Speaker 1: No, we are abeeny of rebeiny macro associates looking ahead
Speaker 1: to the new year and writing this, some of Trump's
Speaker 1: policies will increase growth and reduce inflation, while others could
Speaker 1: be stagflationary. So the impact on growth, inflation, and on
Speaker 1: markets depends on how much of the former versus the
Speaker 1: latter nori are joint. Is now for more one for
Speaker 1: to see is a great singer. How difficult does it
Speaker 1: make it to look ahead to next year with any
Speaker 1: real clarity to come up with some kind of outlook
Speaker 1: when things are so difficult.
Speaker 2: There's a lot of policy uncertainty. As I pointed out,
Speaker 2: some of the economic policies of Traum may increase over
Speaker 2: time growth, reduce inflation, being overall pro business, keeping tax
Speaker 2: rates on capital and a liberal law, deregulating the economy,
Speaker 2: and things like increasing the production of hostil fuels and
Speaker 2: pushing down the prices of energy. Probably also this Dodge initiative,
Speaker 2: overtiming greaser economic efficiency and so on. So those are
Speaker 2: the positives, and over time they could increase growth, they
Speaker 2: could reduce inflation. But we know there are some of
Speaker 2: other policy we don't know how much they're going to
Speaker 2: be implemented, they will increase inflation and potentially be stockflationary.
Speaker 2: In my view, tariffs are inflationary. Protection is the risk
Speaker 2: of the economic world with China, first draconia, restriction to migration,
Speaker 2: if not the mass deportation. If we have unfunded physical
Speaker 2: deficits and the promises imply eight trillion dollars of deficits
Speaker 2: over additional over the next ten years, that's going to
Speaker 2: crowd out growth by increasing interest rates norminal and real,
Speaker 2: and the bond market digilans are going to wake up.
Speaker 2: If you try to disorderly weaken the dollar, that could
Speaker 2: be inflationary, and if you interfere with independence of the FAT.
Speaker 2: Now I think on the positive side, I think there
Speaker 2: are a number of factors that are going to constrain the
Speaker 2: bad policies. One is market discipline. If you follow pulse
Speaker 2: that inflationary, then bond market digitalans are going to wake up.
Speaker 2: Bond is going to go higher, the stock market is
Speaker 2: going to correct, and it cares about the bond market.
Speaker 2: It cares about the stock market. Secondly, Fed independence. If
Speaker 2: he follows policies the lead to inflation, the FED may
Speaker 2: not continue to cut thraight it's next year, may even
Speaker 2: raise rates if inflation.
Speaker 3: Were to be going higher.
Speaker 2: And also policy choices, as you pointed out, on one side,
Speaker 2: you have people like Scott Bessett want to escalate the
Speaker 2: escalate on tariffs, and others are total trade hawks on
Speaker 2: trade and on China, like Peter Navarro. So it depends
Speaker 2: on the balance between who's going to be in powered.
Speaker 1: Let's unpack some of that pe can't tariffs pick to
Speaker 1: pay already so far this morning, you've heard some of it.
Speaker 1: Plase weigh in if it's targeted, could be a good
Speaker 1: thing for the American economy.
Speaker 2: Well, if it's targeted, I would say that the impacts
Speaker 2: on inflation are going to be modest, and maybe some
Speaker 2: of the reassuring that radio is occurring is going to continue,
Speaker 2: and there'll be actually pressure on our trade partners to say,
Speaker 2: if you don't want tariffs, you have to bring more
Speaker 2: investment semiconductors. Authors it Besy, you name it to the
Speaker 2: United States. So that's the escalator in order to de escalate.
Speaker 2: But I would say the higher does STARTFF become, the
Speaker 2: more there's an impact on improprices, the more there's an
Speaker 2: impact on inflation, and the more, there is global fragmentation,
Speaker 2: and there's also the risk, of course of trade wars
Speaker 2: of our trade partner retaliating against the United States. If
Speaker 2: that occurs, the impact on growth is going to be
Speaker 2: more negative than impact on inflation is going to be.
Speaker 2: Value depends on the size of these STARTUS. If it's
Speaker 2: Navaro types of policies on trade is taflationary. If it's
Speaker 2: escalated the escalate, maybe the impact inflation is moldest and
Speaker 2: the negative impact on growth is also modest.
Speaker 4: So some people are arguing that we're in this wave
Speaker 4: of deglobalization that basically reverses some of the disinflationary forces
Speaker 4: of the three decades following really the mid eighties. I'm
Speaker 4: wondering whether that's actually true, whether that's what we're seeing,
Speaker 4: because there still is quite a bit of trade, it's
Speaker 4: just going different routes, and frankly, you could see that
Speaker 4: overproduction from places like China are going to lower prices
Speaker 4: in certain places even if they don't in the US
Speaker 4: if there walls up. In other words, are we overestimating
Speaker 4: the inflationary impact on a dramatic level of a lot
Speaker 4: of these tariffs?
Speaker 2: Well, the impact of high tariffs on the United States
Speaker 2: would be inflationary. But if you think about the impact
Speaker 2: on growth and inflation, rest of the world will be
Speaker 2: this inflationary because if there is a shock to the
Speaker 2: demand for the experts of Europe, Asia, China, then there'll
Speaker 2: be excess supply. Growth is weakened in those parts of
Speaker 2: the world, and that leads to this inflation the rest
Speaker 2: of the world. So the impact on the US of
Speaker 2: high tariff is inflationary. The impact on the rest of
Speaker 2: the world is this inflationary because the access supplied.
Speaker 4: You used to be called doctor doom. Are you retiring
Speaker 4: that mantle?
Speaker 3: I always said, I'm.
Speaker 2: Not doctor douma, doctor realist. There are plenty of upside
Speaker 2: in hellmic growth, and by the way, some of them
Speaker 2: are thinking that are more secular. I think the impact
Speaker 2: of technological innovation implied that potential growth in the US
Speaker 2: by the end of the decade could be close to
Speaker 2: three percent. And the fact we already have seen for
Speaker 2: the last couple of years growth of two point five
Speaker 2: to twenty eight percent with inflation falling, is signed that
Speaker 2: maybe PRODUCTI growth is increasing and potential is increasing, and
Speaker 2: we can grow faster with having lower inflation.
Speaker 3: So I'm not doctor.
Speaker 5: Dum when it comes to terrorists. Just to go back
Speaker 5: to this idea of the personnel. We know what Jamison
Speaker 5: Greer as well thinks about China. In hearing to Congress,
Speaker 5: he had talked about strategically coupling. Do you expect that
Speaker 5: over the next four years between Beijing and Washington.
Speaker 3: Yes, I do.
Speaker 2: I think that one of the biggest risks is not
Speaker 2: just tarif in general, but a broader economic war against China.
Speaker 3: Ifles.
Speaker 2: Listen to the long list of complaints of the Drum administration.
Speaker 2: They say China has been thriding on free riding on
Speaker 2: international trading system, tariff, non TARIFERI barriers, government procurement policies,
Speaker 2: FTI policies, intellectual property rights and of course fend and
Speaker 2: lots of other things. And also geopolitically, there may be
Speaker 2: an attempt to try to contain the rise of China.
Speaker 2: So the biggest risk is not just TARIF on China,
Speaker 2: but how much the overall policies forward. China is going
Speaker 2: to be confrontational, and if they feel that we're trying
Speaker 2: to contain their rise, they could become quite aggressive themselves.
Speaker 3: Well.
Speaker 5: From page of the ft today talking about these four
Speaker 5: government back authorities that are telling local chip companies that
Speaker 5: you can no longer buy silicone from the United States,
Speaker 5: they're no longer safe or reliable or we already in
Speaker 5: this moment you're describing, Well.
Speaker 2: Certainly in anything to do with the high tech, we've
Speaker 2: started already in the by the administration to be in
Speaker 2: a process of de coupling, restriction to experts, both of
Speaker 2: semiconductor and circonductor equipment, restriction to anything investiated with AI
Speaker 2: and high technology.
Speaker 3: Under Biden was an arrow yard and.
Speaker 2: High fences and stuff that was supposed to be critical.
Speaker 3: So the risking.
Speaker 2: I think that in the case of Trump administration, we
Speaker 2: may move from the risking with China to decoupling with
Speaker 2: China did something much more, how to say, severe.
Speaker 1: Does Europe need to pick a side.
Speaker 2: They'll be in a very very tough position because geopolitically
Speaker 2: Europeans are close to the United States, NATO and so on,
Speaker 2: but they do a lot of trade and investment with China.
Speaker 2: You know, under the buy the administration was easy because
Speaker 2: there was a compromise within the digit seven about the
Speaker 2: risking as opposed to the coupling. If his US goes
Speaker 2: towards the coupling, It says European I have to follow
Speaker 2: us otherwise that consequences not just on trade but also
Speaker 2: NATO security and you name it. Then I think Europe
Speaker 2: is already weak being a tougher spot.
Speaker 1: How much worse could things get for the Europeans. We've
Speaker 1: been saying through this morning that France is ungovernable at
Speaker 1: the moment, which means it can't deliver reforms. And you
Speaker 1: know in Europe things have to get worse before ultimately
Speaker 1: they find solutions. How much worse does it need to get?
Speaker 2: Well, things are really pretty bad already in Europe. I
Speaker 2: think that potential growth is below one percent in Europe
Speaker 2: growth Europe is going to be in the Eurozone less
Speaker 2: than one percent next year. So and structural reform I'm
Speaker 2: not going to occur anytime soon. There's a fragmentation between
Speaker 2: these twenty seven countries. Some of them want more integration,
Speaker 2: some of them want less. At the core of Europe,
Speaker 2: German in Germany and France are going to politically unstable.
Speaker 2: So I don't see either the Letter Report or the
Speaker 2: Drug Report for more integers, for a common market, for
Speaker 2: more productivity, Combatants being implemented.
Speaker 3: So it looks pretty dark for your brain.
Speaker 4: Now, which is the reason why I'm surprised that so
Speaker 4: many people come in and they say it's priced in.
Speaker 4: We don't really see a path out of here. We
Speaker 4: don't necessarily see an economic engine or the political will
Speaker 4: or capability to really counter it. At what point are
Speaker 4: we facing off with the potential dollar shock? And I
Speaker 4: ask this because yes, THEO is likely to stay around
Speaker 4: here a week and further, but what if it actually
Speaker 4: weakens dramatically. Is the ECB is forced to cut rates
Speaker 4: and that divergence widens.
Speaker 2: Well, there are many good reasons why the dollar may
Speaker 2: continue to strengthen. One is, of course, star if if
Speaker 2: they reduce the trade deficit is going to strengthen.
Speaker 3: Two.
Speaker 2: Trumpet said, I want to have actually the dollar at
Speaker 2: the center of the global reserve system, and therefore that
Speaker 2: implies you want strong dollar than a week dollar relative
Speaker 2: grow differential relative monetary policies. The fact that the US
Speaker 2: is innovating and capital is flowing into the US capital
Speaker 2: markets and the stock market all implied that the dollar
Speaker 2: over time should become stronger. The euro and other currencies
Speaker 2: should become weaker. The problem however, is that Trump says
Speaker 2: a strong dollar has led to the industrialization, to American carnage,
Speaker 2: people free writing on us, to having large trade deficits,
Speaker 2: and we want at some point a week dollar. The
Speaker 2: fundamentals imply a stronger dollar, but policy that may be
Speaker 2: an attempt eventually, maybe in the second half of an administration,
Speaker 2: to find an agreement on currency, maybe to say either
Speaker 2: you accept ten percent tariffs or you accept a ten
Speaker 2: percent depreciation of the dollar.
Speaker 3: I would not rule out there'll.
Speaker 2: Be some big Mara Lago agreement. Is you know, the
Speaker 2: effects agreement are always in a resort, you know Breta,
Speaker 2: No Woods America, the coach Lasa, you know Louver and
Speaker 2: so on, so and mar Lago acord is something that
Speaker 2: they're going to think about, not in the first two years,
Speaker 2: but down the line they're going to say to the
Speaker 2: trading partners, you don't want tariffs.
Speaker 3: You have to do other things for us.
Speaker 1: No reale. You've had a big move in bigcoin over
Speaker 1: the last month or so. I had a big move
Speaker 1: over the last several years. Have you rethought the way
Speaker 1: you think about what happening care.
Speaker 3: Not really?
Speaker 2: I mean, people talk about bitcoin being a cryptocurrency like
Speaker 2: the other ones, but they're not really currencies. They're not
Speaker 2: a unit of account, they're not a scalable means of payment,
Speaker 2: they're not a stable store of value. They're not a
Speaker 2: single numeror Bitcoin in the past, when to seventeen down
Speaker 2: then to sixteen and has above one hundred, you could
Speaker 2: have another fifty percent correction. So it's a speculative act,
Speaker 2: like mime stocks, sparks.
Speaker 3: And others, highly volatile.
Speaker 2: Many people are going to it, but don't take El
Speaker 2: Salvador the force. Everyone's used bitcoin as legal tender and
Speaker 2: less than one percent of ale transaction occurring in bitcoin,
Speaker 2: so I don't think it's going to ever become a currency.
Speaker 3: There's going to be a speculative act.
Speaker 1: One thing the dolar is appreciated against is bitcoin, and
Speaker 1: I think this is where I would see some separation
Speaker 1: between what's happening with main coins and mainstocks and what
Speaker 1: is happening with bitcoin. There seems to be a preference.
Speaker 1: There are market participants who believe that this is a
Speaker 1: place to be if you're worried about it. Appreciation of
Speaker 1: the US dollar and a fiscal trajectory of the United
Speaker 1: States of America do you see a case for it there?
Speaker 2: Not really, because actually when the FED was essentially rising
Speaker 2: rates and inflation was higher, Bitcoin was falling, like in
Speaker 2: twenty two, as there was the stock market correction, and
Speaker 2: other stocks are going higher and the FED is easy
Speaker 2: and inflation has fallen, Bitcoin is going higher again, So
Speaker 2: historically has not been a hedge against inflation. Actually looks
Speaker 2: like it's highly correlated. Positively, bit stocks a better relative
Speaker 2: to the equity market, so it's not a traditional like
Speaker 2: hedge like gold that is in periods of time or
Speaker 2: inflation rising or the basement or worries about the dollarization.
Speaker 2: So it's something to me looks like expectedly a said,
Speaker 2: it is highly correlated with equity, so it's not a
Speaker 2: hedge against inflation.
Speaker 4: You say, sort of parallel tracks to memestocks and some
Speaker 4: of the other euphoria that we've seen. At the same time,
Speaker 4: there seems to be something more concrete behind this. You
Speaker 4: mentioned gold, and we are seeing that real gold and
Speaker 4: tandem because of what John is talking about, that store
Speaker 4: of value outside of the US dollar to protect against
Speaker 4: some sort of loss of fiscal dominance. Do you see
Speaker 4: with a more institutionalized structure endorsed by a presidential administration,
Speaker 4: there being a case for at least a crypto based
Speaker 4: store of value that could offset some of the risks
Speaker 4: of volatility in the dollar and the potential loss on
Speaker 4: the margins of fiscal dominance down the road.
Speaker 2: I'm not sure because if you're worried about inflation the
Speaker 2: basement of fiat currency or even the dollarization, there are
Speaker 2: plenty of other assets that provide a good head shorten treasuries, tapes,
Speaker 2: oil out commodities, gold, precious metal. So it's not as
Speaker 2: if there is not other alternatives. And as I pointed out,
Speaker 2: in the last few years, when inflation was higher, actually
Speaker 2: bitcoon was falling, and when inflection has fallen, bcone is
Speaker 2: going higher, so it doesn't look like it's been actually
Speaker 2: negatively correlated with inflation. So it is a spectul debaset
Speaker 2: for some people is a store of value. But if
Speaker 2: you want to hedge yourself against inflation, I think is
Speaker 2: that a spectrum of variety of other assets that are
Speaker 2: backed actually by real income or something store of value
Speaker 2: that are a better hedge against some of the risks
Speaker 2: that people worry about.
Speaker 5: But given the change of tone in Washington, do you
Speaker 5: think there could be retail adoption at any point.
Speaker 3: Oh yeah, and.
Speaker 2: There's already been retail adoption. But my word is actually
Speaker 2: that the regulation on crypto might become looser like they
Speaker 2: were before, and then you have another speculative run, You
Speaker 2: have another sets of scams like FTXSPF and so on,
Speaker 2: and then you get another bust. So the risk is
Speaker 2: who are going to go towards a very little regulation.
Speaker 2: You know, there are lots of players in this space
Speaker 2: that are quite shady, and the lack of regulation actually
Speaker 2: leads to a bigger bubble and a bigger bust.
Speaker 1: On the line, none you a long time, Just want
Speaker 1: to finish up with something positive. Looking out to twenty
Speaker 1: twenty five. Favorite region line now, favorite economy, The place
Speaker 1: you're most optimistic about for next year?
Speaker 3: Which one?
Speaker 2: It's a bit of consensus, but I think the United
Speaker 2: States still is going to outperform weth in terms of
Speaker 2: economic growth and equity markets.
Speaker 1: Yes, it seems to be the one place to be here.
Speaker 1: It repeated it don't we the United States. It keeps
Speaker 1: coming back to America.
Speaker 4: It feels like Tina. This is the Tina trade. There
Speaker 4: is no alternative at a time or essentially, growth is
Speaker 4: concentrated in the world's biggest economy, and maybe it's trickling out,
Speaker 4: maybe it's not. But nonetheless you also have yield.
Speaker 1: Here, no reel. It's good to say it, sir for
Speaker 1: catching up with us. Thank you. Noria Rabini, that of
Speaker 1: Rabeni Macro Associates,