1 00:00:10,520 --> 00:00:14,400 Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast. 2 00:00:14,520 --> 00:00:16,960 Speaker 2: I'm Joe Wisenthal and I'm Tracy Allaway. 3 00:00:17,160 --> 00:00:21,200 Speaker 1: Tracy, you know something that has always struck me about 4 00:00:21,440 --> 00:00:24,239 Speaker 1: I don't know, the financial system, I guess, is that 5 00:00:24,920 --> 00:00:29,840 Speaker 1: from the US perspective, it feels like any time anyone 6 00:00:29,960 --> 00:00:34,680 Speaker 1: spends any money anywhere, particularly dollars anywhere, like the US 7 00:00:34,760 --> 00:00:38,159 Speaker 1: could sort of go after them, even if it's overseas 8 00:00:38,560 --> 00:00:41,400 Speaker 1: completely out of the country. It feels like the US 9 00:00:41,520 --> 00:00:46,319 Speaker 1: basically has the prerogative to say, you're breaking the law. 10 00:00:46,440 --> 00:00:48,160 Speaker 1: So what you're doing something we're not going to allow. 11 00:00:48,400 --> 00:00:50,280 Speaker 2: This is what exorbitant privilege looks like. 12 00:00:50,440 --> 00:00:52,680 Speaker 1: Right, Yeah, this is it. I guess that's it. 13 00:00:53,080 --> 00:00:55,800 Speaker 2: Well, I think you're hitting on something that's kind of 14 00:00:55,840 --> 00:00:59,720 Speaker 2: fundamental about the current financial system, which is the dollar 15 00:00:59,840 --> 00:01:04,160 Speaker 2: is the global reserve currency, and there are some pros 16 00:01:04,240 --> 00:01:07,240 Speaker 2: and benefits that come with that. One of them is 17 00:01:07,280 --> 00:01:11,080 Speaker 2: that you can use it as a tool of state craft, 18 00:01:11,160 --> 00:01:14,120 Speaker 2: so you can go after people that you don't like 19 00:01:14,200 --> 00:01:17,800 Speaker 2: or people that are breaking the law. But there is 20 00:01:17,880 --> 00:01:21,360 Speaker 2: also this tension on the other side where it seems 21 00:01:21,400 --> 00:01:25,880 Speaker 2: like there are some downsides too, right, like maybe at 22 00:01:25,920 --> 00:01:30,000 Speaker 2: certain times the US would desire a weaker dollar in 23 00:01:30,240 --> 00:01:36,919 Speaker 2: order to jumpstart economic growth or certain exports, manufacturing, things 24 00:01:37,000 --> 00:01:39,520 Speaker 2: like that. I think on the whole, most people would 25 00:01:39,560 --> 00:01:42,720 Speaker 2: agree that the dollar's special status in the financial system 26 00:01:43,080 --> 00:01:46,880 Speaker 2: has been a massive benefit for the US, viz. The 27 00:01:47,280 --> 00:01:51,400 Speaker 2: huge deficit and people willingly funding that and things like that. 28 00:01:51,640 --> 00:01:54,919 Speaker 2: But there are downsides, and that debate kind of bursts 29 00:01:54,920 --> 00:01:56,920 Speaker 2: into the public consciousness every once in a while. 30 00:01:57,280 --> 00:02:02,640 Speaker 1: Yeah, one thing, obviously since early twenty twenty two, when 31 00:02:02,760 --> 00:02:08,320 Speaker 1: Russia invaded Ukraine, that sort of seems to have you know, 32 00:02:08,440 --> 00:02:11,519 Speaker 1: then the US responded with an extraordinary amount of sanctions 33 00:02:11,560 --> 00:02:14,960 Speaker 1: and cutting off Russia from the dollar base system almost 34 00:02:15,000 --> 00:02:19,280 Speaker 1: every way imaginable. It's sort of like, you know, maybe 35 00:02:19,440 --> 00:02:23,480 Speaker 1: catalyzed the new round of talk of, okay or parts. 36 00:02:23,200 --> 00:02:25,280 Speaker 2: Of the world power of the dollar, the. 37 00:02:25,320 --> 00:02:28,040 Speaker 1: Power of the dollar, exactly right. And I think that 38 00:02:28,200 --> 00:02:30,800 Speaker 1: was sort of a pivotal moment. I don't know if 39 00:02:30,800 --> 00:02:32,760 Speaker 1: it will be a pivotal moment for the future of 40 00:02:32,800 --> 00:02:35,640 Speaker 1: the dollar, but at least it was a pivotal moment 41 00:02:36,240 --> 00:02:39,239 Speaker 1: at least in this current cycle of people talking about 42 00:02:39,280 --> 00:02:40,200 Speaker 1: dollar alternatives. 43 00:02:40,240 --> 00:02:42,799 Speaker 2: You know, it's interesting you bring that up because you're 44 00:02:42,840 --> 00:02:45,760 Speaker 2: absolutely right. It feels like that was the catalyst for 45 00:02:45,919 --> 00:02:49,400 Speaker 2: the current round of discussion about the power of the 46 00:02:49,440 --> 00:02:52,160 Speaker 2: dollar and the future of the dollar in the financial system. 47 00:02:52,600 --> 00:02:57,360 Speaker 2: But thinking back to some all blots history, when I 48 00:02:57,440 --> 00:03:01,680 Speaker 2: think about that question of the US maybe overreaching or 49 00:03:01,800 --> 00:03:05,320 Speaker 2: using the dollar in this particular way, in the way 50 00:03:05,360 --> 00:03:07,880 Speaker 2: they used it for Russia, I think about the conversation 51 00:03:08,120 --> 00:03:12,280 Speaker 2: we had with the former head of Afghanistan Central Bank. 52 00:03:12,960 --> 00:03:16,959 Speaker 2: Do you remember that, Yeah, because there was I think 53 00:03:17,080 --> 00:03:21,080 Speaker 2: like seven or eight or nine billion dollars worth of 54 00:03:21,160 --> 00:03:25,760 Speaker 2: reserves held by the Afghan Central Bank, and when the 55 00:03:25,760 --> 00:03:29,480 Speaker 2: Taliban took over, the US basically seized all of it. 56 00:03:29,680 --> 00:03:32,800 Speaker 2: They put some of it aside for nine to eleven litigation, 57 00:03:32,960 --> 00:03:35,040 Speaker 2: and then some of it got put into a fund 58 00:03:35,120 --> 00:03:38,320 Speaker 2: that was supposed to be dispersed to the Afghan people 59 00:03:38,440 --> 00:03:41,440 Speaker 2: in some way. But that to me, and maybe we 60 00:03:41,560 --> 00:03:43,160 Speaker 2: touched on it in the episode, but that to me 61 00:03:43,320 --> 00:03:46,040 Speaker 2: was sort of the crossing the rubicon moment when you 62 00:03:46,080 --> 00:03:49,880 Speaker 2: can actually say I'm going to take these central bank reserves. 63 00:03:49,840 --> 00:03:50,200 Speaker 3: You know what. 64 00:03:50,240 --> 00:03:52,960 Speaker 1: It sort of gets to this idea in my head, 65 00:03:53,000 --> 00:03:55,080 Speaker 1: and I think that's a great example, which is that 66 00:03:55,680 --> 00:03:59,600 Speaker 1: a dollar is not really a thing that you have 67 00:04:00,120 --> 00:04:06,800 Speaker 1: to claim to capacity on this global, complicated dollar network, right, 68 00:04:07,040 --> 00:04:09,080 Speaker 1: and so we think maybe it's like, oh money, it's 69 00:04:09,200 --> 00:04:11,000 Speaker 1: you have it. It's sort of like property, but it's 70 00:04:11,000 --> 00:04:14,440 Speaker 1: not like really like property. It's really just it's almost 71 00:04:14,480 --> 00:04:16,680 Speaker 1: like it's almost like a ticket in some way to 72 00:04:17,320 --> 00:04:19,919 Speaker 1: like a plane, but if the plane doesn't want to 73 00:04:19,920 --> 00:04:22,880 Speaker 1: honor your ticket, if the airline like it can and 74 00:04:22,960 --> 00:04:25,160 Speaker 1: so it almost feels like there's sort of a reminder 75 00:04:25,200 --> 00:04:28,719 Speaker 1: that yes, you could theoretically hold dollars, but in the end, 76 00:04:29,040 --> 00:04:31,400 Speaker 1: like the US could sort of decide like, actually, your 77 00:04:31,440 --> 00:04:33,000 Speaker 1: dollars are no good here anymore. 78 00:04:33,120 --> 00:04:37,080 Speaker 2: Yeah, there's conditions attached to that ticket or that it's 79 00:04:37,080 --> 00:04:39,640 Speaker 2: not an actual piece of paper, but that line item 80 00:04:39,760 --> 00:04:41,239 Speaker 2: in a computer system somewhere. 81 00:04:41,400 --> 00:04:43,440 Speaker 1: And so I think it's really interesting, like what is 82 00:04:43,520 --> 00:04:46,839 Speaker 1: the history of all of this, What are the limits 83 00:04:47,000 --> 00:04:50,279 Speaker 1: to this power? How did we sort of emerge with 84 00:04:50,400 --> 00:04:54,039 Speaker 1: this capability to sort of track the dollar flows and 85 00:04:54,080 --> 00:04:56,320 Speaker 1: decide who gets access and how do we cut people 86 00:04:56,360 --> 00:05:01,239 Speaker 1: off from the dollar system? It's extremely extremely interesting question. 87 00:05:01,400 --> 00:05:04,800 Speaker 2: Yeah, and it's definitely core Audlot's content at this point. 88 00:05:04,880 --> 00:05:07,080 Speaker 2: So in addition to speaking to the former head of 89 00:05:07,200 --> 00:05:10,279 Speaker 2: Afghan Central Bank. We've had Sultan Poso Yeah, on a 90 00:05:10,360 --> 00:05:14,039 Speaker 2: number of times to talk about his vision of dedollarization 91 00:05:14,240 --> 00:05:18,400 Speaker 2: and Bretton Wood's three. We've had Perry Marling debate Sultan 92 00:05:18,480 --> 00:05:22,000 Speaker 2: to talk about this particular issue. And I'm happy to 93 00:05:22,040 --> 00:05:24,440 Speaker 2: say that today we have one of our own Bloomberg 94 00:05:24,520 --> 00:05:25,560 Speaker 2: colleagues to talk about this. 95 00:05:25,800 --> 00:05:29,440 Speaker 1: We literally have the perfect guest. We are going to 96 00:05:29,480 --> 00:05:33,520 Speaker 1: be speaking with senior Washington correspondent for Bloomberg News, Salia Mosen. 97 00:05:33,880 --> 00:05:38,440 Speaker 1: She is the author of a brand new book, paper Soldiers, 98 00:05:38,480 --> 00:05:43,799 Speaker 1: How the Weaponization of the Dollar changed the World order. Seleia, 99 00:05:43,920 --> 00:05:45,520 Speaker 1: thank you so much for coming on odd Laws. 100 00:05:45,760 --> 00:05:46,760 Speaker 3: I'm so excited to be here. 101 00:05:46,839 --> 00:05:49,800 Speaker 1: Joe and Tracy, why did you write this book? What 102 00:05:50,000 --> 00:05:53,560 Speaker 1: prompted this book about the weaponization of the dollar. 103 00:05:53,720 --> 00:05:56,440 Speaker 3: It's a crazy thing. It might have been January sixth, 104 00:05:56,640 --> 00:05:59,200 Speaker 3: the insurrection. I don't know. It's hard for me to 105 00:05:59,200 --> 00:06:01,760 Speaker 3: put a pinpoint where, you know, for a journalist, it's 106 00:06:01,760 --> 00:06:04,880 Speaker 3: a natural course to say, oh, well, maybe I'll write 107 00:06:04,880 --> 00:06:08,560 Speaker 3: a book. But something happened that day. A lot of emotions. 108 00:06:09,120 --> 00:06:12,440 Speaker 3: Let's set most of them aside and just talk about 109 00:06:12,720 --> 00:06:16,520 Speaker 3: the Treasury Department and the dollar on January sixth, and 110 00:06:16,600 --> 00:06:19,520 Speaker 3: in the couple of days that followed, we all saw 111 00:06:19,560 --> 00:06:23,120 Speaker 3: reports and I reported on how then Treasure Secretary Stephen 112 00:06:23,200 --> 00:06:26,960 Speaker 3: Mnushan may or may not have been involved in talks 113 00:06:27,080 --> 00:06:30,039 Speaker 3: about the twenty fifth Amendment, and do we need to 114 00:06:30,720 --> 00:06:35,239 Speaker 3: sideline President Donald Trump? And I thought to myself, Wow, 115 00:06:35,360 --> 00:06:39,240 Speaker 3: the Treasure Secretary's job has just gotten so huge. You know, 116 00:06:39,360 --> 00:06:41,640 Speaker 3: a couple of weeks ago, he was in Congress trying 117 00:06:41,680 --> 00:06:44,680 Speaker 3: to get another spending bill through. A couple of days 118 00:06:44,720 --> 00:06:46,840 Speaker 3: after that, he was in the Middle East pitching our 119 00:06:46,880 --> 00:06:52,719 Speaker 3: international economic policy and economic sanctions programs and other elements 120 00:06:52,720 --> 00:06:56,159 Speaker 3: of geopolitics. And here we are now he might be 121 00:06:56,320 --> 00:07:00,960 Speaker 3: involved in removing the president. That combined with a op 122 00:07:01,160 --> 00:07:06,120 Speaker 3: ed that Bob Rubin wrote right after January sixth, And 123 00:07:06,400 --> 00:07:08,479 Speaker 3: he wrote an op ed. It was about a couple 124 00:07:08,520 --> 00:07:13,400 Speaker 3: of different things, but there was one sentence that I 125 00:07:13,440 --> 00:07:16,560 Speaker 3: think it kind of sums up the kind of reporting 126 00:07:16,560 --> 00:07:19,160 Speaker 3: that I've done for many years now, and it sums 127 00:07:19,240 --> 00:07:22,080 Speaker 3: up why I wrote the book. He said in this column, 128 00:07:22,560 --> 00:07:26,440 Speaker 3: faith in democracy and faith in markets go hand in hand. 129 00:07:27,000 --> 00:07:30,120 Speaker 3: And I just thought, oh my gosh, the dollar is 130 00:07:30,200 --> 00:07:32,840 Speaker 3: part of our democracy. Democracy is part of our dollar, 131 00:07:33,160 --> 00:07:35,520 Speaker 3: and that's kind of what started everything for me in 132 00:07:35,520 --> 00:07:35,920 Speaker 3: my brain. 133 00:07:36,280 --> 00:07:39,360 Speaker 2: So I'm glad he brought up Trump here because this 134 00:07:39,400 --> 00:07:42,960 Speaker 2: came up on an episode relatively recently. Actually, I think 135 00:07:43,040 --> 00:07:46,760 Speaker 2: Trump is kind of, for once a very good prism, 136 00:07:46,840 --> 00:07:49,840 Speaker 2: a very clear prism to view some of the debate 137 00:07:50,360 --> 00:07:54,760 Speaker 2: around the dollar, because he sort of instinctually understands that 138 00:07:54,880 --> 00:07:58,160 Speaker 2: a strong dollar might be in the US interest. It 139 00:07:58,320 --> 00:08:01,040 Speaker 2: sounds good to be able to say, like, we have 140 00:08:01,200 --> 00:08:05,640 Speaker 2: the world's reserve currency, and the dollar is great, et cetera. 141 00:08:06,080 --> 00:08:08,560 Speaker 2: But on the other hand, there were times during his 142 00:08:08,800 --> 00:08:12,960 Speaker 2: administration where he would talk about the desire for a 143 00:08:12,960 --> 00:08:16,320 Speaker 2: weaker dollar and we need a weeker dollar in order 144 00:08:16,360 --> 00:08:20,040 Speaker 2: to boost manufacturing, get more jobs back to the country, 145 00:08:20,080 --> 00:08:23,240 Speaker 2: et cetera. In your reporting, was it ever clear to 146 00:08:23,280 --> 00:08:27,960 Speaker 2: you like which side he landed on, or even broadening 147 00:08:28,040 --> 00:08:31,120 Speaker 2: it out. The US Treasury kind of has a long 148 00:08:31,480 --> 00:08:37,240 Speaker 2: and complex history when it comes to expressing its desire 149 00:08:37,400 --> 00:08:39,360 Speaker 2: for the green back, whether it wants a strong one 150 00:08:39,520 --> 00:08:39,720 Speaker 2: or not. 151 00:08:40,600 --> 00:08:44,160 Speaker 3: Absolutely, And that's what Paper Soldiers is all about. It's 152 00:08:44,240 --> 00:08:49,280 Speaker 3: all about the complexities of Treasury secretaries and any other 153 00:08:49,840 --> 00:08:53,760 Speaker 3: fed or White House or congressional official talking about the 154 00:08:53,840 --> 00:08:58,480 Speaker 3: dollar and how sensitive each in every syllable can be. 155 00:08:58,640 --> 00:09:00,880 Speaker 3: You know, if we talk about Bob Ruba and how 156 00:09:00,920 --> 00:09:04,600 Speaker 3: many words he used to describe his view on the dollar, 157 00:09:04,679 --> 00:09:07,520 Speaker 3: what order those words were in currency traders in the 158 00:09:07,600 --> 00:09:11,600 Speaker 3: nineties used to listen to everything to determine how to 159 00:09:11,600 --> 00:09:14,680 Speaker 3: make their trades. Now, on the question of Donald Trump 160 00:09:15,320 --> 00:09:19,000 Speaker 3: in you know, from twenty seventeen through twenty twenty into 161 00:09:19,000 --> 00:09:22,880 Speaker 3: twenty twenty one, you know, as usual, he's a mercurial person, 162 00:09:23,720 --> 00:09:30,560 Speaker 3: lots of gray areas. He definitely saw the benefits of saying, yes, 163 00:09:30,720 --> 00:09:32,840 Speaker 3: we have a strong dollar policy, we have a strong 164 00:09:32,920 --> 00:09:36,720 Speaker 3: dollar because it reflects a strong economy. But he was 165 00:09:37,160 --> 00:09:42,960 Speaker 3: the first politician who in any real way realized that 166 00:09:43,080 --> 00:09:46,360 Speaker 3: a strong dollar and that policy from the nineties and 167 00:09:46,400 --> 00:09:50,959 Speaker 3: that had persisted, was hurting certain parts of the country. 168 00:09:51,000 --> 00:09:54,200 Speaker 3: And we're talking about the forgotten man in you know, 169 00:09:54,280 --> 00:09:59,439 Speaker 3: like the manufacturing sector, the roust belt of the country. 170 00:09:59,480 --> 00:10:01,960 Speaker 3: And I in book I take you into Weir in 171 00:10:02,000 --> 00:10:06,320 Speaker 3: West Virginia, into Marine Ohio and what happened to those 172 00:10:06,440 --> 00:10:10,600 Speaker 3: factory workers in the manufacturing sector. As globalization, which is 173 00:10:10,679 --> 00:10:15,400 Speaker 3: underpinned by a strong dollar policy sort of overtook everything 174 00:10:15,440 --> 00:10:18,880 Speaker 3: and people kind of forgot about the economic scarring that 175 00:10:19,000 --> 00:10:23,199 Speaker 3: happened as the manufacturing sector in the US kind of disappeared. 176 00:10:23,280 --> 00:10:26,080 Speaker 3: So he kind of looks at it both way. But actually, 177 00:10:27,080 --> 00:10:30,760 Speaker 3: earlier in March, Trump was on as a presidential hopeful 178 00:10:30,880 --> 00:10:37,280 Speaker 3: again on CNBC talking about how he thinks it's dangerous 179 00:10:37,320 --> 00:10:40,679 Speaker 3: that people are talking about de dollarization. He is wading 180 00:10:40,720 --> 00:10:43,920 Speaker 3: into the d dollarization to debate, and we've all learned 181 00:10:43,920 --> 00:10:47,520 Speaker 3: that he puts action behind those kinds of words. 182 00:10:48,120 --> 00:10:51,600 Speaker 1: So there's two things, and they're sort of related, but 183 00:10:51,640 --> 00:10:54,000 Speaker 1: they're also sort of separate. So there is the strong 184 00:10:54,120 --> 00:10:56,800 Speaker 1: dollar in the sense of the price of the dollar 185 00:10:56,880 --> 00:10:59,560 Speaker 1: against our trading partners or the price of the dollar 186 00:10:59,640 --> 00:11:02,640 Speaker 1: again and the end and the euro and all that. 187 00:11:03,000 --> 00:11:05,480 Speaker 1: And then there is the sort of strong dollar, which 188 00:11:05,520 --> 00:11:09,079 Speaker 1: is it is the currency that everybody for the most 189 00:11:09,080 --> 00:11:13,080 Speaker 1: part uses globally to settle trade. And you know, and 190 00:11:13,120 --> 00:11:16,480 Speaker 1: this sort of gets to the incredible power that the 191 00:11:16,640 --> 00:11:22,679 Speaker 1: US has over this network, Like just high level, what 192 00:11:22,840 --> 00:11:26,280 Speaker 1: is the limits of what the US can do to 193 00:11:26,360 --> 00:11:28,800 Speaker 1: the dollar network, to the various like banks, et cetera, 194 00:11:29,000 --> 00:11:33,320 Speaker 1: and messaging services where dollars and goods are traded, like 195 00:11:33,720 --> 00:11:36,320 Speaker 1: what is this sort of what is the perimeter of 196 00:11:36,400 --> 00:11:40,800 Speaker 1: America's ability to I guess police transactions. 197 00:11:40,080 --> 00:11:40,480 Speaker 2: In the dot. 198 00:11:40,840 --> 00:11:44,160 Speaker 3: It's a debate that's raging in political and economic circles 199 00:11:44,200 --> 00:11:46,959 Speaker 3: in Washington and I think in pretty much every capital 200 00:11:47,160 --> 00:11:52,080 Speaker 3: around the world, because the US is actually figuring out 201 00:11:52,320 --> 00:11:57,160 Speaker 3: what that perimeter is, where that boundary is. There's been 202 00:11:57,200 --> 00:12:00,520 Speaker 3: a couple of moments where the US has real ooh, 203 00:12:00,600 --> 00:12:02,600 Speaker 3: I touched it and it was too hot. So there 204 00:12:02,760 --> 00:12:08,959 Speaker 3: was in twenty eighteen when Steven Mnusian's Treasury department sanctioned 205 00:12:09,520 --> 00:12:13,199 Speaker 3: olag Derpaska, a Russian oligarch who owned a majority stake 206 00:12:13,320 --> 00:12:16,320 Speaker 3: of Russol at the time, like one of the largest 207 00:12:16,679 --> 00:12:21,040 Speaker 3: aluminum makers in the world, and Treasury in the US 208 00:12:21,200 --> 00:12:24,000 Speaker 3: found out kind of the hard way that maybe we 209 00:12:24,080 --> 00:12:28,600 Speaker 3: overdid it or didn't look into these sanctions deeply enough, 210 00:12:28,840 --> 00:12:32,560 Speaker 3: because we had a lot of blowback from them. You know, 211 00:12:32,640 --> 00:12:35,040 Speaker 3: there was a lot of self inflicted wounds there because 212 00:12:35,360 --> 00:12:42,840 Speaker 3: commodity prices swung twenty percent on each headline about those sanctions. 213 00:12:42,920 --> 00:12:44,920 Speaker 3: Any kind of change in the date that they would 214 00:12:44,920 --> 00:12:47,199 Speaker 3: be implemented, or what kind of carve outs were coming. 215 00:12:48,000 --> 00:12:51,200 Speaker 3: Markets swung, And that's not actually a goal of OPAC, 216 00:12:51,280 --> 00:12:55,360 Speaker 3: which sort of oversees the Treasure Department's sanctions implementation. The 217 00:12:55,440 --> 00:13:00,360 Speaker 3: Office of Foreign Assets Control. They want to move a 218 00:13:00,360 --> 00:13:03,800 Speaker 3: little bit, a little bit more softly without triggering this 219 00:13:04,160 --> 00:13:09,760 Speaker 3: much turmoil. And what we saw was, you know, a 220 00:13:09,800 --> 00:13:16,480 Speaker 3: little manufacturing plant in Ireland that is realizing that, well, 221 00:13:16,600 --> 00:13:20,560 Speaker 3: sanctions might completely muck up our cash flow, so we 222 00:13:20,640 --> 00:13:24,440 Speaker 3: might be forced to shut down our smelter. Okay, that 223 00:13:24,559 --> 00:13:29,120 Speaker 3: smelter runs at two eight hundred degrees fahrenheit. It costs 224 00:13:29,160 --> 00:13:31,040 Speaker 3: a lot of money to shut it down. If it 225 00:13:31,080 --> 00:13:33,360 Speaker 3: should take days or maybe a couple of weeks to 226 00:13:33,440 --> 00:13:35,920 Speaker 3: actually physically shut it down, but if they run out 227 00:13:35,960 --> 00:13:38,560 Speaker 3: of money, they have to shut it down quickly. That 228 00:13:38,600 --> 00:13:41,200 Speaker 3: means there's going to be all these toxins polluting the 229 00:13:41,240 --> 00:13:44,240 Speaker 3: air and the water supply. But sanctions are going to 230 00:13:44,280 --> 00:13:46,960 Speaker 3: trigger that closure. Treasury did not think it through. That 231 00:13:47,120 --> 00:13:50,320 Speaker 3: was one example of the Treasure Department learning boundaries. And 232 00:13:50,360 --> 00:13:52,680 Speaker 3: the other one is the one that Joe Trees you 233 00:13:52,720 --> 00:13:56,400 Speaker 3: guys just mentioned the big sanctions in February twenty twenty two, 234 00:13:57,600 --> 00:14:00,839 Speaker 3: with you know, cutting Russia off from the dollar. 235 00:14:17,880 --> 00:14:20,600 Speaker 2: So you go into detail on this in your book, 236 00:14:20,640 --> 00:14:23,240 Speaker 2: and by the way, I love that example of the 237 00:14:23,280 --> 00:14:27,280 Speaker 2: smelter and sort of an unanticipated consequence of doing this. 238 00:14:27,400 --> 00:14:31,600 Speaker 2: But you talk in your book about the internal debate 239 00:14:32,040 --> 00:14:34,520 Speaker 2: of whether or not to sanction Russia, and I think 240 00:14:34,560 --> 00:14:37,240 Speaker 2: you mentioned that Janet Yellen sort of had to be 241 00:14:37,360 --> 00:14:41,680 Speaker 2: convinced and that there was this memory of the oh 242 00:14:41,720 --> 00:14:46,400 Speaker 2: like dere Paska incident sort of hovering around. I guess 243 00:14:46,560 --> 00:14:49,160 Speaker 2: what I want to ask is how much of this, 244 00:14:49,160 --> 00:14:53,000 Speaker 2: this weaponization of the dollar is a question of political 245 00:14:53,080 --> 00:14:56,000 Speaker 2: will and how far the US Treasury wants to push 246 00:14:56,080 --> 00:15:01,080 Speaker 2: on that string versus technological ability. It seems like the 247 00:15:01,200 --> 00:15:05,120 Speaker 2: US does have the capacity to shut people off in 248 00:15:05,160 --> 00:15:08,360 Speaker 2: some respects, so for instance through the swift system, which 249 00:15:08,400 --> 00:15:11,560 Speaker 2: again you go into some detail on, but there is 250 00:15:11,600 --> 00:15:14,880 Speaker 2: this overarching question of whether or not it should, whether 251 00:15:14,960 --> 00:15:17,960 Speaker 2: or not it'll backfire either in the short term or 252 00:15:18,000 --> 00:15:21,400 Speaker 2: in the long term by diminishing the desirability of the 253 00:15:21,440 --> 00:15:22,920 Speaker 2: dollar as a reserve currency. 254 00:15:23,920 --> 00:15:27,480 Speaker 3: It's complicated, as things tend to be in Washington. There 255 00:15:27,640 --> 00:15:31,760 Speaker 3: is huge political will to use economic sanctions and to 256 00:15:32,640 --> 00:15:35,800 Speaker 3: make them even more sophisticated than they've ever been. What 257 00:15:35,840 --> 00:15:39,640 Speaker 3: we've seen is we've gone from you in the early 258 00:15:39,720 --> 00:15:42,720 Speaker 3: nineteen hundreds up until pretty much two thousand and one. 259 00:15:43,280 --> 00:15:46,360 Speaker 3: OPHAC was a bit of an orphan of the Treasure Department. 260 00:15:46,600 --> 00:15:51,000 Speaker 3: No one really paid attention to them. Economic sanctions at 261 00:15:51,000 --> 00:15:53,520 Speaker 3: that time, they were so blunt. It was just like 262 00:15:53,920 --> 00:15:59,000 Speaker 3: embargoes on Cuba. It didn't really have this great big impact. 263 00:15:59,080 --> 00:16:03,200 Speaker 3: It wasn't discussed in two thousand and one. Nine to 264 00:16:03,200 --> 00:16:07,280 Speaker 3: eleven hits, and you know, the global War on terror 265 00:16:07,480 --> 00:16:12,240 Speaker 3: did not start with military tanks rolling into some country 266 00:16:12,680 --> 00:16:16,760 Speaker 3: or American troops in their boots hitting the ground somewhere. 267 00:16:16,840 --> 00:16:20,040 Speaker 3: It started September twenty fourth, two thousand and one, with 268 00:16:20,120 --> 00:16:23,480 Speaker 3: George W. Bush, with a stroke of a pen, giving 269 00:16:23,760 --> 00:16:27,560 Speaker 3: the US Treasury Department the authority to weaponize the dollar, 270 00:16:27,640 --> 00:16:31,520 Speaker 3: to use the dollar to find out how did the 271 00:16:31,640 --> 00:16:35,520 Speaker 3: terrorists finance those attacks? Because nine to eleven it costs 272 00:16:35,560 --> 00:16:38,520 Speaker 3: those terrorists like four hundred thousand dollars, and later officials 273 00:16:38,520 --> 00:16:41,560 Speaker 3: found out that that money was moved in the light 274 00:16:41,600 --> 00:16:45,240 Speaker 3: of day. So the US realized that, okay, we can 275 00:16:45,600 --> 00:16:48,960 Speaker 3: track these money flows and either stop the next attack 276 00:16:49,080 --> 00:16:53,280 Speaker 3: or just choke off, you know, bad actors or terrorists, organizations, 277 00:16:53,360 --> 00:16:57,240 Speaker 3: or terrorists themselves from money flow and the ability to 278 00:16:57,280 --> 00:17:00,800 Speaker 3: get cash by cutting them off from the global financial 279 00:17:00,840 --> 00:17:03,280 Speaker 3: system because we control the dollar. That's kind of where 280 00:17:03,280 --> 00:17:07,080 Speaker 3: it started, and sanctions have gotten more and more sophisticated. 281 00:17:07,359 --> 00:17:11,040 Speaker 3: Treasury created an entire unit called the Terrorism and Financial 282 00:17:11,080 --> 00:17:15,280 Speaker 3: Intelligence Unit that was created in the aftermath of nine 283 00:17:15,320 --> 00:17:18,200 Speaker 3: to eleven in two thousand and four and built out 284 00:17:18,680 --> 00:17:22,480 Speaker 3: a basically an intelligence unit within the Treasure Department. So 285 00:17:22,640 --> 00:17:25,280 Speaker 3: Treasury in the US is the only finance ministry in 286 00:17:25,320 --> 00:17:28,360 Speaker 3: the world with its own intelligence operation. 287 00:17:28,640 --> 00:17:32,520 Speaker 1: Basically. Yeah, this is so fascinating, And I thought this 288 00:17:32,640 --> 00:17:35,240 Speaker 1: part of your book where you talk about nine to 289 00:17:35,240 --> 00:17:37,760 Speaker 1: eleven was really interesting. So what were these sort of 290 00:17:37,960 --> 00:17:42,239 Speaker 1: capabilities of o FAC or the Treasury in terms of 291 00:17:42,359 --> 00:17:46,879 Speaker 1: tracking illicit money flows prior to nine to eleven and 292 00:17:46,920 --> 00:17:50,520 Speaker 1: then like sort of what was the difference between specifically 293 00:17:50,560 --> 00:17:52,840 Speaker 1: what they did, what they could could do, and then 294 00:17:53,200 --> 00:17:54,320 Speaker 1: pre and post nine to eleven. 295 00:17:54,600 --> 00:17:56,640 Speaker 3: They didn't have much Before nine to eleven, Like I said, 296 00:17:56,640 --> 00:17:59,400 Speaker 3: OPHAC was this orphan No one really paid attention to them. 297 00:17:59,800 --> 00:18:02,199 Speaker 3: They did a lot of work, but their budget was small, 298 00:18:02,320 --> 00:18:04,119 Speaker 3: their staffing was small. They didn't have a lot of 299 00:18:04,119 --> 00:18:07,439 Speaker 3: access to the Treasury Secretary, which you know, then you 300 00:18:07,480 --> 00:18:09,040 Speaker 3: have no one to sort of lift the profile. But 301 00:18:09,119 --> 00:18:14,919 Speaker 3: also the US wasn't looking at how to work in 302 00:18:15,000 --> 00:18:18,760 Speaker 3: this space. That's between kinetic action, which is you know, 303 00:18:18,840 --> 00:18:23,520 Speaker 3: sending tanks and forces in and diplomacy. That's what sanctions are, right, 304 00:18:23,520 --> 00:18:26,760 Speaker 3: It's that spot in the middle, meaning diplomacy has failed us, 305 00:18:26,800 --> 00:18:29,119 Speaker 3: but we are not ready for like an actual, live, 306 00:18:29,480 --> 00:18:32,440 Speaker 3: bloody war. So let's go in the middle and use sanctions. 307 00:18:32,440 --> 00:18:34,439 Speaker 3: And it's pretty cheap, right, So that's where the like 308 00:18:34,560 --> 00:18:36,879 Speaker 3: what Tracy asked earlier, that's where the political will is 309 00:18:36,920 --> 00:18:41,280 Speaker 3: that it's not as expensive and doesn't spill blood as 310 00:18:41,359 --> 00:18:44,360 Speaker 3: like a war, but it's a good option when diplomacy 311 00:18:44,520 --> 00:18:45,119 Speaker 3: isn't working. 312 00:18:45,520 --> 00:18:46,280 Speaker 1: We talked us a. 313 00:18:46,280 --> 00:18:49,639 Speaker 2: Little bit more about technological ability. This is why I 314 00:18:49,680 --> 00:18:51,920 Speaker 2: was curious, like how much of it is the politics 315 00:18:52,359 --> 00:18:55,639 Speaker 2: versus what we are actually physically able to do. In 316 00:18:55,680 --> 00:18:59,879 Speaker 2: the financial system, so if I have a dollar, to 317 00:19:00,080 --> 00:19:04,000 Speaker 2: Joe's point in the intro, there are certain conditions that 318 00:19:04,080 --> 00:19:07,720 Speaker 2: are attached to that dollar, and there is to some 319 00:19:07,880 --> 00:19:11,800 Speaker 2: extent visibility on that dollar as well talk to us 320 00:19:11,800 --> 00:19:15,040 Speaker 2: a little bit more about what a dollar looks like 321 00:19:15,280 --> 00:19:19,000 Speaker 2: or how much visibility the US government can have into it. 322 00:19:19,640 --> 00:19:23,080 Speaker 3: That's such a good question, Tracy, because dollars are actually transported, 323 00:19:23,119 --> 00:19:26,960 Speaker 3: sometimes wrapped in plastic shrink wrap and in trucks like 324 00:19:27,119 --> 00:19:31,320 Speaker 3: loaded into Afghanistan, Like the New York Federal Reserve actually 325 00:19:31,359 --> 00:19:35,320 Speaker 3: sends money like this to Cobble, or they did in 326 00:19:35,359 --> 00:19:37,919 Speaker 3: the past. Right, That's why the Treasure Department would have 327 00:19:37,960 --> 00:19:41,960 Speaker 3: an attache in Cobble there to sort of witness that 328 00:19:42,240 --> 00:19:47,000 Speaker 3: millions of dollars of actual physical cash greenbacks coming into 329 00:19:47,000 --> 00:19:50,320 Speaker 3: the country. So that's the really hard part, right, how 330 00:19:50,320 --> 00:19:56,720 Speaker 3: to monitor that. Banks do have a responsibility to tell 331 00:19:56,760 --> 00:20:01,240 Speaker 3: the Treasure Department through these Suspicious Activity Reports sars when 332 00:20:01,320 --> 00:20:06,800 Speaker 3: they see transactions happening that touch their financial institution that 333 00:20:07,080 --> 00:20:10,280 Speaker 3: look suspicious to them. But these sars are just it's 334 00:20:10,359 --> 00:20:15,480 Speaker 3: just like throwing something in some obscure filing box and 335 00:20:15,520 --> 00:20:18,080 Speaker 3: maybe someone shifting through it will see what they need 336 00:20:18,119 --> 00:20:21,520 Speaker 3: to see. It's hard to see a pattern. Basically, after 337 00:20:21,640 --> 00:20:24,439 Speaker 3: nine to eleven, officials realize that they don't have a 338 00:20:24,560 --> 00:20:29,600 Speaker 3: ton of visibility the US itself autonomously to see how 339 00:20:29,640 --> 00:20:33,080 Speaker 3: dollars are moving through the global financial system. And this 340 00:20:33,200 --> 00:20:36,320 Speaker 3: is where it gets interesting. After nine to eleven, Treasure 341 00:20:36,359 --> 00:20:39,960 Speaker 3: officials wanted to get that glimpse, and they knew that 342 00:20:40,359 --> 00:20:46,040 Speaker 3: SWIFT based in Belgium, part of the EU, and that 343 00:20:46,119 --> 00:20:51,679 Speaker 3: jurisdiction has data within its fortresses. You know, the building 344 00:20:51,720 --> 00:20:55,159 Speaker 3: itself in Lahoopa, Belgium is you know, it looks like 345 00:20:55,200 --> 00:20:58,800 Speaker 3: an actual fortress, but they have the data that shows 346 00:20:58,880 --> 00:21:02,920 Speaker 3: the routing number and the transaction time in real time. 347 00:21:03,080 --> 00:21:03,280 Speaker 1: You know. 348 00:21:03,520 --> 00:21:06,560 Speaker 3: Swift is basically the Gmail of the banking system. 349 00:21:06,640 --> 00:21:07,720 Speaker 2: It is like that. 350 00:21:08,280 --> 00:21:11,640 Speaker 3: Yeah, it's a way for banks to communicate with each other. 351 00:21:11,680 --> 00:21:13,720 Speaker 3: Here's the bank account number, here is the name, here's 352 00:21:13,880 --> 00:21:16,439 Speaker 3: the address and the amount that needs to be moved. 353 00:21:16,480 --> 00:21:21,639 Speaker 3: But it promises privacy. No one will know the nature 354 00:21:21,640 --> 00:21:25,040 Speaker 3: of the transaction, right And a couple of different central 355 00:21:25,040 --> 00:21:28,800 Speaker 3: banks are involved in sort of that network that SWIFT 356 00:21:28,840 --> 00:21:31,960 Speaker 3: has built up, including the Fed, Bank of Japan, Bank 357 00:21:32,000 --> 00:21:34,400 Speaker 3: of England and a couple of others. And so Treasury 358 00:21:34,400 --> 00:21:37,920 Speaker 3: officials got together and they spoke to Swift. The head 359 00:21:38,400 --> 00:21:40,720 Speaker 3: at the time after nine to eleven was Lenny Shrink, 360 00:21:41,280 --> 00:21:43,399 Speaker 3: really really interesting guy that I spoke to for the 361 00:21:43,440 --> 00:21:47,720 Speaker 3: book Colorful Character, and he said, well, they approached me, 362 00:21:47,800 --> 00:21:50,360 Speaker 3: and he said he knew that that call as soon 363 00:21:50,400 --> 00:21:54,080 Speaker 3: as those planes hit the Twin Towers in Manhattan. He 364 00:21:54,119 --> 00:21:57,240 Speaker 3: says he remembers he was in Europe for I think 365 00:21:57,320 --> 00:22:01,240 Speaker 3: Ireland for a meeting with a Swift board member. He 366 00:22:01,400 --> 00:22:03,679 Speaker 3: was biting into a sandwich when he heard that nine 367 00:22:03,720 --> 00:22:07,480 Speaker 3: to eleven happened. He found out exactly the depth of 368 00:22:07,520 --> 00:22:09,639 Speaker 3: the problem and then he knew, right then, I'm going 369 00:22:09,720 --> 00:22:11,679 Speaker 3: to get a call from the Charges Department. They're going 370 00:22:11,760 --> 00:22:14,439 Speaker 3: to want data. They're going to want to know how 371 00:22:14,560 --> 00:22:18,960 Speaker 3: did money that financed that attack move through this system, 372 00:22:19,080 --> 00:22:21,359 Speaker 3: how did we miss it, and how can we catch 373 00:22:21,520 --> 00:22:25,680 Speaker 3: the next one? Because bring yourself back to September twelfth 374 00:22:25,720 --> 00:22:30,119 Speaker 3: and thirteenth, we were terrified. You know, everyone at that 375 00:22:30,240 --> 00:22:34,040 Speaker 3: time internationally said I'm an American today because if someone 376 00:22:34,040 --> 00:22:37,600 Speaker 3: can attack this country, they're attacking everyone. If you remember 377 00:22:37,720 --> 00:22:40,520 Speaker 3: the Queen of England at the time, she sang the 378 00:22:40,640 --> 00:22:43,719 Speaker 3: national anthem, the American national anthem, because she said I 379 00:22:43,760 --> 00:22:48,040 Speaker 3: stand with America. So Lenny Shrink, an American himself, knew 380 00:22:48,040 --> 00:22:51,919 Speaker 3: that that call was coming. So when Treasury finally called 381 00:22:52,400 --> 00:22:54,280 Speaker 3: he had he was ready. You know, it depends on 382 00:22:54,320 --> 00:22:56,320 Speaker 3: who you ask, but it's possible that Treasury might have 383 00:22:56,320 --> 00:22:58,760 Speaker 3: approached Swift a couple of times before then looking for 384 00:22:58,840 --> 00:23:01,840 Speaker 3: some data and they always kind of said no. And 385 00:23:02,080 --> 00:23:08,760 Speaker 3: so they finally got to talking about specifics, and Lenny 386 00:23:08,760 --> 00:23:11,960 Speaker 3: Shrink spoke to a couple of the different central bank 387 00:23:12,000 --> 00:23:17,240 Speaker 3: governors that were involved. According to one source, Alan Greenspan 388 00:23:17,400 --> 00:23:22,240 Speaker 3: at that time was against it, initially against Treasury having 389 00:23:22,280 --> 00:23:26,880 Speaker 3: any insight into Swift data because he said gentlemen shouldn't 390 00:23:26,920 --> 00:23:30,720 Speaker 3: read gentleman's mail, So he didn't like the idea at first. 391 00:23:30,960 --> 00:23:32,720 Speaker 1: First of all, I think you wrote in your book 392 00:23:32,800 --> 00:23:35,960 Speaker 1: that this only came out like in two thousand and six, 393 00:23:36,119 --> 00:23:39,000 Speaker 1: that the that the Treasury had approached Swift about getting 394 00:23:39,080 --> 00:23:42,080 Speaker 1: access to more data, like it was done pretty surreptitiously 395 00:23:42,160 --> 00:23:43,280 Speaker 1: or secretly for a while. 396 00:23:43,560 --> 00:23:47,439 Speaker 3: Yeah, so Swift, okay, Speed, that's what it alludes to. 397 00:23:47,920 --> 00:23:51,040 Speaker 3: Treasury's code name for the whole program was Turtle, the 398 00:23:51,119 --> 00:23:52,400 Speaker 3: opposite Swift. 399 00:23:52,800 --> 00:23:55,400 Speaker 2: I love the Yeah, it's great. 400 00:23:55,640 --> 00:23:55,880 Speaker 1: Yeah. 401 00:23:55,920 --> 00:23:57,919 Speaker 3: So if you were like if you were at an 402 00:23:57,960 --> 00:24:01,080 Speaker 3: airport maybe in two thousand and one through six and 403 00:24:01,200 --> 00:24:05,520 Speaker 3: saw like these government, you know, gray or sort of 404 00:24:05,960 --> 00:24:09,520 Speaker 3: muted suits. A man may be handcuffed to a briefcase. 405 00:24:09,600 --> 00:24:11,880 Speaker 3: And if they were talking about a turtle, they were 406 00:24:11,920 --> 00:24:15,760 Speaker 3: talking about swift. So they used swift. They were able 407 00:24:15,840 --> 00:24:18,240 Speaker 3: to come to an agreement. They would have to subpoena 408 00:24:18,359 --> 00:24:22,399 Speaker 3: the information. There was a lengthy process there. Lenny Schrank said, 409 00:24:22,480 --> 00:24:24,560 Speaker 3: I want the US to have the information that they 410 00:24:24,640 --> 00:24:27,359 Speaker 3: need and not a bite more because he didn't want 411 00:24:27,400 --> 00:24:30,000 Speaker 3: it to be abused and he wanted to set a precedent. 412 00:24:30,440 --> 00:24:33,240 Speaker 3: He did say to me that the only reason that 413 00:24:33,760 --> 00:24:37,399 Speaker 3: the US was able to get that information was the 414 00:24:37,440 --> 00:24:40,080 Speaker 3: power of the dollar. It is the owner of the 415 00:24:40,080 --> 00:24:43,639 Speaker 3: world's reserve asset. Coming to Swift, saying we need to 416 00:24:43,680 --> 00:24:47,199 Speaker 3: protect our economy in our financial system because after nine 417 00:24:47,240 --> 00:24:50,280 Speaker 3: to eleven the stock market was wiped out. Up one 418 00:24:50,280 --> 00:24:52,959 Speaker 3: point four trillion dollars of value disappeared that day, the 419 00:24:53,000 --> 00:24:55,600 Speaker 3: S and P five hundred plunged. Over a couple of weeks, 420 00:24:55,960 --> 00:24:59,640 Speaker 3: the markets were closed because physically the heart of American 421 00:24:59,720 --> 00:25:03,240 Speaker 3: stock market had been attacked right the financial district was 422 00:25:03,320 --> 00:25:06,600 Speaker 3: right by the World Trade Center. So he said, that's 423 00:25:06,640 --> 00:25:09,600 Speaker 3: why that's the only persuasive power. Any other country had 424 00:25:09,640 --> 00:25:11,159 Speaker 3: come to us, it was a very easy no. We 425 00:25:11,200 --> 00:25:12,440 Speaker 3: wouldn't even have to explain. 426 00:25:13,359 --> 00:25:16,719 Speaker 2: So one thing that I think often comes up when 427 00:25:16,760 --> 00:25:20,719 Speaker 2: we're debating the role of the dollar. I mean, obviously 428 00:25:20,840 --> 00:25:24,840 Speaker 2: people can see the benefits that it has for the US. 429 00:25:25,000 --> 00:25:29,160 Speaker 2: There is that idea of exorbitant privilege, and the US 430 00:25:29,240 --> 00:25:31,840 Speaker 2: is able to issue a lot of dollar denominated debt 431 00:25:31,960 --> 00:25:35,600 Speaker 2: and fund a lot of different things, thinks in part 432 00:25:35,720 --> 00:25:39,960 Speaker 2: to its currency. But I guess one thing that often 433 00:25:40,720 --> 00:25:43,240 Speaker 2: doesn't get discussed, or doesn't get discussed as much, is 434 00:25:43,359 --> 00:25:45,959 Speaker 2: the idea of what the rest of the world gets 435 00:25:46,200 --> 00:25:49,560 Speaker 2: from the dollar's special position. Can you talk a little 436 00:25:49,600 --> 00:25:52,760 Speaker 2: bit about that, Why does the rest of the world 437 00:25:53,560 --> 00:25:57,880 Speaker 2: agree to do stuff like invoice in dollars or buy 438 00:25:58,080 --> 00:26:02,119 Speaker 2: US treasury debt or how large reserves of dollars that 439 00:26:02,200 --> 00:26:04,439 Speaker 2: it holds at the New York Fed and things like 440 00:26:04,480 --> 00:26:05,240 Speaker 2: that terracy? 441 00:26:05,280 --> 00:26:09,400 Speaker 3: The answer that question actually begins like seventy eighty years ago, 442 00:26:09,840 --> 00:26:13,000 Speaker 3: nineteen forty four Breton Woods. Lots of economists and monks 443 00:26:13,040 --> 00:26:15,159 Speaker 3: here in Washington and around the world in financial and 444 00:26:15,200 --> 00:26:18,400 Speaker 3: economic policy circles loved to talk about Breton Woods. This 445 00:26:18,480 --> 00:26:22,879 Speaker 3: is when, by design, the dollar was crowned as the 446 00:26:22,920 --> 00:26:27,040 Speaker 3: reserve asset, the most important asset in the world. At 447 00:26:27,080 --> 00:26:29,280 Speaker 3: the time, the world had just emerged from back to 448 00:26:29,320 --> 00:26:35,280 Speaker 3: back global wars. Europe's fiscal position most of the countries 449 00:26:35,320 --> 00:26:40,360 Speaker 3: there it wasn't good. The UK had held the reserve asset, 450 00:26:40,760 --> 00:26:44,120 Speaker 3: the British pound. They were no longer the largest economy 451 00:26:44,119 --> 00:26:48,159 Speaker 3: in the world, and since their actual physical infrastructure was 452 00:26:48,200 --> 00:26:51,480 Speaker 3: so damaged after two wars, they had a lot of 453 00:26:51,520 --> 00:26:54,040 Speaker 3: spending they had to do. The US was sort of 454 00:26:54,040 --> 00:26:58,400 Speaker 3: this hercules in a cradle emerging to take on the 455 00:26:58,440 --> 00:27:02,440 Speaker 3: global superpower role. It had been heading toward for decades 456 00:27:02,920 --> 00:27:05,399 Speaker 3: and it was ready for it. Everyone was looking at 457 00:27:05,440 --> 00:27:08,879 Speaker 3: America like they have got this figured out. They're going 458 00:27:08,920 --> 00:27:12,639 Speaker 3: to lead us into the future. All the technology is 459 00:27:12,680 --> 00:27:15,720 Speaker 3: there and everything is clean and shiny over there. They're 460 00:27:15,720 --> 00:27:18,840 Speaker 3: a stable country and helped wrap up the war. So 461 00:27:19,880 --> 00:27:25,439 Speaker 3: the US helped create the infrastructure of the World Bank, 462 00:27:25,680 --> 00:27:30,960 Speaker 3: the International Monetary Fund, all ways to knit the world 463 00:27:31,040 --> 00:27:35,320 Speaker 3: together so that we're so economically integrated that we cannot 464 00:27:35,920 --> 00:27:37,560 Speaker 3: start a war with each other, because then there's that 465 00:27:37,640 --> 00:27:42,040 Speaker 3: deep and self inflicted wound because we are so economically 466 00:27:42,040 --> 00:27:45,439 Speaker 3: aligned so much trade going on amongst us. Everyone kind 467 00:27:45,480 --> 00:27:48,240 Speaker 3: of relied on the dollar to lead the way forward, 468 00:27:48,359 --> 00:27:50,560 Speaker 3: the same way they relied on the US to lead 469 00:27:50,600 --> 00:27:52,800 Speaker 3: the way forward, because it was a safety net. Right 470 00:27:52,840 --> 00:27:55,880 Speaker 3: at the time, the dollar was pegged to gold, and 471 00:27:55,960 --> 00:27:59,520 Speaker 3: so there was this promise that is, as long as 472 00:27:59,560 --> 00:28:04,119 Speaker 3: we can continue on dollar dependency, then we will all 473 00:28:04,160 --> 00:28:10,080 Speaker 3: stick together and emerge from the ashes of two wars stronger. 474 00:28:10,119 --> 00:28:14,800 Speaker 3: And in those eighty years, global GDP did grow a 475 00:28:14,840 --> 00:28:20,160 Speaker 3: lot because of globalization, because of that economic integration, and 476 00:28:20,240 --> 00:28:24,320 Speaker 3: so as the United States rose and consolidated power, its 477 00:28:24,359 --> 00:28:28,160 Speaker 3: superpower status, people were more and more invested in dollars 478 00:28:28,560 --> 00:28:31,160 Speaker 3: themselves and depending on the dollar. And it turns out 479 00:28:31,160 --> 00:28:35,159 Speaker 3: that when you know a crisis hit, whether it's a 480 00:28:35,200 --> 00:28:38,600 Speaker 3: regional crisis in some part of Asia or Europe or 481 00:28:38,680 --> 00:28:43,240 Speaker 3: Latin America, or there was political instability in another country, 482 00:28:43,960 --> 00:28:46,680 Speaker 3: or something that was more global, a pandemic, a global 483 00:28:46,760 --> 00:28:49,800 Speaker 3: financial crisis, even if that financial crisis started in America, 484 00:28:50,160 --> 00:28:53,400 Speaker 3: the dollar has been seen as a safe haven. Let's 485 00:28:53,400 --> 00:28:56,480 Speaker 3: all flee to this place because we know that this 486 00:28:56,680 --> 00:28:59,600 Speaker 3: country has rule of law, free and fair elections, a 487 00:28:59,640 --> 00:29:03,120 Speaker 3: strong and stable democracy. If we park our cash and 488 00:29:03,240 --> 00:29:07,280 Speaker 3: our wealth and our savings in there in this asset. 489 00:29:07,640 --> 00:29:09,200 Speaker 3: It'll be there when we come back to it. 490 00:29:09,440 --> 00:29:11,880 Speaker 1: So you know, you hold dollars like, there's the network 491 00:29:11,920 --> 00:29:15,320 Speaker 1: effects of everyone using the same currency. There's the general 492 00:29:15,400 --> 00:29:19,480 Speaker 1: price stability, there's the rule of law, et cetera. Now, 493 00:29:19,640 --> 00:29:21,720 Speaker 1: as we said in the introduction, or we were talking 494 00:29:21,720 --> 00:29:25,840 Speaker 1: about earlier, like the sort of sanctions in twenty twenty two, 495 00:29:26,040 --> 00:29:30,800 Speaker 1: or as Tracy mentioned, the seizing of the Afghanistan dollars, 496 00:29:31,200 --> 00:29:34,040 Speaker 1: it seems to have woken much of the world up 497 00:29:34,360 --> 00:29:37,479 Speaker 1: that yes, there are benefits to holding the dollar for 498 00:29:37,560 --> 00:29:40,800 Speaker 1: maybe obvious economic reasons, but it comes with strings, or 499 00:29:40,800 --> 00:29:43,080 Speaker 1: it comes with risks. Do you think that there's like 500 00:29:43,360 --> 00:29:45,720 Speaker 1: a sort of I don't know, maybe a gap in 501 00:29:45,760 --> 00:29:49,520 Speaker 1: that realization where maybe it's like people sort of around 502 00:29:49,520 --> 00:29:53,840 Speaker 1: the world actors understood the benefits of transacting in the 503 00:29:53,880 --> 00:29:57,600 Speaker 1: dollar network, and it only clicking later on that is 504 00:29:57,680 --> 00:30:00,400 Speaker 1: conditions to part of that network that the the US 505 00:30:00,480 --> 00:30:03,400 Speaker 1: essentially has quite a bit of power to police reactions. 506 00:30:04,040 --> 00:30:07,120 Speaker 3: Absolutely, I think that this was something that kind of 507 00:30:07,160 --> 00:30:10,520 Speaker 3: crept up on us without maybe us realizing right away. 508 00:30:10,520 --> 00:30:13,480 Speaker 3: I mean, for one thing, the dollar and the US 509 00:30:13,880 --> 00:30:18,360 Speaker 3: has an immense dominance across the world. The world's largest 510 00:30:18,360 --> 00:30:21,800 Speaker 3: economy is the US. The next three countries on that 511 00:30:21,880 --> 00:30:24,880 Speaker 3: ranking put together and you get maybe to wear the 512 00:30:24,880 --> 00:30:29,240 Speaker 3: size of the US economy. So by sheer strength and 513 00:30:29,400 --> 00:30:32,320 Speaker 3: just internal power, a lot of innovation happens in the US. 514 00:30:32,400 --> 00:30:35,320 Speaker 3: We have a lot of fiscal spending, which drives more 515 00:30:35,360 --> 00:30:36,400 Speaker 3: research and development. 516 00:30:52,800 --> 00:30:55,480 Speaker 2: So the other thing that tends to happen in this 517 00:30:55,600 --> 00:30:58,440 Speaker 2: type of conversation is people will say, oh, well, the 518 00:30:58,480 --> 00:31:02,400 Speaker 2: dollars the reserve cur andy, because it's a unipolar world 519 00:31:02,640 --> 00:31:07,960 Speaker 2: and the US has dominated at least up until relatively recently. 520 00:31:08,000 --> 00:31:11,479 Speaker 2: But as you point out, it's kind of it's almost 521 00:31:11,520 --> 00:31:14,480 Speaker 2: the opposite, Like there was a lot of consensus building 522 00:31:14,880 --> 00:31:18,400 Speaker 2: going into the initial stages of building up the dollar 523 00:31:18,560 --> 00:31:21,640 Speaker 2: as the reserve currency, and it feels like even now 524 00:31:22,200 --> 00:31:25,880 Speaker 2: there is still a degree of cooperation here. And you 525 00:31:26,000 --> 00:31:29,479 Speaker 2: mentioned Swift for instance. I mean, Swift seems to have 526 00:31:29,520 --> 00:31:32,959 Speaker 2: the cooperation of several central banks, which you already mentioned. 527 00:31:33,240 --> 00:31:35,960 Speaker 2: But I guess my question is like, A, how much 528 00:31:36,240 --> 00:31:41,040 Speaker 2: cooperation goes into the dollar's special position, and then B 529 00:31:41,840 --> 00:31:46,000 Speaker 2: how vulnerable do you think some of that consensus is 530 00:31:46,480 --> 00:31:48,520 Speaker 2: in current day. 531 00:31:49,000 --> 00:31:51,560 Speaker 3: That's such a good question. There is so much consensus, 532 00:31:51,640 --> 00:31:54,640 Speaker 3: and I'm going to point you to history again. If 533 00:31:54,640 --> 00:31:58,760 Speaker 3: you look at the nineteen eighties, a really interesting and 534 00:31:58,880 --> 00:32:01,479 Speaker 3: exciting thing happened. I almost wish I was a financial 535 00:32:01,520 --> 00:32:04,320 Speaker 3: journalist back then, covering the Plaza and the Louver Accord. 536 00:32:04,920 --> 00:32:09,600 Speaker 3: So in nineteen eighties, let's think it's inflation was really high, 537 00:32:10,000 --> 00:32:14,360 Speaker 3: the dollar was really strong because interest rates had been 538 00:32:14,440 --> 00:32:20,120 Speaker 3: hiked up to combat inflation, and manufacturing sector farmers, a 539 00:32:20,120 --> 00:32:24,280 Speaker 3: lot of x you know, our exporters were complaining about 540 00:32:24,320 --> 00:32:27,960 Speaker 3: how strong the dollar was, and other countries were saying 541 00:32:27,960 --> 00:32:31,080 Speaker 3: that the US has this quote benign neglect of the dollar. 542 00:32:31,160 --> 00:32:33,640 Speaker 3: They don't care that it's so strong it's damaging its 543 00:32:33,680 --> 00:32:37,520 Speaker 3: own economy. They're, you know, folks insider complaining, and overseas, 544 00:32:37,600 --> 00:32:41,200 Speaker 3: it's making it hard for other countries to buy goods 545 00:32:41,240 --> 00:32:44,840 Speaker 3: that America is making and trying to sell. So at 546 00:32:44,840 --> 00:32:48,480 Speaker 3: the time, it was the G five, it was West Germany, Japan, 547 00:32:49,520 --> 00:32:52,600 Speaker 3: the UK, the US, and I think France got together 548 00:32:52,880 --> 00:32:56,920 Speaker 3: at the Plaza Hotel in Manhattan and I went there 549 00:32:57,040 --> 00:32:59,280 Speaker 3: to research the room. What it looks like. I asked 550 00:32:59,320 --> 00:33:01,560 Speaker 3: somebody of one of the bell hops or something like, Okay, 551 00:33:01,560 --> 00:33:03,360 Speaker 3: has this room been the same since the eighties? Because 552 00:33:03,360 --> 00:33:06,520 Speaker 3: I got to write about it and they all secretly 553 00:33:06,600 --> 00:33:11,480 Speaker 3: met with then Treasure Secretary Jim Baker to collectively agree 554 00:33:11,560 --> 00:33:15,560 Speaker 3: that they were going to medal in currency markets to 555 00:33:15,840 --> 00:33:19,200 Speaker 3: weaken the dollar, and you know, that's kind of what 556 00:33:19,280 --> 00:33:23,920 Speaker 3: triggered the whole strong dollar policy lore of journalists and 557 00:33:23,960 --> 00:33:26,280 Speaker 3: currency traders trying to figure out what does a treasure 558 00:33:26,320 --> 00:33:28,920 Speaker 3: secretary say about the dollar? Because maybe there's going to 559 00:33:28,960 --> 00:33:31,520 Speaker 3: be government intervention in the dollar because they did it right, 560 00:33:32,200 --> 00:33:33,280 Speaker 3: what about now? 561 00:33:33,600 --> 00:33:37,320 Speaker 1: Like, so, does this feel like a different moment? Because, 562 00:33:37,440 --> 00:33:40,560 Speaker 1: as Tracy and I have talked about on multiple episodes, 563 00:33:40,720 --> 00:33:43,640 Speaker 1: and you know, both of us have aaly been reporters 564 00:33:43,680 --> 00:33:46,200 Speaker 1: for about fifteen years, but within those fifteen years there 565 00:33:46,200 --> 00:33:49,440 Speaker 1: are like multiple waves of people talk about post dollar 566 00:33:49,480 --> 00:33:54,040 Speaker 1: ear multipolar era, new alternative. Does this feel like does 567 00:33:54,120 --> 00:33:57,600 Speaker 1: twenty twenty two to twenty twenty four and beyond. Does 568 00:33:57,640 --> 00:34:01,000 Speaker 1: this feel like something different where the conversations like, oh, 569 00:34:01,040 --> 00:34:03,520 Speaker 1: that's right really might be a change or does this 570 00:34:03,560 --> 00:34:07,960 Speaker 1: feel like another time in multiple cycles where yes, there's 571 00:34:07,960 --> 00:34:10,120 Speaker 1: plenty of talk about a post dollar ero, but it 572 00:34:10,160 --> 00:34:11,239 Speaker 1: doesn't really amount to much. 573 00:34:12,239 --> 00:34:14,960 Speaker 3: You're right, A lot of people for decades since the 574 00:34:15,000 --> 00:34:18,080 Speaker 3: Bretonwoods Agreement in the nineteen forties, have been wondering when 575 00:34:18,280 --> 00:34:21,359 Speaker 3: is the dollar's hegemony going to end? Where who's going 576 00:34:21,400 --> 00:34:24,799 Speaker 3: to be the one to take over? Is it gonna 577 00:34:24,800 --> 00:34:28,560 Speaker 3: be the Japanese yen? When the Euro came on the landscape, 578 00:34:28,760 --> 00:34:30,840 Speaker 3: Oh maybe the Euro will take over the dollar, and 579 00:34:30,880 --> 00:34:34,880 Speaker 3: no one has really done that. What's different now is Trump. 580 00:34:35,160 --> 00:34:38,200 Speaker 3: He came onto the scene. He disrupted so many of 581 00:34:38,239 --> 00:34:42,439 Speaker 3: our long held economic assumptions to the point where we've 582 00:34:42,440 --> 00:34:45,280 Speaker 3: got Biden and his first Date of the Union speech, 583 00:34:45,880 --> 00:34:49,920 Speaker 3: give it a different delivery, emphasize different words, capitalize different letters, 584 00:34:49,960 --> 00:34:51,960 Speaker 3: and it could have been something that Trump said because 585 00:34:52,000 --> 00:34:55,239 Speaker 3: Biden was talking a lot about buy America and now 586 00:34:55,280 --> 00:34:58,080 Speaker 3: we hear Janet Allen talking about friend shoring. All of 587 00:34:58,120 --> 00:35:02,320 Speaker 3: this to me sounds a lot populism and make America 588 00:35:02,360 --> 00:35:06,799 Speaker 3: great in America first. And so we are seeing that 589 00:35:07,080 --> 00:35:13,000 Speaker 3: Trump's disruption continued. He shifted the trajectory. You know, now, 590 00:35:13,160 --> 00:35:16,640 Speaker 3: let's get really wonky. The US Treasure Department twice a 591 00:35:16,760 --> 00:35:20,600 Speaker 3: year releases a currency policy report, and when I was 592 00:35:20,600 --> 00:35:23,319 Speaker 3: covering Treasury, I loved this report. I even sprung it 593 00:35:23,400 --> 00:35:26,800 Speaker 3: loose once ahead of schedule, and you know, even civil 594 00:35:26,800 --> 00:35:28,799 Speaker 3: servants were wondering, how on earth it's to like I 595 00:35:28,800 --> 00:35:31,600 Speaker 3: get a hold of this report because everyone to know. 596 00:35:31,680 --> 00:35:34,120 Speaker 3: What everyone wanted to know, is the US going to 597 00:35:34,200 --> 00:35:37,239 Speaker 3: designate China a currency manipulator because they were the most 598 00:35:37,280 --> 00:35:42,520 Speaker 3: obvious contender for that tag. And what we've seen is 599 00:35:42,560 --> 00:35:46,440 Speaker 3: that Trump has brought action behind his words and he 600 00:35:46,520 --> 00:35:51,800 Speaker 3: has shifted the debate. So now if the US wanted 601 00:35:51,840 --> 00:35:55,600 Speaker 3: to get a bunch of countries together to manipulate the dollar, 602 00:35:55,760 --> 00:35:58,320 Speaker 3: it's a totally different ballgame. For one thing, currency markets 603 00:35:58,360 --> 00:36:01,600 Speaker 3: are just too big to be able to allow a 604 00:36:01,640 --> 00:36:05,440 Speaker 3: couple of governments to influence it. And then who's going 605 00:36:05,480 --> 00:36:07,440 Speaker 3: to join the US in that The US does not 606 00:36:07,680 --> 00:36:10,600 Speaker 3: have the same standing that it did ten years ago 607 00:36:11,000 --> 00:36:13,600 Speaker 3: or forty years ago when the Plaza a cord happened. 608 00:36:13,800 --> 00:36:16,160 Speaker 3: Now we're in twenty twenty four. You know, in twenty 609 00:36:16,200 --> 00:36:18,680 Speaker 3: eighteen and nineteen, there's a deep chapter in the book 610 00:36:18,680 --> 00:36:22,600 Speaker 3: on this when Trump actually talked about intervening in the dollar, 611 00:36:22,880 --> 00:36:25,600 Speaker 3: which would have been a huge deal. And Larry Kudlow, 612 00:36:26,160 --> 00:36:27,520 Speaker 3: you know, he's sitting on the other side of the 613 00:36:27,600 --> 00:36:31,240 Speaker 3: resolute desk inside the Oval Office said to Trump, who's 614 00:36:31,280 --> 00:36:33,399 Speaker 3: going to join us? No, ally is going to want 615 00:36:33,400 --> 00:36:34,160 Speaker 3: to work with us on this. 616 00:36:34,640 --> 00:36:37,200 Speaker 2: So on a similar point, you know, there is this 617 00:36:37,400 --> 00:36:42,000 Speaker 2: vibrant debate now about whether or not the sanctions against 618 00:36:42,080 --> 00:36:46,120 Speaker 2: Russia have been effective, whether or not the US in 619 00:36:46,320 --> 00:36:51,320 Speaker 2: one way or another, overstepped the bounds when it decided 620 00:36:51,360 --> 00:36:54,359 Speaker 2: to cut off Russia from the banking system or even 621 00:36:54,440 --> 00:36:58,560 Speaker 2: going back to the Afghanistan reserves and things like that. 622 00:36:58,640 --> 00:37:02,920 Speaker 2: I know you're not covering the Treasury uh specifically now, 623 00:37:03,000 --> 00:37:06,080 Speaker 2: but presumably you're still talking to plenty of people in 624 00:37:06,200 --> 00:37:09,600 Speaker 2: DC where you're based. What are they saying now about 625 00:37:09,640 --> 00:37:10,560 Speaker 2: that decision. 626 00:37:11,160 --> 00:37:14,239 Speaker 3: The current administration has ended up in a bit of 627 00:37:14,239 --> 00:37:17,880 Speaker 3: a defensive posture when it comes to talking about the dollar. 628 00:37:19,120 --> 00:37:22,680 Speaker 3: The minute we started hearing Janet Yellen say there's no 629 00:37:22,760 --> 00:37:25,480 Speaker 3: threat against the dollar, and I'm going to give you 630 00:37:25,480 --> 00:37:28,080 Speaker 3: the extreme example, it's like when Nixon said I'm not 631 00:37:28,160 --> 00:37:30,440 Speaker 3: a crook, right, So it's like, oh, there's nothing to 632 00:37:30,480 --> 00:37:33,799 Speaker 3: see here. That's super extreme. But if she's talking about it, 633 00:37:33,920 --> 00:37:37,279 Speaker 3: if the Treasury Secretary and the Fed Fed chair Powell 634 00:37:37,360 --> 00:37:40,279 Speaker 3: earlier in March, testified and said to Congress there's no 635 00:37:40,360 --> 00:37:44,280 Speaker 3: threat to the dollar from russia sanctions. FED official Christopher 636 00:37:44,360 --> 00:37:48,320 Speaker 3: Waller did a speech dedicated to the dollar's role in 637 00:37:48,360 --> 00:37:50,680 Speaker 3: the global financial system and what its outlook could be, 638 00:37:50,719 --> 00:37:54,000 Speaker 3: and he also said Russia's sanctions are not affecting the dollar. 639 00:37:54,120 --> 00:37:56,000 Speaker 3: So it's kind of like, well, if you're saying it, 640 00:37:56,040 --> 00:37:59,120 Speaker 3: that means you're studying it. That means you thought it 641 00:37:59,160 --> 00:38:02,520 Speaker 3: was worth looking in, So maybe there's something there. At 642 00:38:02,520 --> 00:38:04,839 Speaker 3: the same time, we have a lot of countries who 643 00:38:04,880 --> 00:38:08,280 Speaker 3: are wondering, like, oh, are we too dependent on the dollar? 644 00:38:08,400 --> 00:38:11,680 Speaker 3: Because if they cut off Russia, a G twenty country 645 00:38:12,400 --> 00:38:15,520 Speaker 3: that in twenty twenty two was the world's eleventh largest economy, 646 00:38:16,080 --> 00:38:19,160 Speaker 3: so closely knitted with Europe, and they cut them off, 647 00:38:19,280 --> 00:38:21,919 Speaker 3: and it was pretty wild for the country. Right here 648 00:38:21,920 --> 00:38:25,399 Speaker 3: in the US, our gas prices at the pump went 649 00:38:25,520 --> 00:38:28,960 Speaker 3: up because of those sanctions, and at the time Americans 650 00:38:29,000 --> 00:38:31,520 Speaker 3: were willing to pay that price. But that's not going 651 00:38:31,600 --> 00:38:32,920 Speaker 3: to last forever. 652 00:38:33,600 --> 00:38:37,000 Speaker 1: By the way, I looked up the Swift headquarters after 653 00:38:37,000 --> 00:38:38,600 Speaker 1: you mentioned that it looks like a fort. It is 654 00:38:38,640 --> 00:38:43,399 Speaker 1: an incredible building. Actually, you were not exaggerating in fact, 655 00:38:43,400 --> 00:38:46,640 Speaker 1: it's far grander than what I expected. When Russia was 656 00:38:46,680 --> 00:38:49,640 Speaker 1: cut off from SWIFT in twenty twenty two, that was 657 00:38:49,680 --> 00:38:52,319 Speaker 1: just seen as like this, like watershed move the sort 658 00:38:52,320 --> 00:38:57,360 Speaker 1: of like the finance equivalent of a nuclear option. Do 659 00:38:57,400 --> 00:38:59,920 Speaker 1: you see, like when you talk about going back to 660 00:39:00,080 --> 00:39:03,400 Speaker 1: your answer just now, like a building up of new networks, 661 00:39:03,440 --> 00:39:07,120 Speaker 1: of alternative networks of moving money around. 662 00:39:07,480 --> 00:39:12,920 Speaker 3: When the Trump administration blew up the JCPOA, the agreement 663 00:39:13,520 --> 00:39:17,719 Speaker 3: around Iran's nuclear program and withdrew from it, we saw 664 00:39:17,800 --> 00:39:23,279 Speaker 3: European countries wondering, how can we continue to transact with 665 00:39:23,320 --> 00:39:26,080 Speaker 3: Iran and abide by our agreement with Iran and not 666 00:39:26,239 --> 00:39:31,000 Speaker 3: violate US sanctions? Because Trump then reimposed nine hundred and 667 00:39:31,040 --> 00:39:34,680 Speaker 3: seventy one or more economic sanctions on Iran, and so 668 00:39:34,760 --> 00:39:36,799 Speaker 3: Europe didn't want to be in a violation of those. Now, 669 00:39:36,800 --> 00:39:39,560 Speaker 3: the interesting thing that happened was that no European country 670 00:39:39,840 --> 00:39:43,280 Speaker 3: wanted to own that non SWIFT network and get blamed 671 00:39:43,320 --> 00:39:46,520 Speaker 3: by the US for creating that. The thing that I 672 00:39:46,560 --> 00:39:48,799 Speaker 3: would point to and the thing that actually, you know, 673 00:39:48,800 --> 00:39:51,160 Speaker 3: I end the book on a note of hope that 674 00:39:51,280 --> 00:39:54,640 Speaker 3: I think that the US, you know, as a democracy 675 00:39:54,880 --> 00:39:57,080 Speaker 3: is supposed to be self critical. We're in a very 676 00:39:57,239 --> 00:40:01,040 Speaker 3: self critical moment right now, and that extends from social problems, 677 00:40:01,080 --> 00:40:03,880 Speaker 3: political problems, economic finance, and like let's get long key 678 00:40:03,920 --> 00:40:07,840 Speaker 3: currency policy. So I think that we're going to emerge 679 00:40:07,880 --> 00:40:10,799 Speaker 3: from this hopefully stronger. Like that's my pie in the sky, 680 00:40:10,920 --> 00:40:14,400 Speaker 3: hopeful thinking. If you look at some of the countries 681 00:40:14,440 --> 00:40:18,080 Speaker 3: that are trying to create a network outside of the dollar, 682 00:40:18,239 --> 00:40:21,560 Speaker 3: it's like the bricks plus and a lot of them 683 00:40:21,840 --> 00:40:25,719 Speaker 3: are closed detocracies. They are not open democracies. The way 684 00:40:25,760 --> 00:40:28,920 Speaker 3: the US is now. Where I find hope is that 685 00:40:29,000 --> 00:40:32,799 Speaker 3: hopefully in a decade or two, we have shown that 686 00:40:32,840 --> 00:40:37,680 Speaker 3: we continue to be a country that has a stable democracy, 687 00:40:37,800 --> 00:40:39,799 Speaker 3: rule of law, free and fair elections, all those things, 688 00:40:39,840 --> 00:40:44,640 Speaker 3: independent agencies. But those other countries, you know, if they're 689 00:40:44,680 --> 00:40:48,800 Speaker 3: run by dictators, then that dictator, just like everyone else, 690 00:40:49,040 --> 00:40:51,360 Speaker 3: their life will come to a close. What's going to 691 00:40:51,400 --> 00:40:55,320 Speaker 3: happen at that moment? And when there's political instability, people 692 00:40:55,520 --> 00:40:58,120 Speaker 3: lead to the dollar the next time there's some kind 693 00:40:58,160 --> 00:41:01,080 Speaker 3: of global crisis. If every one runs to the dollar, 694 00:41:01,800 --> 00:41:03,880 Speaker 3: I think you can put a big period on that question. 695 00:41:04,800 --> 00:41:07,760 Speaker 3: Is dedollarization happening? Because we are still the safe haven. 696 00:41:08,239 --> 00:41:11,040 Speaker 3: And so then what's going to happen if Putin or 697 00:41:11,200 --> 00:41:13,520 Speaker 3: Cheson Paying, or some of these other countries lose their 698 00:41:13,560 --> 00:41:17,279 Speaker 3: dictators or their authoritarian leaders. There's a power vacuum, and 699 00:41:17,320 --> 00:41:19,560 Speaker 3: there's a power grab, and there's instability. They don't have 700 00:41:19,640 --> 00:41:22,960 Speaker 3: time to deal with trying to become a reserve asset 701 00:41:23,080 --> 00:41:26,440 Speaker 3: or trying to outskirt or outrun the world's reserve asset. 702 00:41:26,480 --> 00:41:28,600 Speaker 3: By creating this network, they're going to be dealing with 703 00:41:28,640 --> 00:41:29,719 Speaker 3: their inside problems. 704 00:41:30,080 --> 00:41:33,239 Speaker 1: Sleia Mosen, author of the new book Paper Soldiers, How 705 00:41:33,239 --> 00:41:36,799 Speaker 1: the Weaponization of the Dollar Change the World Order. Thank 706 00:41:36,840 --> 00:41:39,960 Speaker 1: you so much for coming on odd Lots and congratulations 707 00:41:39,960 --> 00:41:40,359 Speaker 1: on the book. 708 00:41:40,640 --> 00:41:42,439 Speaker 3: Thanks so much. I was an honored adjoin. 709 00:41:52,480 --> 00:41:57,040 Speaker 1: TSEA. I really like Sleia's perspective that dollar strength is 710 00:41:57,080 --> 00:42:00,719 Speaker 1: sort of downstream from political stability, and I think that's 711 00:42:00,760 --> 00:42:04,640 Speaker 1: a really important element of all of this, which is 712 00:42:04,680 --> 00:42:07,400 Speaker 1: that you know, we look at measures get to GDP 713 00:42:07,600 --> 00:42:10,919 Speaker 1: and inflation, et cetera. But the real thing that sort 714 00:42:10,920 --> 00:42:14,080 Speaker 1: of undergirds at all and that sort of needs to 715 00:42:14,120 --> 00:42:17,799 Speaker 1: be maintained, is just this assumption that the US is 716 00:42:17,840 --> 00:42:21,200 Speaker 1: a stable country at the rule of law, and probably 717 00:42:21,200 --> 00:42:23,239 Speaker 1: the most stable with the strongest rule of law in 718 00:42:23,239 --> 00:42:23,600 Speaker 1: the world. 719 00:42:23,760 --> 00:42:27,680 Speaker 2: Now absolutely, I really liked her final answers, sort of 720 00:42:27,760 --> 00:42:31,520 Speaker 2: linking a lot of the network effects and the politics together. 721 00:42:31,680 --> 00:42:36,520 Speaker 2: And I think Charlie Kindelberger made this point ages ago 722 00:42:36,640 --> 00:42:41,440 Speaker 2: that like, the reason the dollar reigns supreme, the reason 723 00:42:41,480 --> 00:42:44,960 Speaker 2: there is this dollar hegemony like isn't necessarily because the 724 00:42:45,080 --> 00:42:48,360 Speaker 2: US is imposing it on the rest of the world 725 00:42:48,800 --> 00:42:52,720 Speaker 2: or because there is this unipolar world. Instead, it's because, 726 00:42:52,760 --> 00:42:56,640 Speaker 2: like there has been decades of sort of consensus building 727 00:42:56,760 --> 00:43:00,760 Speaker 2: and network building around this. And so the question is, Okay, 728 00:43:00,880 --> 00:43:05,360 Speaker 2: if people are uncomfortable with the dollar because they're worried 729 00:43:05,400 --> 00:43:09,400 Speaker 2: that the US can over exert its control of the system, 730 00:43:09,560 --> 00:43:12,600 Speaker 2: such as what we saw with Russia getting kicked out 731 00:43:12,600 --> 00:43:15,960 Speaker 2: of the banking system or Afghanistan reserves getting seized and 732 00:43:16,000 --> 00:43:18,319 Speaker 2: that sort of thing, then they need to build up 733 00:43:18,400 --> 00:43:21,480 Speaker 2: an alternative, which means they have to build a network. 734 00:43:21,760 --> 00:43:25,160 Speaker 2: And frankly, as Sleia was sort of intimating towards the end, 735 00:43:25,440 --> 00:43:28,719 Speaker 2: like dictators, they might not they might be busy, they 736 00:43:28,760 --> 00:43:30,400 Speaker 2: might be too busy to build up a network, but 737 00:43:30,440 --> 00:43:32,480 Speaker 2: also they might not be that good at it. 738 00:43:32,800 --> 00:43:34,520 Speaker 1: Or yeah, I thought that was a great answer, or 739 00:43:34,560 --> 00:43:37,719 Speaker 1: they might that no one could just have the confidence 740 00:43:37,880 --> 00:43:43,800 Speaker 1: of sort of an internal policy stability after that, Leader Leaves, 741 00:43:44,080 --> 00:43:46,760 Speaker 1: I thought it was a really fascinating point. Also, until 742 00:43:46,800 --> 00:43:50,640 Speaker 1: her book, I hadn't really appreciated the degree to which 743 00:43:50,760 --> 00:43:55,200 Speaker 1: nine to eleven specifically was a turning point for our 744 00:43:56,880 --> 00:44:02,680 Speaker 1: our aggressiveness maybe or our ability to essentially monitor global 745 00:44:02,719 --> 00:44:03,440 Speaker 1: financial flows. 746 00:44:03,560 --> 00:44:07,480 Speaker 2: Yeah, it's such a it's taken for granted so much now, 747 00:44:07,520 --> 00:44:09,600 Speaker 2: and it is such a given that it's kind of 748 00:44:09,640 --> 00:44:12,680 Speaker 2: weird to hark back to a time. I mean, I 749 00:44:12,680 --> 00:44:15,120 Speaker 2: guess it would have just been the year two thousand, 750 00:44:15,239 --> 00:44:19,480 Speaker 2: so twenty four years ago, when the US wasn't using 751 00:44:19,760 --> 00:44:25,120 Speaker 2: something like Swift to aggressively monitor terrorist financing. It is 752 00:44:25,200 --> 00:44:27,839 Speaker 2: crazy to think about how much I mean, I guess 753 00:44:27,880 --> 00:44:29,680 Speaker 2: it's a little bit obvious that nine to eleven was 754 00:44:29,680 --> 00:44:33,560 Speaker 2: a watershed moment. But also in terms of the financial system. 755 00:44:33,440 --> 00:44:37,560 Speaker 1: Yeah, totally't. I hadn't really appreciated that all. And also 756 00:44:37,760 --> 00:44:41,200 Speaker 1: just this idea too of like there was a point 757 00:44:41,239 --> 00:44:43,919 Speaker 1: and maybe we can never go back to that where 758 00:44:44,000 --> 00:44:47,959 Speaker 1: it's like you actually have leaders coming together and coming 759 00:44:48,000 --> 00:44:50,840 Speaker 1: to some consensus, not just in terms of like the 760 00:44:50,880 --> 00:44:53,920 Speaker 1: sort of weaponization of the dollar or the ability to 761 00:44:54,000 --> 00:44:57,400 Speaker 1: track dollar, but also coordination on price, as in the 762 00:44:57,440 --> 00:45:01,120 Speaker 1: case of the Plaza Accord. All of these things that 763 00:45:01,160 --> 00:45:06,240 Speaker 1: are like so rapidly changed, so dramatically different, the current 764 00:45:06,280 --> 00:45:10,879 Speaker 1: system feels simultaneously obvious and also very new. 765 00:45:11,120 --> 00:45:15,600 Speaker 2: Yeah, yes, it's like inevitable and also kind of mind blowing. 766 00:45:15,719 --> 00:45:19,000 Speaker 2: Yeah it's happened at all. I'm sure we could go 767 00:45:19,040 --> 00:45:21,400 Speaker 2: on for longer, and I'm sure we will have many, 768 00:45:21,400 --> 00:45:24,080 Speaker 2: many more episodes on exactly this topic, but for now, 769 00:45:24,080 --> 00:45:24,799 Speaker 2: shall we leave it there? 770 00:45:24,880 --> 00:45:25,600 Speaker 1: Let's leave it there. 771 00:45:25,800 --> 00:45:28,680 Speaker 2: This has been another episode of the All Thoughts Podcast. 772 00:45:28,719 --> 00:45:31,760 Speaker 2: I'm Tracy Alloway. You can follow me at Tracy Alloway. 773 00:45:31,880 --> 00:45:34,719 Speaker 1: And I'm Joe Wisenthal. You can follow me at the Stalwart. 774 00:45:34,960 --> 00:45:38,120 Speaker 1: Follow our guests Seleia Mosen, She's at Seleia Mosen and 775 00:45:38,200 --> 00:45:41,000 Speaker 1: check out her new book Paper Soldiers, How the Weaponization 776 00:45:41,080 --> 00:45:44,560 Speaker 1: of the Dollar Changed the World Order. Follow our producers 777 00:45:44,640 --> 00:45:48,160 Speaker 1: Carmen Rodriguez at Carmen Arman, dash Ol Bennett at Dashbot 778 00:45:48,160 --> 00:45:50,719 Speaker 1: and kel Brooks at Kilbrooks. And thank you to our 779 00:45:50,760 --> 00:45:54,120 Speaker 1: producer Moses On. For more Oddlots content, go to Bloomberg 780 00:45:54,160 --> 00:45:57,040 Speaker 1: dot com slash odd Lots where we have transcripts, a blog, 781 00:45:57,120 --> 00:46:00,560 Speaker 1: and a newsletter. And check out the discord discord gg 782 00:46:00,640 --> 00:46:02,759 Speaker 1: slash odd lots where you can chat about all of 783 00:46:02,800 --> 00:46:06,040 Speaker 1: these topics twenty four to seven with fellow listeners. 784 00:46:06,280 --> 00:46:08,440 Speaker 2: And if you enjoy odd Lots, if you like it 785 00:46:08,480 --> 00:46:12,080 Speaker 2: when we discuss the history of US dollar dominance, then 786 00:46:12,160 --> 00:46:15,800 Speaker 2: please leave us a positive review on your favorite podcast platform. 787 00:46:15,920 --> 00:46:18,360 Speaker 2: And don't forget if you are a Bloomberg subscriber, you 788 00:46:18,400 --> 00:46:21,640 Speaker 2: can listen to all of our episodes absolutely ad free. 789 00:46:21,719 --> 00:46:24,440 Speaker 2: All you need to do is connect your Bloomberg subscription 790 00:46:24,800 --> 00:46:44,120 Speaker 2: to Apple Podcasts. Thanks for listening.