WEBVTT - Bloomberg Surveillance TV: April 9th, 2026 0:00:02.360 --> 0:00:06.720 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwitz and Amerie Hordern. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.280 --> 0:00:33.919 anywhere else you listen, and as always on the Bloomberg 0:00:34.000 --> 0:00:35.840 Terminal and the Bloomberg Business app. 0:00:36.440 --> 0:00:38.879 Here's the latest crude climbing ast. Hey Ron says some 0:00:39.040 --> 0:00:42.080 terms of the ceasefire have been violated. The energy shock 0:00:42.280 --> 0:00:45.280 rippling through the global economy. Joining us now, I'm so 0:00:45.360 --> 0:00:49.400 pleased to say, is OECD chief economist Stefano Scarpetta. Stefano, 0:00:49.479 --> 0:00:52.440 thank you so much forgetting for making some time. How 0:00:52.520 --> 0:00:55.360 much are you looking at a dampening effect on the 0:00:55.400 --> 0:00:57.840 global economy as a result of what's going on in 0:00:57.840 --> 0:00:58.480 the Middle East? 0:01:00.000 --> 0:01:01.840 Of course that there is a lot of uncertainty. We 0:01:02.040 --> 0:01:05.440 just publish our interim Economic Outlook on the twenty sixth 0:01:05.520 --> 0:01:09.759 of November, and basically if on the twenty eighth of February, 0:01:09.880 --> 0:01:13.560 before the war in Iran, would have actually rised upward 0:01:13.800 --> 0:01:17.520 the projection for global GDP growth for twenty six by 0:01:17.600 --> 0:01:20.480 zero point three percentage point. All of that was shaped 0:01:20.520 --> 0:01:24.640 off because of the impact of the war and the 0:01:24.680 --> 0:01:28.000 crisis in the Middle East, and the increase of course 0:01:28.040 --> 0:01:32.440 in energy prices. Now, the recent announcement of the cease fire, 0:01:32.760 --> 0:01:35.880 if it is implemented, if this means of course reopen 0:01:35.959 --> 0:01:38.880 the Strait of Ormont's, and we have seen already in 0:01:38.920 --> 0:01:41.240 the impact on the price of oil, would have sort 0:01:41.280 --> 0:01:44.240 of a sort of effect on the economy. And we 0:01:44.280 --> 0:01:46.920 see already a reduction in the price of oil. But 0:01:47.040 --> 0:01:48.920 of course a lot of ifs here because these have 0:01:49.040 --> 0:01:51.400 to be maintained, the cease fire and we have to 0:01:51.440 --> 0:01:54.360 see exactly vessels getting through the Strait of Ormontes. So 0:01:54.920 --> 0:01:57.680 unfortunately we had to revise a basically our projection by 0:01:57.720 --> 0:01:59.560 all the increase that would have happened if it was 0:01:59.560 --> 0:02:01.120 not because of the world how. 0:02:01.080 --> 0:02:06.320 Much are Europe and Asian nations dispunfortunately affected by the 0:02:06.320 --> 0:02:09.360 fact that oil prices are likely to remain significantly higher, 0:02:09.440 --> 0:02:12.079 even if there is some sort of conclusion at least 0:02:12.080 --> 0:02:16.400 in the north in the near term to this conflict. No. 0:02:16.520 --> 0:02:19.600 Indeed, of course Asia in general and Europe are more 0:02:19.639 --> 0:02:22.160 affected by the highking price of oil and gas, in 0:02:22.200 --> 0:02:25.280 particular the Asian countries, but I think even within the 0:02:25.320 --> 0:02:28.360 Asia region there are significant differences because two countries that 0:02:28.360 --> 0:02:31.040 depend heavily on oil getting through the Strait of Ormos, 0:02:31.080 --> 0:02:34.839 like Korea and Japan, they have large reserves, while other 0:02:34.919 --> 0:02:39.120 countries in the region Indonesia Thailand have much smaller reserves, 0:02:39.120 --> 0:02:41.320 so they are more exposed of the hiking price than 0:02:41.440 --> 0:02:44.519 the other two countries. Europe forces also dependent on gas 0:02:44.520 --> 0:02:46.720 coming from the Strait of Wormos, so is of course 0:02:47.000 --> 0:02:50.840 more exposed. What matters really is the duration of these 0:02:51.000 --> 0:02:54.680 increase in oil prices and gas prices, and of course 0:02:54.840 --> 0:02:57.440 whether or not they have been damaged to the infrastructure 0:02:57.520 --> 0:03:00.360 in the region, in Iran and other neighboring countries, because 0:03:00.360 --> 0:03:02.880 of course repairing the damages may take long, and this 0:03:03.040 --> 0:03:05.959 may actually have an impact on the profile of oil 0:03:06.040 --> 0:03:07.720 and gas prices going forward. 0:03:07.760 --> 0:03:09.920 When a consideration, when do you know you can no 0:03:10.000 --> 0:03:12.120 longer just look through this and actually there's going to 0:03:12.160 --> 0:03:15.040 be structural changes and permanent shifts. 0:03:15.840 --> 0:03:18.079 Well that's a good question, depends again on for how 0:03:18.120 --> 0:03:20.920 long the price will stay high. We have seen short 0:03:21.000 --> 0:03:24.440 term responses in many countries of the UECD, including the 0:03:24.520 --> 0:03:27.480 support to consumer and to firms to face this high 0:03:27.919 --> 0:03:30.560 energy price. We have seen that in Europe basically in 0:03:30.600 --> 0:03:33.200 most of the UCD countries, the early measures that have 0:03:33.280 --> 0:03:36.680 been introduced has been way to basically reduce the increasing 0:03:36.760 --> 0:03:39.800 price at the gas station and for the companies. But 0:03:39.880 --> 0:03:42.120 of course these are very expensive, so they cannot be 0:03:42.160 --> 0:03:45.240 prolonged for too long, and our recommendation is to try 0:03:45.280 --> 0:03:47.920 to move as quickly as possible to more target measure. 0:03:48.280 --> 0:03:51.280 It actually provides support to consumers most affected by the 0:03:51.320 --> 0:03:54.680 increasing energy prices and actually to the firms that depend 0:03:54.760 --> 0:03:57.880 more by energy. So this is I think is our recommendation. 0:03:58.480 --> 0:04:00.480 Then of course there might be some ration, and we 0:04:00.520 --> 0:04:02.880 have learned through the COVID crisis that does some telework 0:04:02.960 --> 0:04:06.920 actually may reduce sort of the consumption of energy. And 0:04:07.000 --> 0:04:09.440 I think these are also implemented by a number of countries. 0:04:09.440 --> 0:04:12.240 Indeed, well, do remember countries have the fiscal capacity to 0:04:12.280 --> 0:04:12.720 fight us. 0:04:13.960 --> 0:04:16.200 That's a very good question, because of course the physical 0:04:16.279 --> 0:04:19.080 capacity is limited, and that's one more reason why we 0:04:19.120 --> 0:04:23.120 are recommended to move into target measure and actually temporary measures, 0:04:23.160 --> 0:04:25.799 because of course what happened in the twenty two energy 0:04:25.839 --> 0:04:28.920 crisis was some of the prices support measures were kept 0:04:28.960 --> 0:04:31.839 for too long and this led of course to significant 0:04:31.839 --> 0:04:34.960 public spending in this area. So there is a need 0:04:34.960 --> 0:04:37.600 to targeting, and there is also a need to already 0:04:38.120 --> 0:04:41.880 introduce sunset closest whereby if the price go down then 0:04:41.920 --> 0:04:43.400 this measure will be removed quickly. 0:04:44.240 --> 0:04:47.720 Stay with us. More PLEMPAC surveillance coming up after this. 0:04:57.000 --> 0:04:59.520 Here's a view from Wall Street this morning. Bob Michael 0:04:59.520 --> 0:05:02.600 of JP Morgan Azset Management, writing, the market is starting 0:05:02.600 --> 0:05:06.080 to unwind the tail risk associated with a global economy 0:05:06.080 --> 0:05:08.040 that would have to live with oil above one hundred 0:05:08.080 --> 0:05:11.320 dollars for a protracted period. Bob joins is now in 0:05:11.360 --> 0:05:13.320 our New York studios, which is a wonderful thing. Bob, 0:05:13.360 --> 0:05:14.279 great to see you. 0:05:14.160 --> 0:05:14.880 Happy to be here. 0:05:14.960 --> 0:05:17.600 Do you think that it's appropriate to remove some of 0:05:17.640 --> 0:05:21.599 the wagers on oil being below one hundred dollars a 0:05:21.600 --> 0:05:23.280 barrel for a protracted period of time. 0:05:24.520 --> 0:05:28.239 Well, that's a complicated question. I think the best answer 0:05:28.360 --> 0:05:31.400 is we can live with oil one hundred dollars a 0:05:31.440 --> 0:05:35.520 barrel for a while. I think what the administration has 0:05:35.560 --> 0:05:38.560 done a good job of doing to us over the 0:05:38.839 --> 0:05:42.840 last year plus is to train us and we look 0:05:43.000 --> 0:05:46.479 for signs of when is the rhetoric at a high, 0:05:46.720 --> 0:05:49.719 but they're starting to look for an exit and we're 0:05:49.760 --> 0:05:52.040 starting to see that now, and I think that's why 0:05:52.080 --> 0:05:55.880 the markets are so optimistic. If we go back to Tariff, 0:05:56.160 --> 0:05:59.960 if we think about Greenland, if we think about Venezuela. 0:05:59.680 --> 0:06:03.039 At some point the rhetoric is very high, but the 0:06:03.080 --> 0:06:07.120 administration finds an off ramp and exits. And I challenge 0:06:07.120 --> 0:06:09.400 you to tell me that all three of those things 0:06:09.400 --> 0:06:12.000 have been buttoned up. They're all still going on in 0:06:12.040 --> 0:06:14.600 the background, and it feels like we're on the same 0:06:14.680 --> 0:06:17.920 kind of off ramp here. That's pretty good for the markets. 0:06:18.000 --> 0:06:20.680 So yesterday we saw people have faith in the idea 0:06:20.839 --> 0:06:23.520 that the escalation in rhetoric at least had peaked and 0:06:23.560 --> 0:06:24.680 we at least are coming. 0:06:24.600 --> 0:06:25.280 To that off ramp. 0:06:25.320 --> 0:06:29.359 It's almost exactly following the timeframe a Liberation Day last year. 0:06:29.480 --> 0:06:33.000 I'm just wondering whether you think it's viable in an 0:06:33.000 --> 0:06:37.440 ongoing fashion, even during some of the question marks around 0:06:37.440 --> 0:06:38.120 how durable. 0:06:38.120 --> 0:06:39.200 The ceasefire really is. 0:06:39.920 --> 0:06:44.400 So we do. Because there's been significant repricing across markets, 0:06:44.680 --> 0:06:48.240 especially in the bond market, investors are caught a little 0:06:48.279 --> 0:06:51.880 bit offside. For an actual off ramp, I don't know 0:06:52.000 --> 0:06:55.280 that you need a cease fire for the entire two 0:06:55.360 --> 0:06:59.000 week period. You probably need one for the back half 0:06:59.160 --> 0:07:02.800 of the next four eight hours, enough time for everyone 0:07:02.920 --> 0:07:07.080 to meet in Islamaba and to iron out details of 0:07:07.120 --> 0:07:09.720 what an off ramp could look like. And then I 0:07:09.760 --> 0:07:12.160 think over the next month, we're going to see this 0:07:12.360 --> 0:07:15.960 in the distant rear view mirror, even if oil stays 0:07:15.960 --> 0:07:18.800 at one hundred dollars a barrel, because it's going to 0:07:18.880 --> 0:07:22.320 take time to get the fiscal oil to where it's needed. 0:07:22.400 --> 0:07:25.640 So you think these Islamban talks are real incredible. 0:07:25.760 --> 0:07:29.080 I think they are. I think they're essential for the administration. 0:07:29.640 --> 0:07:32.800 If they're genuinely looking for an off rep it sounds 0:07:32.880 --> 0:07:35.080 like for the last three weeks they've been looking for that. 0:07:35.520 --> 0:07:39.400 I feel Vance is on his way there, the Israelis 0:07:39.440 --> 0:07:41.680 will be there and something will come out of them. 0:07:41.760 --> 0:07:44.880 But when it comes to this gap between the Iranians 0:07:44.920 --> 0:07:47.400 and the United States, they don't agree on anything, right. 0:07:47.240 --> 0:07:53.520 Now right, everyone, It's classic bargaining. You want this, somebody 0:07:53.520 --> 0:07:55.560 else wants that. You'll find a way to meet in 0:07:55.600 --> 0:07:58.480 the middle. There are lots of things that the US 0:07:58.520 --> 0:08:02.840 can do. Yesterday I listened to General Kine. He declared victory. 0:08:02.960 --> 0:08:06.400 You listen to events, he declared victory. They've already started 0:08:06.440 --> 0:08:11.320 the process of saying, look, the primary mission was to 0:08:11.600 --> 0:08:15.240 mitigate a nuclear threat. We've done that. We'd like the 0:08:15.280 --> 0:08:17.400 straight open We'll see if we can get to that. 0:08:17.840 --> 0:08:21.040 If not, we supply enough of our own oil. We'll 0:08:21.120 --> 0:08:21.680 just move on. 0:08:22.000 --> 0:08:24.320 So with fixed income, what does by the dip mean? 0:08:24.560 --> 0:08:27.480 Because we've seen that certainly in credit, with investor grade 0:08:27.480 --> 0:08:29.960 credit spreads moving down below at one point where they 0:08:30.000 --> 0:08:33.800 were right before the war took place. We just heard 0:08:34.200 --> 0:08:36.920 earlier this morning Keith Lerner talking about how he went 0:08:36.960 --> 0:08:39.960 wholesale into yal bonds because he sees opportunity. Now. Is 0:08:39.960 --> 0:08:41.800 it more the credit risk side, or is it more 0:08:41.800 --> 0:08:45.800 the government bond side. With expectations and inflation will ultimately 0:08:46.040 --> 0:08:47.520 continue on its downward path. 0:08:48.600 --> 0:08:53.800 It's everything. It's just an acceptance that investors are under 0:08:53.840 --> 0:08:57.880 allocated to fixed income. Equities have bubbled higher for them 0:08:58.000 --> 0:09:02.240 over the years, They've allocated a lot to alternatives. They're 0:09:02.280 --> 0:09:05.440 looking for opportunities to get into fixed income. I've been 0:09:05.480 --> 0:09:08.120 in Houston for the last couple of days meeting with clients. 0:09:08.480 --> 0:09:11.439 They don't want to miss this backup in yields. They 0:09:11.480 --> 0:09:14.360 want to get into the bond market. It starts with 0:09:14.520 --> 0:09:17.360 where is fair value? I think the FED is in 0:09:17.480 --> 0:09:20.920 hibernation mode. I like that. I like a three and 0:09:21.000 --> 0:09:25.560 five eighths percent FED funds rate. It's solid. It leaves 0:09:25.559 --> 0:09:28.120 it at about zero on a real basis. If you 0:09:28.200 --> 0:09:32.040 deflate it by headline inflation, that's okay. It also leaves 0:09:32.120 --> 0:09:34.680 yield in the bond market. The two years should be 0:09:34.760 --> 0:09:38.640 within touching distance of that. It's probably about ten, fifteen 0:09:38.600 --> 0:09:41.360 to twenty basis points too high. And the ten year, 0:09:41.400 --> 0:09:44.040 we think with a three and five eighths percent FED 0:09:44.080 --> 0:09:47.600 funds rate either side of four percent, you're a little 0:09:47.600 --> 0:09:50.319 bit over four and a quarter. That looks okay, and 0:09:50.440 --> 0:09:53.840 Keith is right. Credit spreads are attractive. All the problem 0:09:53.880 --> 0:09:57.760 credits had financed themselves in the private credit market is 0:09:57.800 --> 0:10:00.160 that a separate problem. Is that all part of of 0:10:00.160 --> 0:10:04.000 the same credit problem we'll see over the next eighteen months. 0:10:04.120 --> 0:10:07.760 But for now, the bond market looks pretty good. It 0:10:08.160 --> 0:10:12.240 held in phenomenally well over the last six weeks, and 0:10:12.400 --> 0:10:16.360 investors don't want to miss this opportunity the way they 0:10:16.400 --> 0:10:19.760 did last year with Liberation Day. 0:10:19.800 --> 0:10:20.720 Well neither do companies. 0:10:20.800 --> 0:10:23.120 Right, we're seeing a rash of bond deals coming to market, 0:10:23.160 --> 0:10:25.200 a lot of issue ince. We saw the most issuance 0:10:25.240 --> 0:10:27.760 ever globally for corporates in March, and now it seems 0:10:27.800 --> 0:10:29.200 like anytime there's a window. 0:10:29.000 --> 0:10:30.680 And hasn't it gone well? 0:10:30.960 --> 0:10:33.120 It has gone incredibly well, and all of the dead 0:10:33.160 --> 0:10:35.080 sales have been oversubscribed. 0:10:34.400 --> 0:10:37.640 To Yes, I tell you, well, it's also there's money there. 0:10:38.040 --> 0:10:41.600 It tells you that we in the bond market look 0:10:41.640 --> 0:10:45.959 at corporate earnings, we look at profitability, we look at leverage, 0:10:46.120 --> 0:10:46.880 and we're. 0:10:46.800 --> 0:10:48.360 Okay, given that. 0:10:48.800 --> 0:10:52.080 Isn't there a dissonance between the belief that inflation will 0:10:52.080 --> 0:10:53.079 go down over time? 0:10:53.720 --> 0:10:55.120 Will also seeing. 0:10:55.200 --> 0:10:58.079 The animal spirits come back to markets with so much 0:10:58.120 --> 0:11:00.720 money still available and people looking or even one hundred 0:11:00.720 --> 0:11:03.640 dollars a barrel in terms of oil prices, saying consumers 0:11:03.640 --> 0:11:06.440 can withstand that. Listening to Ed Bashion over at Delta 0:11:06.880 --> 0:11:10.400 're optimistic. We're seeing customers absorb the higher prices. I mean, 0:11:10.440 --> 0:11:12.920 can't you bake in higher inflation? Doesn't have to be 0:11:12.960 --> 0:11:16.480 one or the other animal spirits or potentially a bid 0:11:16.520 --> 0:11:17.080 into duration. 0:11:17.559 --> 0:11:21.520 Well, I think we've crossed that divide. I think we 0:11:21.640 --> 0:11:25.640 in the markets accept that a two percent inflation target 0:11:25.679 --> 0:11:28.760 is a myth. We haven't been there in half a decade. 0:11:29.320 --> 0:11:32.679 It didn't feel comfortable when we try to get there, 0:11:32.720 --> 0:11:35.080 and we were printing one point seven to one point eight. 0:11:35.440 --> 0:11:39.160 It's too low for an economy the size and complexity 0:11:39.320 --> 0:11:42.760 of the US two and a half feels like the 0:11:42.840 --> 0:11:46.040 new two percent. And we're a little bit above that 0:11:46.920 --> 0:11:51.680 because we've got transitory inflation because of the energy shock 0:11:52.080 --> 0:11:55.040 that too may or may not fade. But I look 0:11:55.080 --> 0:11:58.440 at our analysis, I read Mike Faroli stuff a lot. 0:11:58.800 --> 0:12:02.560 Even with where energy is and the probabilities of this 0:12:02.679 --> 0:12:06.880 being extended, we've got inflation if you look at headline 0:12:06.880 --> 0:12:09.319 and core, between three and a half and three percent 0:12:09.440 --> 0:12:12.079 for this year, but we have real GDP at about 0:12:12.080 --> 0:12:15.080 two and a quarter percent. So what we're saying is 0:12:15.440 --> 0:12:20.360 this economy can absorb higher inflation than two percent, even 0:12:20.400 --> 0:12:24.000 inflation around three percent, And the FED probably doesn't do 0:12:24.120 --> 0:12:27.480 anything because they went into the last meeting still a 0:12:27.520 --> 0:12:30.880 little bit concerned about the labor market. Now they're probably 0:12:31.000 --> 0:12:34.079 more balanced, so they're going to sit on their heads. 0:12:34.320 --> 0:12:37.040 Stay with us. Mulblinbeg Savannan's coming. 0:12:36.840 --> 0:12:48.800 Up off to this. We think, thankfully at this point, 0:12:48.840 --> 0:12:51.440 I think have a ceasefire thanks to the leadership of 0:12:51.440 --> 0:12:54.600 the present United States. We have the Iranians promising to 0:12:54.640 --> 0:12:56.720 open the streets of four moves, and we have a 0:12:56.760 --> 0:12:59.920 negotiation that's supposed to start this weekend. That's the truth. 0:13:00.160 --> 0:13:02.000 I think it's a good first step. We're going to 0:13:02.000 --> 0:13:04.680 see if we can make more progress here in the 0:13:04.720 --> 0:13:07.560 day's to come. I'm optimistic that the Iranians are going 0:13:07.600 --> 0:13:09.840 to be smart, that they're going to negotiate in good faith. 0:13:10.040 --> 0:13:12.640 Here's the latest. Vice President Vance gearing up to lead 0:13:12.679 --> 0:13:15.599 direct talks with Iran on Saturday. With fighting in the 0:13:15.640 --> 0:13:19.480 Middle East threatening to derail an already fragile ceasefire, Former 0:13:19.520 --> 0:13:23.360 Deputy National Security Advisor Victoria Coats writing, the odds of 0:13:23.360 --> 0:13:26.800 Iran sticking for the full two weeks is pretty small 0:13:26.960 --> 0:13:27.680 in my book. 0:13:28.040 --> 0:13:28.760 Victoria joins us. 0:13:28.800 --> 0:13:30.560 Now, Victoria, thank you so much for being with us. 0:13:30.760 --> 0:13:33.880 So what are you gleaning so far from a pretty 0:13:33.960 --> 0:13:36.480 uneasy ceasefire, if you could even call it that, for 0:13:36.600 --> 0:13:39.679 twenty four hours, beset by attacks and a lot of 0:13:39.840 --> 0:13:41.280 arguments between both sides. 0:13:41.920 --> 0:13:44.760 Yes, this is a pretty dicey period. And this is 0:13:45.600 --> 0:13:48.000 standard for this kind of arrangement. If you think back 0:13:48.000 --> 0:13:52.040 to the Gaza War, the early ceasefires were extremely delicate. 0:13:52.080 --> 0:13:53.880 There was a lot of pushing at the edges by 0:13:53.920 --> 0:13:56.480 both sides, and it took a long time to get 0:13:56.559 --> 0:14:00.240 to a durable deal under President Trump last fall. So 0:14:00.440 --> 0:14:02.319 I think we're going to see a similar kind of 0:14:02.400 --> 0:14:05.640 jocking for position here. But the interesting thing here is 0:14:05.679 --> 0:14:09.000 that the Ranians really don't have any cards beside the 0:14:09.040 --> 0:14:10.920 Strait of Homoots, And one thing. 0:14:10.800 --> 0:14:13.920 I've noticed is that it's going to be a declining. 0:14:13.440 --> 0:14:16.720 Asset for them because the entire region is talking about 0:14:16.760 --> 0:14:21.040 ways going forward they can circumvent the strait. So Iran's 0:14:21.040 --> 0:14:22.760 going to try to play that card as hard as 0:14:22.760 --> 0:14:23.880 they can right now. 0:14:23.840 --> 0:14:25.440 Get as much as they can out of it. 0:14:25.600 --> 0:14:28.120 But I think their ability to do that going forward 0:14:28.200 --> 0:14:29.280 is going to be quite limited. 0:14:29.880 --> 0:14:33.080 Victoria when it comes to the strait being open as normal, 0:14:33.360 --> 0:14:37.120 but with these strings attached the Iranians basically making sure 0:14:37.160 --> 0:14:40.360 you have to have a payment, whether it's yuan or bitcoin. 0:14:40.400 --> 0:14:42.320 Would that be a success for the United States, Yes, 0:14:42.360 --> 0:14:45.200 there would be more of an uptick of vessels, but 0:14:45.720 --> 0:14:48.640 that means Aron fully controls this key waterway. 0:14:49.600 --> 0:14:51.760 Now, I think that's absolutely what we're going to be 0:14:51.800 --> 0:14:54.880 working on going forward. And what you're seeing the Iranians 0:14:54.960 --> 0:14:59.320 do is essentially a function like a mafia group. They're 0:14:59.320 --> 0:15:02.400 trying to shap down the rest of the world to 0:15:02.520 --> 0:15:05.360 get energy out of the Gulf. And so yes, they 0:15:05.360 --> 0:15:10.320 are demanding crypto payments, which is kind of comical, but 0:15:10.400 --> 0:15:12.680 as I said before, I think their ability to do 0:15:12.760 --> 0:15:15.200 that long term is not going to be there for them. 0:15:15.240 --> 0:15:18.000 And the other thing it shows us is that they 0:15:18.040 --> 0:15:21.920 are desperate for money at this point. They their economy 0:15:22.080 --> 0:15:25.400 is absolutely on the rocks, and they've shut down their 0:15:25.960 --> 0:15:30.040 internet for now thirty five thirty six days. So nobody's 0:15:30.080 --> 0:15:33.200 done that before, and I don't think anyone's really forecasted 0:15:33.280 --> 0:15:36.360 the kind of damage that that's done to that economy. 0:15:36.400 --> 0:15:38.640 And what happens when they open it back up. What 0:15:38.720 --> 0:15:41.040 are the Iranians going to do when suddenly, you know, 0:15:41.080 --> 0:15:43.800 the ATMs are full again, that kind of thing. It's 0:15:43.880 --> 0:15:46.480 really a very difficult situation for them. So I think 0:15:46.480 --> 0:15:49.200 they're thinking very short term right now. They're just thinking, 0:15:49.440 --> 0:15:51.400 how do we get cash out of the strait of 0:15:51.440 --> 0:15:53.440 hormones so we can survive another day. 0:15:53.600 --> 0:15:55.480 This is no leverage that they hold. How do you 0:15:55.480 --> 0:15:57.720 think they're going to use this at the negotiating table 0:15:57.800 --> 0:16:00.440 on Saturday? What would be acceptable to the States? 0:16:01.520 --> 0:16:03.920 Well, that's the thing is this is all they have. 0:16:04.760 --> 0:16:05.960 This is their leverage. 0:16:06.000 --> 0:16:09.960 Otherwise their ability to inflict term on the United States, 0:16:10.040 --> 0:16:13.200 their neighbors on Israel is getting more and more limited. 0:16:13.280 --> 0:16:15.760 That was really the point of Operation etpnic. 0:16:15.520 --> 0:16:18.880 Fury was degrade their ability to inflict that harm and 0:16:18.960 --> 0:16:22.920 also their ability to reconstitute it. And the Secretary of 0:16:22.960 --> 0:16:26.080 War and the Chairman of the Joint Chiefs yesterday laid 0:16:26.080 --> 0:16:29.200 out a very detailed case about how that ability to 0:16:29.240 --> 0:16:33.560 reconstitute their missiles to restart their nuclear program had really 0:16:33.600 --> 0:16:34.400 been destroyed. 0:16:34.520 --> 0:16:37.240 So all they really have is the straight right now. 0:16:37.560 --> 0:16:40.160 And as I said, that's a declining asset for them, 0:16:40.200 --> 0:16:42.360 So they don't have a lot of cards. And I 0:16:42.400 --> 0:16:45.640 think that's the point that the Vice President and the 0:16:45.640 --> 0:16:47.920 special envoys will be making to them. 0:16:48.560 --> 0:16:52.440 Victoria can a post weekend off ramp for the administration 0:16:53.040 --> 0:16:56.400 include leaving the Strait of Hormuz in control of the 0:16:56.440 --> 0:17:01.200 Iranians if they accept US dollars and some conditions about 0:17:01.200 --> 0:17:02.320 how the funds are used. 0:17:02.960 --> 0:17:07.640 In terms of accepting US dollars as tolls, yes, it's toll, 0:17:08.080 --> 0:17:12.040 I mean that is certainly something, although I actually would 0:17:12.040 --> 0:17:14.800 prefer them not to have dollars. I think the economic 0:17:14.920 --> 0:17:18.200 leverage is the other really strong point the Vice President's 0:17:18.240 --> 0:17:20.920 going to have in his pocket. You know, the Iranians 0:17:21.000 --> 0:17:24.359 can't restart their economy without broad sanctions relief. 0:17:24.400 --> 0:17:25.840 I mean, that's just not going to happen. 0:17:25.880 --> 0:17:29.760 I don't see China doing anything material to help them economically, 0:17:29.840 --> 0:17:33.080 and they've alienated countries like Qatar who might have been 0:17:33.160 --> 0:17:35.439 willing to help them in the past past. And I 0:17:35.440 --> 0:17:38.479 think it's notable that Katar went to the United Nations 0:17:38.560 --> 0:17:41.800 yesterday and said they want to hold the Iranians economically 0:17:41.920 --> 0:17:44.520 liable for the damage that was done to their oil 0:17:44.560 --> 0:17:48.280 field during the war. Very interesting development there. So I 0:17:48.320 --> 0:17:51.159 would prefer not to give them dollars. That's that's a 0:17:51.240 --> 0:17:54.040 nice hard currency for them, So I don't I wouldn't 0:17:54.040 --> 0:17:57.280 really see that as a give point for Victoria. 0:17:57.520 --> 0:17:59.040 It was sort of interesting to me that Bob brought 0:17:59.080 --> 0:18:01.119 that up because a lot of people are talking about 0:18:01.440 --> 0:18:04.879 China may be coming closer to Iran and the petro 0:18:05.040 --> 0:18:08.679 dollar becoming the petro yuan. This idea that they could 0:18:08.880 --> 0:18:13.320 enter into the primary relationship considering their role as the 0:18:13.440 --> 0:18:16.399 major buyer right now from the Middle East. Do you 0:18:16.440 --> 0:18:19.680 think that that is exaggerated and that frankly, Iran has 0:18:19.720 --> 0:18:23.280 no friends and that there isn't necessarily any push towards 0:18:23.359 --> 0:18:25.200 China in that kind of material way. 0:18:26.040 --> 0:18:28.200 Well, that's what it has been for the last five 0:18:28.280 --> 0:18:31.040 six years that China has been the primary buyer. They've 0:18:31.080 --> 0:18:34.000 bought in yuan, and then the Iranians can use that 0:18:34.080 --> 0:18:36.160 currency to buy things from the Chinese. 0:18:36.200 --> 0:18:38.480 So it sets up a nice little loop for China, 0:18:38.520 --> 0:18:39.800 and that has been the case. 0:18:39.840 --> 0:18:42.159 It hasn't made a lot of people in Washington happy, 0:18:42.480 --> 0:18:44.800 but it's not that great of a threat to us 0:18:44.840 --> 0:18:46.760 because I don't see anybody else. I don't see the 0:18:46.760 --> 0:18:51.639 Saudis or the Kuwaitis, or the Amortis or the Qatari's 0:18:51.760 --> 0:18:55.000 particularly interested in taking you on for their product. 0:18:55.160 --> 0:18:58.000 So if it's just Iran and. 0:18:58.720 --> 0:19:02.560 That that loop is keeping her on out largely of 0:19:02.680 --> 0:19:06.600 the broader global economy, that doesn't make me all that unhappy. 0:19:07.560 --> 0:19:11.119 This is the Bloomberg Surveillance Podcast, bringing you the best 0:19:11.119 --> 0:19:14.440 in markets, economics, and geopolitics. You can watch the show 0:19:14.520 --> 0:19:17.439 live on Bloomberg TV weekday mornings from six am to 0:19:17.600 --> 0:19:21.280 nine am Eastern. Subscribe to the podcast on Apple, Spotify, 0:19:21.480 --> 0:19:23.720 or anywhere else you listen, and as always, on the 0:19:23.720 --> 0:19:26.160 Bloomberg Terminal and the Bloomberg Business app.