Speaker 1: Hello, and welcome to another episode of the All Thoughts Podcast.
Speaker 1: I'm Tracy Alloway.
Speaker 2: And I'm Joe.
Speaker 1: Why isn't thal Joe? Do you remember what we were
Speaker 1: doing this time last year?
Speaker 3: No?
Speaker 1: Yeah, I can barely remember two weeks ago. Yeah, but
Speaker 1: I actually I remember this one mostly because I looked
Speaker 1: it up right before we started doing this recording. But
Speaker 1: this time last year, we were preparing organizing our first
Speaker 1: live All Thoughts debate between Zultan Posar and Perry Maryland.
Speaker 1: That was really fun.
Speaker 2: We got to do that again.
Speaker 1: Yeah, So we were sort of frantically doing a lot
Speaker 1: of the sort of travel arrangements and things like that
Speaker 1: for that.
Speaker 2: Sorry, waking up early in the morning, like of the
Speaker 2: day of the debate, entering names into a database so
Speaker 2: that people could get into the Bloomberg.
Speaker 1: Yeah, yes too. It was fun, all right. But my
Speaker 1: point is it's been a while since we've spoken to
Speaker 1: Sultan Posar.
Speaker 2: It has been a while, and it's unfortunate because he
Speaker 2: is one of our most requested guests. People would listen
Speaker 2: to him every month if we interviewed him.
Speaker 1: I agree, in fact, I think we should do monthly
Speaker 1: or even quarterly interviews with Sultan. But I am very
Speaker 1: happy to say without further ado that Sultan is he's back.
Speaker 2: He's back and so right. So he was at Credit Sweeze,
Speaker 2: he left Credit Sweeze. He's been kind of silent. There
Speaker 2: has been this incredible mystery about what he's going to
Speaker 2: do next, and uh, we don't know. But he's coming
Speaker 2: out on the Odd Lots podcast, so let's find out.
Speaker 1: He's gonna tell us. Now, Sultan, welcome back to the show.
Speaker 1: We're so glad to have you back on.
Speaker 2: This is like when Lebron James announced on ESPN all
Speaker 2: those years ago what he was going to do next.
Speaker 1: So very nice, thanks for having all right, so what
Speaker 1: are you doing? Just jump right into it. Yeah, you
Speaker 1: were strategistic credits us as everyone knows at this point,
Speaker 1: and now what are you up to?
Speaker 3: Well, the next steps is I have founded my own
Speaker 3: macroeconomic consultancy. The name of the firm is Exlunoplurus, and
Speaker 3: I will be providing research to institutional investors and consult
Speaker 3: institutional investors about plumbing as I always have.
Speaker 2: Okay, meny questions, Well let's just start simple. What is
Speaker 2: X you know?
Speaker 3: Plurist man exlunopluris is the opposite of a plural busulum,
Speaker 3: which is this little motto that we can find on
Speaker 3: a great seal of the United States and on the
Speaker 3: dollar bill. It means in English, out of one many.
Speaker 3: It's meant to capture two ideas. The first idea is,
Speaker 3: you know that my retrospective on what I've been doing
Speaker 3: for a strategies for a decade is basically anticipating moments
Speaker 3: when prices fall apart in funding and rates markets. So
Speaker 3: the basic idea is that most of the time things
Speaker 3: straight on top of each other, you know, the industry
Speaker 3: structure is orderly, and then then something bad happens, whether
Speaker 3: it's panic or a pandemic or a balance sheet constraint
Speaker 3: or liquidity constraint, prices fall apart. So out of one price,
Speaker 3: you are dealing with many prices. And so that's basically
Speaker 3: the bread and butter of what a rate strategist and
Speaker 3: a rate strater is doing, anticipating those moments and being
Speaker 3: on the right.
Speaker 4: Side of those movements.
Speaker 3: And then the other idea is that you know global
Speaker 3: macro as such, I think it grew up as a
Speaker 3: concept and an asset price, if you will in the
Speaker 3: unicorn or moment where globalization was moving forward, the dollar
Speaker 3: was the undisputed global hegemonic currency, and so we were
Speaker 3: all kind of creating the global dollar cycle and going forward.
Speaker 3: As we discussed this in the context of bread in
Speaker 3: was three, that's no longer going to be the case.
Speaker 3: So it's kind of capturing the site PST. You know,
Speaker 3: China is trying to extract itself from the Western financial system,
Speaker 3: much like the Western real economy is trying to extract
Speaker 3: itself out of supply chains that.
Speaker 4: Are running through China.
Speaker 3: And so we are I think at the beginning of
Speaker 3: this era the next five ten years.
Speaker 4: At least, where we are going to go through this.
Speaker 3: Monitory divorce and you know, the dollars hegemony is going
Speaker 3: to be challenged by some geo financial moves that the
Speaker 3: chain is blooding, So out of one dominant reserve currency,
Speaker 3: we will have the world where we will have.
Speaker 2: Met That's a great name.
Speaker 1: So, you know, you mentioned moments in macro and I
Speaker 1: think last year when you released that Breton Woods three
Speaker 1: thesis that you talked about on the show and wrote
Speaker 1: a number of research notes about it, definitely demarketed a
Speaker 1: thing that seemed to be, you know, floating out there
Speaker 1: in people's minds, this idea that maybe finally some things
Speaker 1: were changing around dollar hegemony, as you just mentioned. Talk
Speaker 1: to us about that original thesis a little bit more
Speaker 1: and whether or not you think it's been born out
Speaker 1: over the course of the last I guess twelve to
Speaker 1: fifteen months or so.
Speaker 3: I think the concept is very healthy and it's alive.
Speaker 3: I personally see more and more signs that some of
Speaker 3: these teams that we have discussed on that first show
Speaker 3: when we talked about Bretton Woodstree or computer fruition, and
Speaker 3: also the conversation with bit Perry, I think we did
Speaker 3: a quick temperature check on the idea and at the
Speaker 3: conclusion I had there was that, you know, Bretton wood
Speaker 3: Tree is a healthy baby boy, so to speak. So
Speaker 3: it's throwing and development rapidly. Look a couple of things.
Speaker 3: The frame that my answer to that question is, I
Speaker 3: think it's becoming very obvious that when you talk to
Speaker 3: policy circles and investors in the West, I think the
Speaker 3: primary focus is on how do we, so to speak,
Speaker 3: de risk supply chains that are running through China. How
Speaker 3: do we become more you know self sufficient in terms
Speaker 3: of rare or the capital goods we need for energy,
Speaker 3: transition ships and so.
Speaker 4: On and support.
Speaker 3: And so the focus in the West is on making
Speaker 3: sure that the real economy is decoupled from the East,
Speaker 3: so to speak. And when you speak to market participants
Speaker 3: and policy makers in the East, the primary focus.
Speaker 4: There because they have all the supply chains and so
Speaker 4: they are in control of that part of the equation.
Speaker 3: There, the primary focus is on how do you expect
Speaker 3: yourself from the Western financial system and how do you
Speaker 3: de risk this relationship that you have financially with the
Speaker 3: US dollar and Western national institutions and financial centers in general.
Speaker 3: And I would say that since we last spoke about
Speaker 3: this topic, there have been a number of news headlines
Speaker 3: you know, read out from state visits, what have you,
Speaker 3: where you know things like the rendmen b invoicing of
Speaker 3: commodities is moving ahead. We are reading about more and
Speaker 3: more stories where natural gas deals and oil deals are
Speaker 3: invoiced in.
Speaker 4: Redmond and not equest dollar.
Speaker 3: I have not talked about this aspect of breaton Woodstree,
Speaker 3: but I kind of uncovered the new aspect of it,
Speaker 3: which is the whole Central Bank digital currency topic and
Speaker 3: how all that fits into breadon wood tree. And you know,
Speaker 3: when you start digging in that domain, I think you
Speaker 3: uncover several things that are kind of eye opening. So
Speaker 3: let me just offer one for example, the real economy
Speaker 3: and real economy analog again is you know, in the US,
Speaker 3: for example, they don't allow Huawei.
Speaker 4: To build cell phone towers for obvious reasons.
Speaker 3: You know, there's a risk of beevesdropping and spionage, and
Speaker 3: you know, the Central Bank digital currencies are basically the
Speaker 3: same story. I have been kind of cursorially following CBDCs,
Speaker 3: but I couldn't truly put into an overall macro picture
Speaker 3: as to what are CBDCs about. You know, if you
Speaker 3: think about it, China has been quite busy trying to
Speaker 3: internationalize the rent, being it more for trade settlement purposes
Speaker 3: since the middle of the last decades. Around twenty fifteen
Speaker 3: is when they started, and then that process somehow stalled.
Speaker 3: And I think the reason why that process talled is
Speaker 3: that they recognize that it's pointless to internationalize your currency
Speaker 3: through a Western financial system, through London, through New York,
Speaker 3: and through the balance sheets of Western finational institutions when
Speaker 3: you basically do not control that network of institutions that
Speaker 3: your currency is running through for you to do something
Speaker 3: like that to basically knewed out a whole new correspondent
Speaker 3: banking system, Okay. And so you know, this is also
Speaker 3: the time when Russia annexed Ukraine, so the financial sanctions
Speaker 3: became a much more dominant topic in the financial press.
Speaker 3: So I think that was a wake up role for
Speaker 3: China that if they want to indeed internationalized rent fee,
Speaker 3: they need to start from scratch and they need to
Speaker 3: build a the noblestial network that they control. And so
Speaker 3: this is also the time when CBDC has become a
Speaker 3: hot topic. You know, CBDCs started in China, you know
Speaker 3: the ec and y. And the way I think about
Speaker 3: CBDCs and developments in net space today is that you
Speaker 3: basically need to imagine a world where five ten years
Speaker 3: from now, we are going to have the renmnty that's
Speaker 3: far more internationally used than today, but the settlement of
Speaker 3: international R and B transactions are going to happen on
Speaker 3: the balance sheets of central banks. So instead of having
Speaker 3: a network of correspondent banks, we should be thinking about
Speaker 3: a network of correspondent central banks and a world where
Speaker 3: you have a number of different countries. In each of
Speaker 3: those different countries have their banking systems using the local currency.
Speaker 3: But when country A wants to trade the country B
Speaker 3: you know, Thailand with China, for example, the effects needs
Speaker 3: of those two local banking systems are going to be
Speaker 3: met by dealings between two central banks.
Speaker 4: And so when you reimagine a.
Speaker 3: System like this, it's basically a state the state, and
Speaker 3: a central bank to central bank network that is completely
Speaker 3: independent of Western financial centers and the dollar. So there's
Speaker 3: a ton of development we can develop some time liter
Speaker 3: and show talk about this. So there's a ton of
Speaker 3: development on NetFront. And also the context here is that
Speaker 3: if you want to imagine an alternative to a dollar
Speaker 3: based system, you know, the single most important thing that
Speaker 3: makes the dollar so important is that ninety percent of
Speaker 3: ethics transactions any given day in the world use the
Speaker 3: US dollar as one leg of the transaction. Okay, So
Speaker 3: basically that's because we inherited the system where if you
Speaker 3: want to sell you know, if you want to settle
Speaker 3: a transaction between someone in Hungary in Thailand, okay, the
Speaker 3: way you will do that today is you would sell
Speaker 3: your Hungarian for it buy.
Speaker 4: Euros, sell the euro and buy the dollar and sell
Speaker 4: the US iBOT.
Speaker 3: So that's basically three different currency pairers, three market makers,
Speaker 3: three bid ask spreads. Incredibly inefficient. But again, if you
Speaker 3: go back to this concept of correspondent central banks as
Speaker 3: opposed to correspondent banks, this transaction just can settle between
Speaker 3: the local Bagarian banking system and the local tie banking system.
Speaker 3: We have to do central banks as dealers of less
Speaker 3: resorts in the FX markets.
Speaker 4: And so that that's the last piece I want to mention.
Speaker 3: In this part, which is that you know, in the
Speaker 3: West we are talking about this dealer of less resort
Speaker 3: thing a lot. And the context in which we talk
Speaker 3: about dealer of less resort in the West and in
Speaker 3: the US case specific, is that we need a dealer
Speaker 3: of less resort for the treasury market because the treasuring
Speaker 3: market is not liquid.
Speaker 4: That's where the focus is.
Speaker 3: And of course we need a dealer of less resort
Speaker 3: and the repo market and the FX pop market, but
Speaker 3: I think it's also time to start thinking about dealers
Speaker 3: of first resorts in terms of FX market making for
Speaker 3: the global East, and which is the Central Bank Salfurence,
Speaker 3: the Central Bank correspondent system that I'm describing.
Speaker 2: This is so interesting because I don't think i'd ever
Speaker 2: heard anyone talk about cbdc's within the context of like
Speaker 2: a new kind of plumbing, and you hear stuff about, Okay, well,
Speaker 2: you know, it's the twenty twenty first century and we
Speaker 2: need to be able to pay our stuff on our phones,
Speaker 2: which we already can do, or sometimes you hear about
Speaker 2: it in the context of privacy. I've always had this
Speaker 2: theory that CBDCs are just a way for central bankers
Speaker 2: to get invited to panels and yet and get really
Speaker 2: plush jobs after they leave the central banking world, like
Speaker 2: doing digital money for visa or something like that. So
Speaker 2: but this is like actually sort of like an interesting
Speaker 2: theory before we go a little bit further down on
Speaker 2: this road, because I want to talk more about it,
Speaker 2: but I'm still curious about the business. You know, you're
Speaker 2: going to be going out to, you know, be independent.
Speaker 2: What is your sort of vision for X you know pluris,
Speaker 2: which is again I think is a really clever name,
Speaker 2: the opposite of e plurbus union. What is your vision
Speaker 2: for like what kind of business who it will be?
Speaker 2: Is it going to be who are your clients like,
Speaker 2: talk to us a little bit about what your vision
Speaker 2: for your your firmat.
Speaker 4: Well, thanks for coming back to that. I mean, look,
Speaker 4: I figure you're.
Speaker 2: Going to announce the decision, the big decision here on
Speaker 2: odd lots happy, I like, I'm actually also just I'm
Speaker 2: very curious about how this world works.
Speaker 3: Okay, So look, I have a lot for two streams
Speaker 3: of publications in terms of research. The first one there
Speaker 3: will be money, Banks and Bases. This would be the
Speaker 3: publication that that most people kind of you know, identify
Speaker 3: me with. So I'd be looking at the fifty largest
Speaker 3: balan hips in the world with a lot of attention,
Speaker 3: you know that what the big banks are up to,
Speaker 3: what the gesips are up to, what are they doing
Speaker 3: in their portfolios or the balanceships constraints. And it's going
Speaker 3: to be based on a research piece about the day
Speaker 3: to day working of the dollar system as we know
Speaker 3: it today. And then the parallel publication will be Money
Speaker 3: and World Order, which is going to keep track of
Speaker 3: how Breton Bookstree is evolving because you know these topics
Speaker 3: of the dollarization, the remodetization of gold, you know, using
Speaker 3: central bank digital currencies to build out to knit out,
Speaker 3: you know, the novo financial system, you know, the petrol
Speaker 3: you want, and the rending be invoicing of commodities and
Speaker 3: created goods going forward.
Speaker 4: I think these are basically.
Speaker 3: The two lenses through which one should be following dollar
Speaker 3: funding and dollar rates markets going forward, because you know,
Speaker 3: the day to day we just have to live with,
Speaker 3: but then we absolutely cannot lift our eyes off all
Speaker 3: the geopolitical realities and challenges that that the dollar will
Speaker 3: be facing. So these will be the two publications that
Speaker 3: subscribers will get. As I said, you know, it's a
Speaker 3: it's a price side, so you know, the target audiences
Speaker 3: institutional investors exclusively and that and not retail investors, and
Speaker 3: so I will be completely behind the paywall and subscribers
Speaker 3: will be able to chat with me and the conference
Speaker 3: calls and meetings, And that's basically the simple vision.
Speaker 1: I was actually going to circle back to that towards
Speaker 1: the ends, but since you guzumped me, let me ask
Speaker 1: a question that sort of squares these two thoughts, like
Speaker 1: the new business and the Breton Woods three vision. So
Speaker 1: one of the criticisms that we sometimes hear about, you know,
Speaker 1: big bold predictions about changes in the overall financial system
Speaker 1: is that it's hard to actually invest money based on them.
Speaker 1: So I guess the question is, you know, if someone
Speaker 1: hears Breton Wood's three new central bank digital currencies, four
Speaker 1: x lenders of first resort, things like that, what's actionable
Speaker 1: about those ideas? What is it actually mean for investors?
Speaker 4: I think it means a lot.
Speaker 3: So Number one, I think if you are looking at
Speaker 3: a whole new plumbing where you know, let's back up
Speaker 3: for example, I mean we are used to thinking about
Speaker 3: a world where there is either a dollar shortage in
Speaker 3: some regions or dollar surplus in other regions, and then
Speaker 3: these surfaces get recycled either in the FX swap market
Speaker 3: or in the rate market. And you know, I think
Speaker 3: if we end up in a world where countries are
Speaker 3: now going to have several options, for example, as to
Speaker 3: how they pay for commodities, and let's take oil for
Speaker 3: an example. You know, people hold dollars many reasons. One
Speaker 3: reason why people hold dollars is because oil it has
Speaker 3: been historically priced in dollars. So if you are a
Speaker 3: poor country that needs to import oil on the margin,
Speaker 3: you need to have dollars to be able.
Speaker 4: To do that.
Speaker 3: Now, if you are going to live a world where
Speaker 3: you can pay dollars for oil, but you can also
Speaker 3: pay rendmin b or oil. But if you are a
Speaker 3: gold miner, you can also pay for oil to gold
Speaker 3: like Gone for example. You know, that's basically three options
Speaker 3: you're looking on at a screen, and so you will
Speaker 3: just choose whichever one is cheaper. And that picture gets,
Speaker 3: you know, further complicated by the fact that there is
Speaker 3: oil blowing west, which is one price, and oil blowing east, which.
Speaker 4: Is another price.
Speaker 3: So it's not just again out of one many it's
Speaker 3: not just one price anymore, but it's a bunch of
Speaker 3: prices and a bunch of currencies, and choose whichever works
Speaker 3: best for you. So and also if you go into
Speaker 3: a world where trade is not dominantly invoiced in dollars,
Speaker 3: so people don't have to borrow dollars to import stuff
Speaker 3: and the exporters don't earn dollars exclusively, then it's no
Speaker 3: longer a machinery where you know the dollars are getting
Speaker 3: created on the margin, that dollars are getting accumulated on
Speaker 3: the margin, and the question is how do you recycle
Speaker 3: the earned dollars back into funding and rates markets. So
Speaker 3: if that world splits into you know, we are now
Speaker 3: doing half of this in rendment B and the other
Speaker 3: half we are doing it in dollars, then naturally, for
Speaker 3: example the fxplop market, the landscape of the fx pop
Speaker 3: market is going to get redrawn.
Speaker 4: The following way.
Speaker 3: There will be regions that used to be short dollars,
Speaker 3: but now they are not because they can you know,
Speaker 3: source rendmen be through the rentman b spoplanes from the PBOC,
Speaker 3: So dollars shortages and certain regions are going to disappear.
Speaker 3: Then there will be regions that used to recycle dollar
Speaker 3: surpluses into the fx splop market. You know, maybe the
Speaker 3: Reserve Bank of Australia putting in the fx pop market
Speaker 3: and then you know, some Japanese investor picking those dollars
Speaker 3: up in the fx pop market. You has their treasury portfolios,
Speaker 3: but have you you know, if Australia ends up, you know,
Speaker 3: earning only half as much dollars then as they used
Speaker 3: to in the past, and the other half is now
Speaker 3: in renomn B, then the dollar recycling is going.
Speaker 4: To suffer as well.
Speaker 3: So you know, the supply of dollars in fx pop
Speaker 3: markets and the demand for dollars in the fx pop
Speaker 3: market is going to get redrawn, and I think there
Speaker 3: will be some regions that are going to turn that
Speaker 3: are going to be turned on their head, you know.
Speaker 3: So there will be positive trust currency bases that will
Speaker 3: turn negative, and there will be negative trust currency bases
Speaker 3: that will turn positives. So it's just one example for
Speaker 3: example in terms of fxpops, and then in terms of
Speaker 3: you know, the rest of the world's demand for treasuries,
Speaker 3: which is a big question again. Dollars you historically need
Speaker 3: because you need to import a bunch of things which
Speaker 3: have been exclusively invoiced in dollars. But if you have
Speaker 3: a world where things are being invoiced half in dollars
Speaker 3: and have rende, you know, that need to accumulate dollar.
Speaker 4: Reserves doesn't exist there.
Speaker 3: China, I think is a very important example in this
Speaker 3: regard because one reason why China has so many fex
Speaker 3: reserves because that's kind of like your life insurance policy,
Speaker 3: because all the commodities and foodstuffs that they need to import.
Speaker 3: I mean, I think the big five commodities that the
Speaker 3: import is natural gas, oil, soybeans, copper, gut knows what
Speaker 3: else but you know, the annual bill for those imports
Speaker 3: is running the five hundred billions, you know, so if
Speaker 3: you don't have the dollars to pay for those, your toast.
Speaker 4: So you have to have a lot of dollar reserves.
Speaker 3: But if you end up in a world where you
Speaker 3: can now force commodity exporters to accept your currency for
Speaker 3: those commodity imports and not the US dollar, you basically
Speaker 3: have gained sovereignty from a monetary perspective, and so again
Speaker 3: you will not have to run with as much effects reserves.
Speaker 3: And so you know, this is going to have feedback
Speaker 3: effect on you know, demand for treasuries in general and
Speaker 3: on the margin. You know, things are always in the
Speaker 3: margin devidance. So I think if these teams are going
Speaker 3: to play out over the next five to ten years
Speaker 3: on the margin, you know, demand for treasuries and the
Speaker 3: recycling of dollars in the front end, then an affect
Speaker 3: and the upgrades market, I think, is going to get
Speaker 3: pushed around.
Speaker 2: Would you anticipate in you know, or do you have
Speaker 2: some timing Like we talked about this on a recent
Speaker 2: episode with Karthik centerund But they will see, you know,
Speaker 2: there are a lot of countries around the world that
Speaker 2: float dollar bonds for one reason or another. Do you
Speaker 2: anticipate that we'll see if rinmand B internationalization continues, that
Speaker 2: we will see various ems float more rinman B bonds
Speaker 2: or would that be a crucial aspect towards a successful
Speaker 2: internationalization of R and B.
Speaker 3: I think it can be a part of our MBA internationalization.
Speaker 3: I mean, you know, it's just the way of kind
Speaker 3: of raising offshore R and B that's out there, and
Speaker 3: you can either tap swaplights with the PBOC. You know,
Speaker 3: that's a very important aspect of it. I mean, BBOC
Speaker 3: has swap lined with way more countries than the USA
Speaker 3: swop lines for example, So there is you know, when
Speaker 3: you kind of look at the topography of that EBOC
Speaker 3: spopline network and when you look at the topography of
Speaker 3: the central banks that are actively planning to have a
Speaker 3: CBDC or they actually have a CBDC pilot up and
Speaker 3: running already, I mean, there's a perfect overlap.
Speaker 4: You know.
Speaker 3: So if you think about the swaps as the funding
Speaker 3: angle to the RENVP that you don't have in the
Speaker 3: system get and then if you look at the CBDC
Speaker 3: as the kind of swapping and clearing of existing local
Speaker 3: currencies in the system. I mean you basically have a
Speaker 3: spot effects market and a funding market infrastructure around it.
Speaker 3: So you know, you can internationalize the rendom be that way,
Speaker 3: you can internet nationalize it by you know, em compries
Speaker 3: raising r and bonds to raise term RMB liquidity. But again,
Speaker 3: I think the most important thing here is that we
Speaker 3: are starting to see evidence that more and more commodity
Speaker 3: trades are being settled in rendmen b. And also over
Speaker 3: the past year, the renminb's share of trade and ends
Speaker 3: has increased tremendously. I think it has increased from barely
Speaker 3: one percent to five percent in a twelve month period
Speaker 3: and now it's at far with the euro's share of tradements.
Speaker 3: And again, if that one twelve month period is any sign,
Speaker 3: you know, you project that five ten years out you
Speaker 3: can have a lot of ground.
Speaker 4: That's the rent if you can gain you know.
Speaker 1: Sultan, you mentioned changes in structural demand for treasuries and
Speaker 1: I wanted to ask you about this because this is
Speaker 1: one of the I guess the last research notes that
Speaker 1: you wrote at Credit Swiss. I think it was in January,
Speaker 1: so definitely not the final one. But you were talking
Speaker 1: about at some point the Fed's going to need to
Speaker 1: come in and support the treasury market once again because
Speaker 1: you have all these natural buyers of bonds who are
Speaker 1: starting to step away. And I think you talked about
Speaker 1: potentially the FED having to restart asset purchases as soon
Speaker 1: as the summer. Is that something that you still see.
Speaker 3: On the table, Well, it's the summer. Yeah, So let's
Speaker 3: put it this way. I mean, we have now the
Speaker 3: offer on buyback program that's up and running. You can
Speaker 3: find that mistake and correct yep, you're right, yeap, Okay,
Speaker 3: so there is that, and then we had, you know,
Speaker 3: the problems around SVP and some other banks.
Speaker 4: So let's just put it this way.
Speaker 3: I think that when we think about these what is
Speaker 3: the government going to have to do to step in
Speaker 3: on the margin to calm things down? You know, I
Speaker 3: always tell you that the answer is always the longest spectrum.
Speaker 3: So I think we are in the ante room of something.
Speaker 3: You know, we are dealing with illiquidity with the buybacks.
Speaker 3: So far, so good. We have dealt with underwater bank portfolios.
Speaker 3: I mean the bank term funding program effectively your ability
Speaker 3: to raise at you know, to value underwater bonds at
Speaker 3: the FED at bar and raise liquidity that way if
Speaker 3: you have to. I think that's a pretty that's a
Speaker 3: pretty big support to market functioning.
Speaker 4: So I think, you know, things are happening on the.
Speaker 3: Margin, which kind of points to the FED and the
Speaker 3: Treasury building scaffolding around the treasury market to deal with
Speaker 3: the illiquidity issues and this lack of marginal buyer issues
Speaker 3: that we have been talking about.
Speaker 4: You know.
Speaker 3: The other point here is that you know, in the
Speaker 3: front end there is a ton of liquidity, and so
Speaker 3: all these issue and that the Treasury has been doing
Speaker 3: and will be doing is going to be front and heavy,
Speaker 3: you know. So that's another way of dealing with treasury
Speaker 3: market functioning. I mean, you have two trillion dollars in
Speaker 3: our fy viacility. You're just going to issue where you
Speaker 3: can most likely soak up a lot of liquidity without
Speaker 3: any glitches.
Speaker 4: But again, I think this underlying issue that we are talking.
Speaker 3: About that the world is probably going through a split
Speaker 3: where demand for treasuries from the rest of the world
Speaker 3: is probably not going to be what it wants was.
Speaker 3: It's going to be an issue and as these issues
Speaker 3: pop up, we are going to be dealing with them
Speaker 3: in a step by step passion. But again, I think
Speaker 3: these illiquidity problems are present and we are dealing with
Speaker 3: them as they pop up.
Speaker 2: I want to get you know, your take further on
Speaker 2: like some of the banks and particularly the aftermath of
Speaker 2: SVB et cetera. But before we do, you know, going
Speaker 2: with thinking back a year ago, this conversation or versions
Speaker 2: of this conversation might have been much more commodity centric.
Speaker 2: And obviously oil has fallen quite a little bit. There
Speaker 2: was a lot of stress a year ago about the
Speaker 2: European electricity costs, which have come down significantly. Generally, there's
Speaker 2: been a lot of easing there. But I'm curious, like,
Speaker 2: was that just a sort of like a one time
Speaker 2: reset in terms of maybe post pandemic shocks and of
Speaker 2: course the invasion of Ukraine and that things are settled
Speaker 2: or will sort of like commodity fragility, commodity volatility, anxiety
Speaker 2: about sourcing energy be sort of a permanent or semi
Speaker 2: permanent condition over the next several years as part of
Speaker 2: this sort of Bretton Wood's three point zero vision.
Speaker 3: Yeah, so, you know, to be intellectually honest to ourselves
Speaker 3: and to the listeners, yes, we did talk about you know,
Speaker 3: commodities creating a bigger goal in you know, reserve management practices.
Speaker 4: And whatnot, among many other teams. So I would say that.
Speaker 3: For me, what survives that commodity aspect of the Breton
Speaker 3: would three pieces is that I think gold is definitely
Speaker 3: something that's coming back as a theme. I mean, just
Speaker 3: to give you a very good example, when I saw
Speaker 3: I think Barry Ikagreen was a co author on that paper.
Speaker 3: The IM published a paper about gold and the title
Speaker 3: I think was a barbarous relic no More and it
Speaker 3: was co authored by Barry Ikongreen. So I'll hide behind
Speaker 3: it a little bit, but I think it's noteworthy when
Speaker 3: someone like Barry ikongreenews probably the official biographer of the dollar,
Speaker 3: rites of paper like that, and I think we are
Speaker 3: seeing the more and more in the data that especially
Speaker 3: the countries that are not geopolitically aligned to the US
Speaker 3: are shunning treasuries and shunning the dollar and they are
Speaker 3: buying gold instead. I think there is also a number
Speaker 3: of other headlines which I think are important to keep
Speaker 3: an eye on because individually they might not sum up
Speaker 3: too much. But I think in the fatality of these
Speaker 3: things probably point a trend. You know, Ghana and Russia
Speaker 3: basically had an oil for gold deal whereby Russia ships
Speaker 3: oil to Ghana and Ghana pays gold for.
Speaker 4: The oil that they receive.
Speaker 3: I mean, the basic idea was that a country that
Speaker 3: has prepidy and offex reserves US dollars mostly that also
Speaker 3: minds a lot of gold is going to pointless for
Speaker 3: them to spend their precious dollars on oil when they
Speaker 3: can just swap gold for oil and kind of get
Speaker 3: their oil de band and they have you know, effects
Speaker 3: reserves left for other stuff pharmaceuticals for example. Again, geopolitics
Speaker 3: is at the angle here, but you know, Russia and
Speaker 3: Iran are establishing a special economic zone along the CASP
Speaker 3: and c where the trade is going to be settled
Speaker 3: in a gold act digital token. Forget which country it was,
Speaker 3: but you know there's another gold rich African country which
Speaker 3: is playing with this idea of a gold bag digital token. Again,
Speaker 3: I think these are interesting developments, but again some of
Speaker 3: the last ones that I mentioned are probably on the fringes.
Speaker 3: But again you know in the IMF data and in
Speaker 3: the data Gold Council, we see this massive increase in
Speaker 3: foreign central banks purchases of gold, so that gold aspect
Speaker 3: definitely survives. And yes, you know, energy markets have gone
Speaker 3: up and they have come down, but again I think
Speaker 3: it's just hard to escape the reality that you know,
Speaker 3: Saudi Arabia is not exactly falling over backwards to increase
Speaker 3: oil production, but in fact that there is this stug
Speaker 3: of war where I think the Cran Prince has the
Speaker 3: stic economic agenda. It needs oil prices to trade between
Speaker 3: one hundred dollars a barrel for them to pull up
Speaker 3: that quite ambitious domestic and regional and also geopolitical agenda.
Speaker 3: And I think there is a stug of war between
Speaker 3: the oil consumers and the oil producers where you know,
Speaker 3: things haven't really breaken out into either side, but I
Speaker 3: think that pullback is basically given us a body language
Speaker 3: where you know, if there's not enough demand for oil
Speaker 3: and oil prices are falling, we need our revenue, so
Speaker 3: we're just going to not supply such that prices don't
Speaker 3: pull too much. So again I think the commodity shortage
Speaker 3: and this, you know, I think the team that I
Speaker 3: used was our commodity your problem. I think it's definitely
Speaker 3: there in oil again, you know, Russian oil. Surprisingly, I
Speaker 3: think it all found a way to alternative markets. So
Speaker 3: you know, tanker rates are up. You know, we talked
Speaker 3: about this a year ago, that tanker rates being the
Speaker 3: balance sheet for you know, the real economy balance sheet
Speaker 3: equivalents in the oil market, and the tanker rates are
Speaker 3: through the rule because these shadow fleets had to be
Speaker 3: a sampled to find those pternative markets.
Speaker 4: For Russian oil. And I think, you know, the supply
Speaker 4: chains are probably.
Speaker 3: Getting more caught up in this team involving you know,
Speaker 3: energy transition, you know, getting the lifting and all these
Speaker 3: things that are.
Speaker 4: Needed for that. So I would say that the commodity
Speaker 4: aspect is a mixed bag, except for goal.
Speaker 1: That other African country I think it was Zimbabwe doing
Speaker 1: all digital token So I guess make of that what
Speaker 1: you will.
Speaker 5: But I wanted to go back, well, make makeup well,
Speaker 5: I just wanted to say, you can make up that,
Speaker 5: but you Bill and perhaps a lot of countries that
Speaker 5: people mention on this conversation are going to be the
Speaker 5: sanctioned countries.
Speaker 4: Let's put it that way. But I think that's precisely
Speaker 4: I mean, you know, these are not not.
Speaker 3: The countries that you think about when you're talking on
Speaker 3: the financial press about things. But I think the underlying
Speaker 3: team here is very much one where if you look
Speaker 3: look at this unicorn or world that we are, you know,
Speaker 3: talking about whether it's supply chains or whether it's the
Speaker 3: monster regimes, whether it's you know, foreign policy alignments between
Speaker 3: East and West, you know, two great powers and a
Speaker 3: bunch of on a life, non alive countries. I think
Speaker 3: it's important to pull in these fringe countries because you know,
Speaker 3: there is powering numbers and like, yeah, one country's GDP
Speaker 3: is not much, but you know when you kind of
Speaker 3: plump them all together and they kind of sign into
Speaker 3: one system as opposed to another system, these things are
Speaker 3: going to be meaningful on the market. So I think
Speaker 3: that's why it's important to think about best case countries,
Speaker 3: so to speak. But that's why that's why we mentioned Yeah.
Speaker 1: And I mean US dollar transactions I think are a
Speaker 1: pretty big thing in Zimbabwe, so you know the fact
Speaker 1: that they're experimenting with a new type of thing to
Speaker 1: try to maybe get away from that is interesting. But
Speaker 1: I wanted to go back to what we saw in
Speaker 1: the banking system because everyone who knows your origin story,
Speaker 1: probably knows that you know, started out working at the
Speaker 1: New York FED. There was the famous shadow banking chart
Speaker 1: that you did before the financial crisis, sort of laying
Speaker 1: out how this is entire system actually worked. What do
Speaker 1: you make of the most recent banking crisis? And I
Speaker 1: know some people take issue with actually labeling a crisis.
Speaker 1: We can call it a banking drama or whatever. But
Speaker 1: is the drama over for now?
Speaker 3: Well, it feels like, let me tell you this, It
Speaker 3: feels very different from two thousand and eight. Obviously, I
Speaker 3: mean there it was an existential moment and you know,
Speaker 3: the central nervous system of the global dollar system was
Speaker 3: at risk, you know, the big banks, So the big
Speaker 3: banks were a source of strength this time rapping. I
Speaker 3: would say that we basically have three institutions that became
Speaker 3: collateral damage either to crypto or the tech inclosion or
Speaker 3: you know, your inability to make to underpride you know
Speaker 3: mortgages intelligently, so you know, signature bank is crypto related.
Speaker 3: SPB I think is a very unique case because what
Speaker 3: it kind of tells you is that it is important
Speaker 3: for a bank to be diversified both in terms of
Speaker 3: its lending portfolio and also.
Speaker 4: Its deposit mixed. You know, when I was following the
Speaker 4: SVV the backle the.
Speaker 3: Thing that came to mind for me was, I don't
Speaker 3: know if you remember his tracy, but bear Sterns used
Speaker 3: to have to hatch funds, which were the first hetch
Speaker 3: funds to.
Speaker 4: Blow up in Yeah.
Speaker 3: I forget what they were called, but they had I
Speaker 3: think the bear Sterns Enhanced Leverage fund or whatever they
Speaker 3: were called. You know, those hedge funds were the first
Speaker 3: ones to blow up because they had the worst assets
Speaker 3: imaginable and they had the worst live of the structure imaginable.
Speaker 5: Yeah.
Speaker 1: I think they were like really high yield structured credit
Speaker 1: or something like that.
Speaker 3: Yes, high yield structure credit, you know cdo so that
Speaker 3: stuff on the asset side, you know, overnight funding, so
Speaker 3: pickled funding.
Speaker 4: You know.
Speaker 3: SVB, I would say, is a case where on the
Speaker 3: liability decide. I mean, we know who the big deposit
Speaker 3: the school, the clients were. They were reading about some
Speaker 3: of them in the financial press. But basically, you know,
Speaker 3: if you think about the tech sector, venture capital sector,
Speaker 3: where all the valuations have basically taken a big nose
Speaker 3: dive after tech stocks corrected. You basically had a depositor
Speaker 3: base that was liquidity constraints. So they basically pulled money
Speaker 3: from one bank where a lot of tech entrepreneurs kept
Speaker 3: their cash and so that's a liquidity drain and it
Speaker 3: wasn't diversified on the asset side. SVB had a lot
Speaker 3: of duration. I mean, you know, you guys know that
Speaker 3: my bread and butter is you know, going through all
Speaker 3: the cold reports of the biggest institutions and you know,
Speaker 3: I mean, very few banks have as big a share
Speaker 3: of their agebre a portfolio in strips stripped port respect
Speaker 3: securities as they did. But you know, they had a
Speaker 3: lot of coupon explore, they had a lot of principal
Speaker 3: exposure there. They had a lot of duration in these
Speaker 3: portfolios and they didn't hedge them properly. They also had
Speaker 3: a lending book where they were lending to the same
Speaker 3: you know, customers that were pulling funds away from them.
Speaker 3: But again, the collaboral on that landing book was tex related,
Speaker 3: so you had valuation issues. So that was just kind
Speaker 3: of a perfect storm. Systemic absolutely not, but it's hurt them.
Speaker 3: And you know, first Republic, I mean, I have to
Speaker 3: say I. I have a friend in New York who
Speaker 3: once texted me when First Public was going under, saying,
Speaker 3: I didn't realize I got such a great deal on
Speaker 3: my mortgage that it's the end the first problem. And
Speaker 3: I said, you know, I told him that, Well, next
Speaker 3: time you get a mortgage that's too good to be true,
Speaker 3: you should also short the bank. Maybe the mortgage is
Speaker 3: going to pay it stuff up faster then you anticipate.
Speaker 3: So so again, I think this is basically the story
Speaker 3: of these three the three banks that got into difficulties.
Speaker 3: The solution that the FAT crafted for some of these
Speaker 3: licurity problems, I think they were extremely powerful. I was surprised,
Speaker 3: even shocked when I saw the terms of the BDFP.
Speaker 3: When I talked to my context. You know, there were
Speaker 3: two types of responses to this BDFP program. Number one, yes,
Speaker 3: that's the right move, because the letter and spirit of
Speaker 3: Basal Tree says that treasuries and Genie Maison reserves are
Speaker 3: level one assets, no haircut.
Speaker 4: But again that assumes that you also have the brains
Speaker 4: to hedge the interstraight exposure there.
Speaker 3: And also, I mean, you know, you can put some
Speaker 3: of these bonds that are underwater into a whole maturity
Speaker 3: portfolio where if you are sitting on huge market market losses,
Speaker 3: it doesn't hit your bank's activity and you don't have
Speaker 3: to book those losses.
Speaker 4: And it doesn't hit your capital.
Speaker 3: But again, that assumes that your deposit base is sticky
Speaker 3: and so you're not going to lose deposits in the
Speaker 3: aggregate to the point where you actually have to liquidate
Speaker 3: these underwater bonds. And you know, it was not the
Speaker 3: case for SVV, its case for other banks like Bank
Speaker 3: of America for example. You know, and the other response
Speaker 3: to the BTFB is that you know this is this
Speaker 3: should not have happened because it basically euthanizes the need
Speaker 3: for interest rate risk management in bank portfolio. So it
Speaker 3: was a kind of a polar response. But again, what's
Speaker 3: done is done. I think it's a part of the system.
Speaker 4: Now.
Speaker 3: I think the BTFB is going to be there as
Speaker 3: a standard feature of the system, much like standing people
Speaker 3: facility and spoplanes are there. So you know, these facilities
Speaker 3: tend to be born and slip around. But it's again
Speaker 3: it's the part of the scaffoldings that we have. I mean, imagine,
Speaker 3: imagine the treasury market coming under strain because some of
Speaker 3: these banks have to meet, you know, bitterly short balls,
Speaker 3: and then instead of pledging to the fat off market
Speaker 3: to be at liquidity, you basically have to dump it
Speaker 3: on the dealers. And imagine what that would have done
Speaker 3: the treasury market. Nothing, So we just basically kept this
Speaker 3: treasure is off the great so to speak.
Speaker 2: When when SVB failed, there were sort of two conversations
Speaker 2: that sprung up right afterwards. One had to do with
Speaker 2: like the sort of like, okay, all deposits in the
Speaker 2: US are do we just accept that they're all implicitly
Speaker 2: guaranteed regardless of what the formal FDI C cap is.
Speaker 2: And then there's also a conversation about, you know, five
Speaker 2: thousand banks in the US would which is like I think,
Speaker 2: probably the most banked country in the world. Do we
Speaker 2: just sort of, you know, does anything change with the
Speaker 2: business model of banking or do we just sort of
Speaker 2: accept that there are these contradictions and these tensions but
Speaker 2: we sort of we don't talk about them, and we
Speaker 2: just sort of let these issues go on and occasionally
Speaker 2: we have to clean up a mess. But by and large,
Speaker 2: there's some of these structural questions about the banking system.
Speaker 2: We just sort of kicked the can and let them persist.
Speaker 3: Well, look, I mean I don't think the blanket deposit
Speaker 3: insurances in the cards, but I think again, you know,
Speaker 3: other than the BTFB, we have this other tool, which
Speaker 3: is the FDIC steps in between the PLAT and the
Speaker 3: troubled institution.
Speaker 4: And so there's a capital buffer.
Speaker 3: So you know, it's some of the it's some of
Speaker 3: the same playbooks in a different fashion that we have
Speaker 3: seen in two thousand. You know that that always has
Speaker 3: to be secure through its satisfaction that it's planting, you know,
Speaker 3: but always wants to eliminate credit risk. And you know,
Speaker 3: the FDIC standing has it been plus a special loan
Speaker 3: that the FAT extends. Trouble institutions serve exactly that purpose.
Speaker 3: So I think we will be dealing with whatever problems
Speaker 3: we will be dealing with on a case by case basis.
Speaker 4: Again, I think SVB. You know, the conceptually, the problem.
Speaker 3: Of underwater security portfolios we kind of dealt with commercial
Speaker 3: real estate is going to be a slow burning problem.
Speaker 3: Perry Merton likes to say a bank can be insolvent
Speaker 3: but liquid, but it cannot be solvent, and in liquid
Speaker 3: you know, for as long as the pass don't run,
Speaker 3: we will be able.
Speaker 4: To deal with these issues.
Speaker 3: You know, interest on reserves is manna from heaven. You know,
Speaker 3: it's providing banks to steady stream of interesting income. So
Speaker 3: if you have capitalization issues, that's going to be a
Speaker 3: back door way of kind of refilling your capital base.
Speaker 3: You know, back during the early nineteen eighties when the
Speaker 3: bulbul curve was in charge and we had Latin American
Speaker 3: death crisis and Thanks for underwater and had their capital issues,
Speaker 3: you know, the FED had to generate the steep yield
Speaker 3: curve in the system, which was a way to recapitalize
Speaker 3: the banks, you know, with interest from deserves. You know,
Speaker 3: that's no longer necessary, so it's actually easier. So I
Speaker 3: think the banking system is fine for now. I think
Speaker 3: we had a scare and you know, we are definitely
Speaker 3: going to be dealing with issues in credit portfolios. We
Speaker 3: are going to be dealing with cr lending books. There
Speaker 3: will be consolidation across the banking system. But there are
Speaker 3: many levers that the that can who to help clean
Speaker 3: things up.
Speaker 4: You know.
Speaker 3: JP Morgan, for example, was an institution that came in
Speaker 3: as a healthy hand because I'd like to remind people
Speaker 3: haven't written about as far agoing.
Speaker 4: A long time.
Speaker 3: But you know, don't forget now, You can't thank now.
Speaker 3: I can you know that bank is still under an
Speaker 3: asset cap. You know, it has a ton of unused
Speaker 3: balance sheet capacity, So you know, that's a lot of
Speaker 3: balance sheet capacity to want chain if you need a
Speaker 3: healthy private hand to clean up some stuff in I mean,
Speaker 3: some of the banks that are already very big, and
Speaker 3: we're big beneficiaries of dislocations and banking crisis in recent times,
Speaker 3: are probably not going to be able to add much
Speaker 3: to their balance because they are already too big. But
Speaker 3: you know, I think Wells Fargo is another kind of
Speaker 3: case in the back pocket of the TAT that could
Speaker 3: be pulled out if need be.
Speaker 4: So I think the system is fine.
Speaker 3: I think we're just going to be dealing with these
Speaker 3: microL dislocations here and there, you know, regional bank here,
Speaker 3: regional bank there, treasury market. But again, people will be
Speaker 3: dealing to these things. But you know the name of
Speaker 3: the game is to anticipate this and the appropriate positions.
Speaker 1: Well, can I ask one more question, just going back
Speaker 1: to your sort of shadow banking origins, but the expectation
Speaker 1: now seems to be that, you know, if banks maybe
Speaker 1: have to hold even more capital or maybe d lever
Speaker 1: in one way or another, that a lot of that
Speaker 1: activity is going to end up being pushed into shadow
Speaker 1: banks essentially, so private equity perhaps or some sort of
Speaker 1: non bank lender. And to some extent, this is what
Speaker 1: we've seen since the two thousand and eight financial crisis
Speaker 1: by design of the financial regulators. There is some concern
Speaker 1: that even more starts to get pushed out now and
Speaker 1: maybe if you have interest rates that remain substantially higher,
Speaker 1: that's going to be a big hit for both corporate
Speaker 1: credit and commercial real estate. Should we worry about exposure
Speaker 1: to those sectors in non banks.
Speaker 3: Yes, because I think credit has yet to have its
Speaker 3: threckoning and commercial real estate has yet to have its thckoning.
Speaker 3: But again, it's better to suffer those losses in non
Speaker 3: banks that banks, because you know, banking crises are very
Speaker 3: nasty things. But if these losses get booked and absorbed
Speaker 3: in balance sheets that are I don't want to say
Speaker 3: not levered, because they all are. But you know that
Speaker 3: leverage doesn't really have much to do with money markets.
Speaker 3: That's orders of magnitude better to deal with than dealing
Speaker 3: with a lot of these concentrated exposures in the banking system.
Speaker 4: Regarding that shuttle banking question that you also asked, Tracy,
Speaker 4: I think.
Speaker 3: Where we started this conversation that you know, world trade
Speaker 3: trading of commodities is going to get invoiced in currencies
Speaker 3: other than just the dollar, you know, rent fee and
Speaker 3: all these central bank digital currency market making and EFX markets,
Speaker 3: you know, migrating to the balance sheets of central banks
Speaker 3: and instead of correspondent banks, you should be imaginating correspondent
Speaker 3: central banks. If that pisis is true, I think over
Speaker 3: time that's going to provide balance sheet lead to all
Speaker 3: the jesuves because e FX market making credit lines exclusively
Speaker 3: provided into US dollars to oil and cover and other
Speaker 3: commodities around. You know, that's the bread and butter to
Speaker 3: main of JP, Morgan, Bank of American and City Bank.
Speaker 3: You know, if you kind of moved to this world
Speaker 3: that I'm describing, you know, that's going to provide balangy
Speaker 3: really for the big US banks on the market. You
Speaker 3: can use that for other things, you know, as the
Speaker 3: shot banks are licking their wounds because they are suffering
Speaker 3: their credit and real estate problems. You know, the banking
Speaker 3: system is going to be potentially a source of strength
Speaker 3: in a sense that not only do you have the
Speaker 3: capital to land, but you also have the balent sheet
Speaker 3: to do so. I think so, I think things are
Speaker 3: going to work themselves out. I think it's a good
Speaker 3: thing that things are happening in the shadow banking system.
Speaker 3: The shadow banking system we are talking about today, it's
Speaker 3: very different from the shadow banking system I have. I
Speaker 3: didn't come up with the sexy definition of shadow banking.
Speaker 3: That's very early who said that shadow banking is money
Speaker 3: market funding of capital market landing. And I think the
Speaker 3: general understanding about shadow banking these days is that anything
Speaker 3: that happens outside of a bank that involves credit is
Speaker 3: shadow banking.
Speaker 4: That's not true too to me, at least, because you.
Speaker 3: Know, you have to have a very strong mind market component,
Speaker 3: which is what appifies things, and so that shuttle banking
Speaker 3: is fine and if you will, you know, basically a
Speaker 3: lot of traditional bread and butter Western financial market making,
Speaker 3: credit provisioning, financing functions migrating to the balance sheet of
Speaker 3: central banks cbdc's different currencies. I think that's the new
Speaker 3: shuttle banking terrain that we need to be focusing that
Speaker 3: I will be focusing on, and I will be mapping
Speaker 3: and thinking about because I think that's the frontier that's
Speaker 3: going to drive rate some Tonic markets going forward.
Speaker 2: All Right, Sulton, I have one last, very tiny question,
Speaker 2: and I'm only asking this really because I need to
Speaker 2: know it for the outro of the episode.
Speaker 1: Are you going to join Twitter?
Speaker 4: I will not be doing Twitter, really, I will not
Speaker 4: do social media. Really. Maybe we can say this at
Speaker 4: the end. I will say the name of my website
Speaker 4: where people can go and look.
Speaker 2: Wow, incredible. That's an incredible restraint. It's an incredible restraint.
Speaker 2: I'm very impressed by.
Speaker 4: Is that a good thing? I think it's a good thing.
Speaker 2: I mean, it would make you very scarce, but it's
Speaker 2: an incredible restraint, So I'm impressed.
Speaker 3: No, I will be strictly behind the payball, and probably
Speaker 3: this would be my last public appearance and then I
Speaker 3: would just disappear.
Speaker 2: Okay, well, this is a gift.
Speaker 3: Thank you.
Speaker 2: It was, thank you, it was it was a pleasure.
Speaker 4: Thank you very much for having me.
Speaker 1: All Right, well, thanks so much, Sultan, and the website,
Speaker 1: the new website is expluris dot h U. You should
Speaker 1: definitely check that out, Joe. I love talking to Sultan
Speaker 1: me too. That's such a treat. The quote about like
Speaker 1: we are in the ante room of something. I'm going
Speaker 1: to steal that, yeah, for coverage, but I thought, I mean, look,
Speaker 1: every time we talked to him, there are a number
Speaker 1: of really interesting big picture points. The one thing I
Speaker 1: would say is, I remember when the Breton Woods three
Speaker 1: thesis came out last year. Yeah, there were a lot
Speaker 1: of people saying that this was never going to happen,
Speaker 1: and many of those people now have sort of tweaked
Speaker 1: that statement to oh, you know, it may happen, but
Speaker 1: not for a long time.
Speaker 4: You Know what I think is a.
Speaker 2: Really interesting point that I don't think gets discussed enough
Speaker 2: in this which I appreciated Sultan bringing up, was you know,
Speaker 2: people look at this from a very sort of like
Speaker 2: financial angle, or they talk about China specifically. But I
Speaker 2: liked that he brought up you know, all these other countries,
Speaker 2: the sort of non aligned countries, they matter to a
Speaker 2: significant degree, particularly when added up and sort of the
Speaker 2: politics of on theline countries who don't necessarily see the
Speaker 2: world through the same lens as the US, or have
Speaker 2: the same perspective on many of these global trends. Obviously,
Speaker 2: some of the bricks nations, et cetera, like I just
Speaker 2: the pure like you know, geopolitics sort of gets trotted
Speaker 2: out too much, but they're sort of like the sovereignty
Speaker 2: and the impulses and desires of all these other countries.
Speaker 1: They really matter.
Speaker 2: And as their wealth grows and there as their need
Speaker 2: to grow, what they do economically and who they trade
Speaker 2: with is going to sort of be determinative to some
Speaker 2: extent about who rises and fall.
Speaker 3: Well.
Speaker 1: The other thing I thought was really interesting was this
Speaker 1: idea of maybe outsourcing more dealer functions to the central bank. Yes,
Speaker 1: and if you were to do that, it could potentially
Speaker 1: solve some of the concerns that you just outlined, but
Speaker 1: also free up some balance sheet for big banks to
Speaker 1: do other types of activities, maybe more like non market
Speaker 1: making activities, more loans like that. I hadn't really considered that.
Speaker 2: Yeah, that's a really it's a really interesting point, and
Speaker 2: no one else has really talked about that. But you know,
Speaker 2: we do sort of live in this era in which
Speaker 2: sort of like state capitalism or state directed capitalism is
Speaker 2: such a big thing, right, and so the extent to
Speaker 2: which central banks become bigger sort of active dealers rather
Speaker 2: than just sort of behind the scenes supporters of private
Speaker 2: banks is something to takes seriously. And maybe there is
Speaker 2: a context there in which the sort of the CBDC
Speaker 2: or digital currencies could sort of have like a natural
Speaker 2: fit in that framework.
Speaker 1: Yeah, we need a new map, Yeah we really do,
Speaker 1: don't we. Well, maybe Sultan will publish at his new
Speaker 1: research firm. Shall we leave it there? Let's leave it there?
Speaker 1: All right? This has been another episode of the All
Speaker 1: Thoughts podcast. I'm Tracy Alloway. You can follow me on
Speaker 1: Twitter at Tracy Alloway.
Speaker 2: And I'm Joe Wisenthal. You can follow me on Twitter
Speaker 2: at the Stalwart. Our guest, Sultan Poster, is not on Twitter,
Speaker 2: but you should go check out his brand new website
Speaker 2: xunopluris dot hu. I certainly will be follow our producers
Speaker 2: Carmen Rodriguez at Carmen Arman and dash Ol Bennett at
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Speaker 1: Thanks so much, thanks for listening
Speaker 4: In