06,240 Speaker 3: So I think we will be dealing with whatever problems 763 00:40:06,360 --> 00:40:08,760 Speaker 3: we will be dealing with on a case by case basis. 764 00:40:09,400 --> 00:40:13,799 Speaker 4: Again, I think SVB. You know, the conceptually, the problem. 765 00:40:13,520 --> 00:40:17,400 Speaker 3: Of underwater security portfolios we kind of dealt with commercial 766 00:40:17,560 --> 00:40:19,760 Speaker 3: real estate is going to be a slow burning problem. 767 00:40:20,360 --> 00:40:23,799 Speaker 3: Perry Merton likes to say a bank can be insolvent 768 00:40:23,960 --> 00:40:27,640 Speaker 3: but liquid, but it cannot be solvent, and in liquid 769 00:40:28,280 --> 00:40:31,120 Speaker 3: you know, for as long as the pass don't run, 770 00:40:31,400 --> 00:40:32,520 Speaker 3: we will be able. 771 00:40:32,320 --> 00:40:34,000 Speaker 4: To deal with these issues. 772 00:40:34,080 --> 00:40:38,200 Speaker 3: You know, interest on reserves is manna from heaven. You know, 773 00:40:38,360 --> 00:40:41,440 Speaker 3: it's providing banks to steady stream of interesting income. So 774 00:40:41,600 --> 00:40:44,440 Speaker 3: if you have capitalization issues, that's going to be a 775 00:40:44,560 --> 00:40:47,799 Speaker 3: back door way of kind of refilling your capital base. 776 00:40:48,120 --> 00:40:50,279 Speaker 3: You know, back during the early nineteen eighties when the 777 00:40:50,440 --> 00:40:53,040 Speaker 3: bulbul curve was in charge and we had Latin American 778 00:40:53,120 --> 00:40:56,560 Speaker 3: death crisis and Thanks for underwater and had their capital issues, 779 00:40:56,680 --> 00:40:59,399 Speaker 3: you know, the FED had to generate the steep yield 780 00:40:59,440 --> 00:41:02,600 Speaker 3: curve in the system, which was a way to recapitalize 781 00:41:02,640 --> 00:41:05,080 Speaker 3: the banks, you know, with interest from deserves. You know, 782 00:41:05,160 --> 00:41:09,239 Speaker 3: that's no longer necessary, so it's actually easier. So I 783 00:41:09,320 --> 00:41:11,839 Speaker 3: think the banking system is fine for now. I think 784 00:41:11,920 --> 00:41:15,880 Speaker 3: we had a scare and you know, we are definitely 785 00:41:16,000 --> 00:41:19,120 Speaker 3: going to be dealing with issues in credit portfolios. We 786 00:41:19,200 --> 00:41:22,080 Speaker 3: are going to be dealing with cr lending books. There 787 00:41:22,160 --> 00:41:27,120 Speaker 3: will be consolidation across the banking system. But there are 788 00:41:27,200 --> 00:41:30,719 Speaker 3: many levers that the that can who to help clean 789 00:41:30,800 --> 00:41:31,120 Speaker 3: things up. 790 00:41:31,280 --> 00:41:31,440 Speaker 4: You know. 791 00:41:31,560 --> 00:41:35,480 Speaker 3: JP Morgan, for example, was an institution that came in 792 00:41:35,520 --> 00:41:38,120 Speaker 3: as a healthy hand because I'd like to remind people 793 00:41:38,160 --> 00:41:40,520 Speaker 3: haven't written about as far agoing. 794 00:41:40,239 --> 00:41:40,759 Speaker 4: A long time. 795 00:41:40,840 --> 00:41:44,399 Speaker 3: But you know, don't forget now, You can't thank now. 796 00:41:44,480 --> 00:41:47,600 Speaker 3: I can you know that bank is still under an 797 00:41:47,680 --> 00:41:50,200 Speaker 3: asset cap. You know, it has a ton of unused 798 00:41:50,239 --> 00:41:53,000 Speaker 3: balance sheet capacity, So you know, that's a lot of 799 00:41:53,120 --> 00:41:56,640 Speaker 3: balance sheet capacity to want chain if you need a 800 00:41:56,760 --> 00:42:00,360 Speaker 3: healthy private hand to clean up some stuff in I mean, 801 00:42:00,640 --> 00:42:02,759 Speaker 3: some of the banks that are already very big, and 802 00:42:02,800 --> 00:42:07,879 Speaker 3: we're big beneficiaries of dislocations and banking crisis in recent times, 803 00:42:07,960 --> 00:42:09,759 Speaker 3: are probably not going to be able to add much 804 00:42:10,400 --> 00:42:13,960 Speaker 3: to their balance because they are already too big. But 805 00:42:14,040 --> 00:42:16,719 Speaker 3: you know, I think Wells Fargo is another kind of 806 00:42:17,200 --> 00:42:19,239 Speaker 3: case in the back pocket of the TAT that could 807 00:42:19,280 --> 00:42:20,800 Speaker 3: be pulled out if need be. 808 00:42:20,960 --> 00:42:22,479 Speaker 4: So I think the system is fine. 809 00:42:22,560 --> 00:42:24,759 Speaker 3: I think we're just going to be dealing with these 810 00:42:26,040 --> 00:42:30,160 Speaker 3: microL dislocations here and there, you know, regional bank here, 811 00:42:30,280 --> 00:42:33,000 Speaker 3: regional bank there, treasury market. But again, people will be 812 00:42:33,000 --> 00:42:35,160 Speaker 3: dealing to these things. But you know the name of 813 00:42:35,239 --> 00:42:39,040 Speaker 3: the game is to anticipate this and the appropriate positions. 814 00:42:39,680 --> 00:42:42,520 Speaker 1: Well, can I ask one more question, just going back 815 00:42:42,640 --> 00:42:46,480 Speaker 1: to your sort of shadow banking origins, but the expectation 816 00:42:46,840 --> 00:42:50,640 Speaker 1: now seems to be that, you know, if banks maybe 817 00:42:50,920 --> 00:42:54,919 Speaker 1: have to hold even more capital or maybe d lever 818 00:42:55,200 --> 00:42:57,400 Speaker 1: in one way or another, that a lot of that 819 00:42:57,640 --> 00:43:01,840 Speaker 1: activity is going to end up being pushed into shadow 820 00:43:01,880 --> 00:43:05,880 Speaker 1: banks essentially, so private equity perhaps or some sort of 821 00:43:06,080 --> 00:43:09,239 Speaker 1: non bank lender. And to some extent, this is what 822 00:43:09,360 --> 00:43:12,040 Speaker 1: we've seen since the two thousand and eight financial crisis 823 00:43:12,120 --> 00:43:16,040 Speaker 1: by design of the financial regulators. There is some concern 824 00:43:16,160 --> 00:43:19,200 Speaker 1: that even more starts to get pushed out now and 825 00:43:19,400 --> 00:43:24,080 Speaker 1: maybe if you have interest rates that remain substantially higher, 826 00:43:24,520 --> 00:43:26,560 Speaker 1: that's going to be a big hit for both corporate 827 00:43:26,640 --> 00:43:32,200 Speaker 1: credit and commercial real estate. Should we worry about exposure 828 00:43:32,400 --> 00:43:35,000 Speaker 1: to those sectors in non banks. 829 00:43:36,040 --> 00:43:38,440 Speaker 3: Yes, because I think credit has yet to have its 830 00:43:38,480 --> 00:43:41,640 Speaker 3: threckoning and commercial real estate has yet to have its thckoning. 831 00:43:42,520 --> 00:43:47,000 Speaker 3: But again, it's better to suffer those losses in non 832 00:43:47,120 --> 00:43:51,640 Speaker 3: banks that banks, because you know, banking crises are very 833 00:43:51,760 --> 00:43:55,160 Speaker 3: nasty things. But if these losses get booked and absorbed 834 00:43:55,360 --> 00:43:58,799 Speaker 3: in balance sheets that are I don't want to say 835 00:43:58,840 --> 00:44:01,239 Speaker 3: not levered, because they all are. But you know that 836 00:44:01,440 --> 00:44:04,440 Speaker 3: leverage doesn't really have much to do with money markets. 837 00:44:05,080 --> 00:44:10,320 Speaker 3: That's orders of magnitude better to deal with than dealing 838 00:44:10,440 --> 00:44:13,920 Speaker 3: with a lot of these concentrated exposures in the banking system. 839 00:44:14,880 --> 00:44:18,240 Speaker 4: Regarding that shuttle banking question that you also asked, Tracy, 840 00:44:18,680 --> 00:44:19,200 Speaker 4: I think. 841 00:44:19,280 --> 00:44:22,840 Speaker 3: Where we started this conversation that you know, world trade 842 00:44:23,120 --> 00:44:27,480 Speaker 3: trading of commodities is going to get invoiced in currencies 843 00:44:27,560 --> 00:44:30,200 Speaker 3: other than just the dollar, you know, rent fee and 844 00:44:30,280 --> 00:44:33,840 Speaker 3: all these central bank digital currency market making and EFX markets, 845 00:44:34,640 --> 00:44:37,960 Speaker 3: you know, migrating to the balance sheets of central banks 846 00:44:38,000 --> 00:44:41,520 Speaker 3: and instead of correspondent banks, you should be imaginating correspondent 847 00:44:41,640 --> 00:44:45,640 Speaker 3: central banks. If that pisis is true, I think over 848 00:44:45,760 --> 00:44:48,600 Speaker 3: time that's going to provide balance sheet lead to all 849 00:44:48,680 --> 00:44:54,000 Speaker 3: the jesuves because e FX market making credit lines exclusively 850 00:44:54,080 --> 00:44:57,000 Speaker 3: provided into US dollars to oil and cover and other 851 00:44:57,080 --> 00:44:59,759 Speaker 3: commodities around. You know, that's the bread and butter to 852 00:44:59,800 --> 00:45:02,319 Speaker 3: main of JP, Morgan, Bank of American and City Bank. 853 00:45:03,200 --> 00:45:05,120 Speaker 3: You know, if you kind of moved to this world 854 00:45:05,280 --> 00:45:09,120 Speaker 3: that I'm describing, you know, that's going to provide balangy 855 00:45:09,239 --> 00:45:11,800 Speaker 3: really for the big US banks on the market. You 856 00:45:11,920 --> 00:45:14,400 Speaker 3: can use that for other things, you know, as the 857 00:45:14,480 --> 00:45:17,680 Speaker 3: shot banks are licking their wounds because they are suffering 858 00:45:17,719 --> 00:45:20,040 Speaker 3: their credit and real estate problems. You know, the banking 859 00:45:20,080 --> 00:45:22,960 Speaker 3: system is going to be potentially a source of strength 860 00:45:23,040 --> 00:45:25,239 Speaker 3: in a sense that not only do you have the 861 00:45:25,320 --> 00:45:27,439 Speaker 3: capital to land, but you also have the balent sheet 862 00:45:28,000 --> 00:45:30,200 Speaker 3: to do so. I think so, I think things are 863 00:45:30,239 --> 00:45:32,440 Speaker 3: going to work themselves out. I think it's a good 864 00:45:32,520 --> 00:45:34,720 Speaker 3: thing that things are happening in the shadow banking system. 865 00:45:34,719 --> 00:45:37,960 Speaker 3: The shadow banking system we are talking about today, it's 866 00:45:38,080 --> 00:45:41,560 Speaker 3: very different from the shadow banking system I have. I 867 00:45:41,680 --> 00:45:44,160 Speaker 3: didn't come up with the sexy definition of shadow banking. 868 00:45:44,239 --> 00:45:47,560 Speaker 3: That's very early who said that shadow banking is money 869 00:45:47,600 --> 00:45:51,080 Speaker 3: market funding of capital market landing. And I think the 870 00:45:51,200 --> 00:45:54,520 Speaker 3: general understanding about shadow banking these days is that anything 871 00:45:54,600 --> 00:45:57,719 Speaker 3: that happens outside of a bank that involves credit is 872 00:45:57,760 --> 00:45:58,440 Speaker 3: shadow banking. 873 00:45:58,840 --> 00:46:01,640 Speaker 4: That's not true too to me, at least, because you. 874 00:46:01,680 --> 00:46:04,040 Speaker 3: Know, you have to have a very strong mind market component, 875 00:46:04,360 --> 00:46:07,800 Speaker 3: which is what appifies things, and so that shuttle banking 876 00:46:07,960 --> 00:46:11,080 Speaker 3: is fine and if you will, you know, basically a 877 00:46:11,200 --> 00:46:16,000 Speaker 3: lot of traditional bread and butter Western financial market making, 878 00:46:16,120 --> 00:46:21,960 Speaker 3: credit provisioning, financing functions migrating to the balance sheet of 879 00:46:22,040 --> 00:46:27,120 Speaker 3: central banks cbdc's different currencies. I think that's the new 880 00:46:27,200 --> 00:46:30,400 Speaker 3: shuttle banking terrain that we need to be focusing that 881 00:46:30,520 --> 00:46:32,840 Speaker 3: I will be focusing on, and I will be mapping 882 00:46:32,920 --> 00:46:35,960 Speaker 3: and thinking about because I think that's the frontier that's 883 00:46:36,040 --> 00:46:39,200 Speaker 3: going to drive rate some Tonic markets going forward. 884 00:46:39,600 --> 00:46:43,360 Speaker 2: All Right, Sulton, I have one last, very tiny question, 885 00:46:43,600 --> 00:46:46,000 Speaker 2: and I'm only asking this really because I need to 886 00:46:46,120 --> 00:46:48,320 Speaker 2: know it for the outro of the episode. 887 00:46:48,600 --> 00:46:49,640 Speaker 1: Are you going to join Twitter? 888 00:46:50,760 --> 00:46:53,279 Speaker 4: I will not be doing Twitter, really, I will not 889 00:46:53,400 --> 00:46:56,640 Speaker 4: do social media. Really. Maybe we can say this at 890 00:46:56,640 --> 00:46:58,680 Speaker 4: the end. I will say the name of my website 891 00:46:58,719 --> 00:46:59,920 Speaker 4: where people can go and look. 892 00:47:00,440 --> 00:47:07,280 Speaker 2: Wow, incredible. That's an incredible restraint. It's an incredible restraint. 893 00:47:07,840 --> 00:47:09,000 Speaker 2: I'm very impressed by. 894 00:47:09,080 --> 00:47:11,799 Speaker 4: Is that a good thing? I think it's a good thing. 895 00:47:12,160 --> 00:47:15,160 Speaker 2: I mean, it would make you very scarce, but it's 896 00:47:15,160 --> 00:47:17,520 Speaker 2: an incredible restraint, So I'm impressed. 897 00:47:18,440 --> 00:47:22,160 Speaker 3: No, I will be strictly behind the payball, and probably 898 00:47:22,239 --> 00:47:26,279 Speaker 3: this would be my last public appearance and then I 899 00:47:26,320 --> 00:47:27,200 Speaker 3: would just disappear. 900 00:47:30,120 --> 00:47:31,560 Speaker 2: Okay, well, this is a gift. 901 00:47:32,640 --> 00:47:32,920 Speaker 3: Thank you. 902 00:47:33,000 --> 00:47:36,040 Speaker 2: It was, thank you, it was it was a pleasure. 903 00:47:36,280 --> 00:47:37,440 Speaker 4: Thank you very much for having me. 904 00:47:37,880 --> 00:47:40,680 Speaker 1: All Right, well, thanks so much, Sultan, and the website, 905 00:47:40,760 --> 00:47:45,560 Speaker 1: the new website is expluris dot h U. You should 906 00:47:45,600 --> 00:48:01,400 Speaker 1: definitely check that out, Joe. I love talking to Sultan 907 00:48:01,800 --> 00:48:04,759 Speaker 1: me too. That's such a treat. The quote about like 908 00:48:04,880 --> 00:48:07,160 Speaker 1: we are in the ante room of something. I'm going 909 00:48:07,200 --> 00:48:11,439 Speaker 1: to steal that, yeah, for coverage, but I thought, I mean, look, 910 00:48:11,480 --> 00:48:13,359 Speaker 1: every time we talked to him, there are a number 911 00:48:13,400 --> 00:48:16,279 Speaker 1: of really interesting big picture points. The one thing I 912 00:48:16,320 --> 00:48:19,000 Speaker 1: would say is, I remember when the Breton Woods three 913 00:48:19,200 --> 00:48:21,440 Speaker 1: thesis came out last year. Yeah, there were a lot 914 00:48:21,480 --> 00:48:23,680 Speaker 1: of people saying that this was never going to happen, 915 00:48:24,000 --> 00:48:27,360 Speaker 1: and many of those people now have sort of tweaked 916 00:48:27,960 --> 00:48:31,520 Speaker 1: that statement to oh, you know, it may happen, but 917 00:48:31,680 --> 00:48:32,560 Speaker 1: not for a long time. 918 00:48:33,040 --> 00:48:33,960 Speaker 4: You Know what I think is a. 919 00:48:34,040 --> 00:48:38,080 Speaker 2: Really interesting point that I don't think gets discussed enough 920 00:48:38,440 --> 00:48:41,440 Speaker 2: in this which I appreciated Sultan bringing up, was you know, 921 00:48:41,520 --> 00:48:43,440 Speaker 2: people look at this from a very sort of like 922 00:48:44,400 --> 00:48:47,279 Speaker 2: financial angle, or they talk about China specifically. But I 923 00:48:47,480 --> 00:48:50,920 Speaker 2: liked that he brought up you know, all these other countries, 924 00:48:51,000 --> 00:48:55,000 Speaker 2: the sort of non aligned countries, they matter to a 925 00:48:55,080 --> 00:48:57,800 Speaker 2: significant degree, particularly when added up and sort of the 926 00:48:58,000 --> 00:49:02,480 Speaker 2: politics of on theline countries who don't necessarily see the 927 00:49:02,600 --> 00:49:04,920 Speaker 2: world through the same lens as the US, or have 928 00:49:05,040 --> 00:49:09,480 Speaker 2: the same perspective on many of these global trends. Obviously, 929 00:49:09,560 --> 00:49:12,000 Speaker 2: some of the bricks nations, et cetera, like I just 930 00:49:12,120 --> 00:49:15,680 Speaker 2: the pure like you know, geopolitics sort of gets trotted 931 00:49:15,719 --> 00:49:18,239 Speaker 2: out too much, but they're sort of like the sovereignty 932 00:49:18,520 --> 00:49:21,200 Speaker 2: and the impulses and desires of all these other countries. 933 00:49:21,560 --> 00:49:22,359 Speaker 1: They really matter. 934 00:49:22,800 --> 00:49:25,799 Speaker 2: And as their wealth grows and there as their need 935 00:49:25,920 --> 00:49:29,960 Speaker 2: to grow, what they do economically and who they trade 936 00:49:30,000 --> 00:49:32,640 Speaker 2: with is going to sort of be determinative to some 937 00:49:32,800 --> 00:49:34,839 Speaker 2: extent about who rises and fall. 938 00:49:35,120 --> 00:49:35,239 Speaker 3: Well. 939 00:49:35,280 --> 00:49:37,840 Speaker 1: The other thing I thought was really interesting was this 940 00:49:38,040 --> 00:49:42,560 Speaker 1: idea of maybe outsourcing more dealer functions to the central bank. Yes, 941 00:49:43,120 --> 00:49:46,040 Speaker 1: and if you were to do that, it could potentially 942 00:49:46,200 --> 00:49:48,960 Speaker 1: solve some of the concerns that you just outlined, but 943 00:49:49,200 --> 00:49:53,640 Speaker 1: also free up some balance sheet for big banks to 944 00:49:53,840 --> 00:49:57,800 Speaker 1: do other types of activities, maybe more like non market 945 00:49:57,840 --> 00:50:01,759 Speaker 1: making activities, more loans like that. I hadn't really considered that. 946 00:50:02,120 --> 00:50:04,920 Speaker 2: Yeah, that's a really it's a really interesting point, and 947 00:50:05,239 --> 00:50:07,400 Speaker 2: no one else has really talked about that. But you know, 948 00:50:07,480 --> 00:50:10,040 Speaker 2: we do sort of live in this era in which 949 00:50:10,120 --> 00:50:14,040 Speaker 2: sort of like state capitalism or state directed capitalism is 950 00:50:14,120 --> 00:50:16,840 Speaker 2: such a big thing, right, and so the extent to 951 00:50:16,960 --> 00:50:21,399 Speaker 2: which central banks become bigger sort of active dealers rather 952 00:50:21,520 --> 00:50:24,640 Speaker 2: than just sort of behind the scenes supporters of private 953 00:50:24,760 --> 00:50:27,600 Speaker 2: banks is something to takes seriously. And maybe there is 954 00:50:27,640 --> 00:50:31,400 Speaker 2: a context there in which the sort of the CBDC 955 00:50:31,560 --> 00:50:34,600 Speaker 2: or digital currencies could sort of have like a natural 956 00:50:34,680 --> 00:50:35,720 Speaker 2: fit in that framework. 957 00:50:35,920 --> 00:50:38,520 Speaker 1: Yeah, we need a new map, Yeah we really do, 958 00:50:38,719 --> 00:50:41,680 Speaker 1: don't we. Well, maybe Sultan will publish at his new 959 00:50:41,760 --> 00:50:44,239 Speaker 1: research firm. Shall we leave it there? Let's leave it there? 960 00:50:44,320 --> 00:50:47,080 Speaker 1: All right? This has been another episode of the All 961 00:50:47,120 --> 00:50:49,880 Speaker 1: Thoughts podcast. I'm Tracy Alloway. You can follow me on 962 00:50:50,000 --> 00:50:51,360 Speaker 1: Twitter at Tracy Alloway. 963 00:50:51,520 --> 00:50:54,360 Speaker 2: And I'm Joe Wisenthal. You can follow me on Twitter 964 00:50:54,600 --> 00:50:59,040 Speaker 2: at the Stalwart. Our guest, Sultan Poster, is not on Twitter, 965 00:50:59,200 --> 00:51:02,200 Speaker 2: but you should go check out his brand new website 966 00:51:02,520 --> 00:51:08,120 Speaker 2: xunopluris dot hu. I certainly will be follow our producers 967 00:51:08,200 --> 00:51:11,680 Speaker 2: Carmen Rodriguez at Carmen Arman and dash Ol Bennett at 968 00:51:11,800 --> 00:51:15,000 Speaker 2: dashbot and check out all of our podcasts under the 969 00:51:15,080 --> 00:51:18,239 Speaker 2: handle at podcasts and for more odd Laws content, go 970 00:51:18,320 --> 00:51:21,759 Speaker 2: to Bloomberg dot com slash odd Lots, where we have transcripts, 971 00:51:21,840 --> 00:51:24,800 Speaker 2: a blog, a new newsletter, and you can chat twenty 972 00:51:24,880 --> 00:51:27,680 Speaker 2: four to seven with fellow listeners about all of these topics. 973 00:51:27,719 --> 00:51:29,520 Speaker 2: I'm sure there's going to be a lot of discussion 974 00:51:29,600 --> 00:51:32,840 Speaker 2: about this one in there on the odd Lots discord 975 00:51:33,000 --> 00:51:36,759 Speaker 2: at discord dot gg slash odd Lots. It's a lot 976 00:51:36,800 --> 00:51:37,080 Speaker 2: of fun. 977 00:51:37,200 --> 00:51:39,960 Speaker 1: I go in there a lot and aud lots listeners. 978 00:51:40,080 --> 00:51:43,640 Speaker 1: If you enjoy these podcasts, if you like listening to 979 00:51:43,719 --> 00:51:46,880 Speaker 1: the guests that we have on, like Sultan Posear, please 980 00:51:47,320 --> 00:51:49,880 Speaker 1: go and leave us a review on any of the 981 00:51:49,920 --> 00:51:53,759 Speaker 1: big podcast platforms. If you like us, please let us know. 982 00:51:54,080 --> 00:51:55,800 Speaker 1: Thanks so much, thanks for listening 983 00:52:01,320 --> 00:52:01,360 Speaker 4: In