WEBVTT - Bloomberg Businessweek Weekend - April 18th, 2025 0:00:00.280 --> 0:00:07.240 Bloomberg Audio Studios, Podcasts, radio News. 0:00:08.640 --> 0:00:12.959 This is Bloomberg business Week, Daily reporting from the magazine 0:00:12.960 --> 0:00:17.560 that helps global leaders stay ahead with insight on the people, companies, 0:00:17.640 --> 0:00:22.520 and trends shaping today's complex economy, plus global business finance 0:00:22.560 --> 0:00:26.239 and tech news as it happens. The Bloomberg Business Weekdaily 0:00:26.360 --> 0:00:31.320 Podcast with Carol Masser and Tim Steneveek on Bloomberg Radio. 0:00:32.200 --> 0:00:35.160 Hi, everyone, Welcome to the weekend edition of Bloomberg Business Week. 0:00:35.479 --> 0:00:38.360 This week a holiday and shortened trading week due to 0:00:38.560 --> 0:00:42.320 Good Friday. Even so a super super busy week thanks 0:00:42.360 --> 0:00:44.839 to earnings from a few more big Wall Street banks, 0:00:44.880 --> 0:00:48.519 Golden City and ba A. Also Netflix out with Results 0:00:48.600 --> 0:00:51.240 United too. All of the earnings news can be found 0:00:51.280 --> 0:00:53.880 at Bloomberg dot com and on the Bloomberg. 0:00:53.600 --> 0:00:55.840 We also had a steady flow of tariff headlines. It's 0:00:55.880 --> 0:00:58.520 President Trump's trade war showed no signs of letting up, 0:00:58.640 --> 0:01:01.720 leaving investors risk averse, and so with that in mind, 0:01:01.800 --> 0:01:03.760 we take a look at how Mara a Lago membership 0:01:03.800 --> 0:01:06.640 fees help explain Donald Trump's tariff obsession. 0:01:06.880 --> 0:01:09.960 Plus tariff's, a weaker US dollar and investors turning their 0:01:10.000 --> 0:01:13.280 back on US dollar denominated assets could be the beginning 0:01:13.319 --> 0:01:16.080 of the end of US economic choke points, and the 0:01:16.200 --> 0:01:19.840 US is top place in the geopolitical power world order. 0:01:19.959 --> 0:01:22.880 Including when it comes to so called rare earth minerals. 0:01:23.000 --> 0:01:25.000 What you need to know on that coming up a 0:01:25.000 --> 0:01:26.080 little later this hour. 0:01:26.160 --> 0:01:28.760 First up, tariff, tariff, tariff. 0:01:28.880 --> 0:01:30.160 I am a tariff man. 0:01:30.240 --> 0:01:33.480 To me, the most beautiful word in the dictionary is tariff. 0:01:33.640 --> 0:01:35.760 Build your plant in the United States and you don't 0:01:35.800 --> 0:01:39.200 have any tariffs. We will establish a minimum baseline tariff 0:01:39.240 --> 0:01:42.400 of ten percent. You notice that on the chart, and 0:01:42.880 --> 0:01:46.320 that'll be on other countries to help rebuild our economy 0:01:46.319 --> 0:01:49.080 and to prevent cheating. The tariffs give us great power 0:01:49.080 --> 0:01:52.280 to negotiate, always have, and I really think we're helped 0:01:52.320 --> 0:01:54.920 a lot by the tariff situation that's going on, which 0:01:54.960 --> 0:01:56.400 is a good situation, not a bit. 0:01:56.480 --> 0:01:58.400 It's great. It's going to be legendary. 0:01:58.400 --> 0:02:00.360 You watch well, and I gotta say, hey, if you 0:02:00.360 --> 0:02:02.440 talk to our Bloomberg News team who visited mar A 0:02:02.520 --> 0:02:06.120 Lago last summer to talk to then candidate Donald Trump, 0:02:06.880 --> 0:02:10.200 tariffs definitely came up in their conversation and interview with 0:02:10.280 --> 0:02:12.240 him as well, or at least somebody who also liked 0:02:12.280 --> 0:02:15.960 Tariff's writing about Trump's fascination with them and the marri 0:02:15.960 --> 0:02:18.080 A Lago connection. Let's head to Washington, d C. And 0:02:18.080 --> 0:02:21.880 Bloomberg business Week National correspondent Josh Green. Josh, we all 0:02:21.960 --> 0:02:25.079 do remember the cover story a Business Week head of 0:02:25.080 --> 0:02:27.200 the presidential elections, a picture of Donald Trump. You had 0:02:27.240 --> 0:02:31.440 a group a Bloomberg editorial, really our finest went to 0:02:31.880 --> 0:02:34.639 mar A Lago to talk with him, interview him. Take 0:02:34.720 --> 0:02:37.200 us back there and some of the things that you 0:02:37.240 --> 0:02:39.880 guys covered and what really struck you the most, maybe 0:02:39.919 --> 0:02:41.640 surprised you the most. 0:02:42.200 --> 0:02:42.600 Yeah, you know. 0:02:42.639 --> 0:02:44.799 So last July we went down to mar A Lago 0:02:44.880 --> 0:02:46.840 to interview Trump. A team of us did from Business. 0:02:46.840 --> 0:02:49.280 We had a couple of days before his first and 0:02:49.320 --> 0:02:51.680 what turned out to be infamous debate with Joe Biden. 0:02:52.040 --> 0:02:54.960 Trump had wrapped up the Republican nomination, and so we 0:02:54.960 --> 0:02:58.520 were down there to talk about what Trump's plans for 0:02:58.560 --> 0:03:00.600 the economy WO looked like in a second term. And 0:03:00.639 --> 0:03:02.800 so we covered what we thought were all the major issues, 0:03:03.400 --> 0:03:08.000 you know, tax cuts, deregulation, climate, the Federal Reserve, what 0:03:08.040 --> 0:03:09.800 his plans were for Jerome Powell. 0:03:10.720 --> 0:03:12.680 But Trump kept. 0:03:12.520 --> 0:03:17.360 Bringing up William McKinley unprompted the twenty fifth president, and 0:03:17.400 --> 0:03:19.280 as we were leaving the interview, me and my college 0:03:19.320 --> 0:03:20.960 kind of looked at each other and thought, you know, 0:03:21.360 --> 0:03:23.680 that was a lo odd I haven't heard Trump bring 0:03:23.760 --> 0:03:26.600 up William McKinley before, and I thought about it that 0:03:27.040 --> 0:03:31.600 on Liberation Day April second, when Trump instituted this global 0:03:31.639 --> 0:03:35.400 regime of tariffs that temporarily crashed the stock market. Have 0:03:35.520 --> 0:03:38.560 a lot of banks and analysts worry about recession calls, 0:03:38.600 --> 0:03:41.760 and so in the new issue of BusinessWeek, I kind 0:03:41.760 --> 0:03:44.800 of went back over that interview because I think, in hindsight, 0:03:44.880 --> 0:03:47.640 it offered a lot of insight into kind of the 0:03:47.640 --> 0:03:51.040 way Trump's mind works, especially around tariffs, and kind of 0:03:51.080 --> 0:03:53.280 what he might be thinking and what might be driving 0:03:53.960 --> 0:03:57.360 the obsession that you guys so ably illustrated there on 0:03:57.400 --> 0:04:02.240 the intro that has Trump so on ratcheting up tariffs 0:04:02.680 --> 0:04:05.600 even as starf markets are falling around the world and 0:04:05.680 --> 0:04:07.840 a lot of people are worrying more and more about recessions. 0:04:07.880 --> 0:04:10.240 I mean, you can go back and read that story 0:04:10.320 --> 0:04:12.520 the cover of BusinessWeek. It was the August issue, and 0:04:12.560 --> 0:04:14.520 a lot has certainly changed since then. I mean, even 0:04:14.560 --> 0:04:18.200 back then he was running against Joe Biden. But Josh, 0:04:18.400 --> 0:04:21.840 I still think tariff's caught a lot of people off guard. 0:04:21.920 --> 0:04:25.040 Even if you go back, as you write to members 0:04:25.520 --> 0:04:29.000 of his inner circle, his administration, even back then, they 0:04:29.000 --> 0:04:31.599 didn't necessarily think that he would do what he did 0:04:31.880 --> 0:04:34.600 on April. Second, why did it catch everyone off guard? 0:04:35.640 --> 0:04:37.800 I think caught everybody off guard for a couple of reasons. 0:04:37.880 --> 0:04:41.640 Number one, obviously, Trump cared and instituted tariffs during his 0:04:41.680 --> 0:04:44.560 first term, but he did it at a level that 0:04:44.839 --> 0:04:48.880 wasn't so extreme that markets sort of plunged right away. 0:04:48.920 --> 0:04:51.039 A lot of people thought that, of course Trump is 0:04:51.040 --> 0:04:53.080 going to do something on tariffs. He'll probably do something 0:04:53.080 --> 0:04:56.400 on tariffs in China, you know, maybe some other sectoral 0:04:56.440 --> 0:04:59.760 tariffs around the margins, but he's not going to do 0:04:59.800 --> 0:05:02.480 any thing extreme. I think that was the belief because 0:05:02.680 --> 0:05:04.880 most economists on the right and the left agree that 0:05:04.880 --> 0:05:08.719 tariffs are inflationary, including his own Treasury Secretary Scott Besson, 0:05:08.760 --> 0:05:12.000 who I mentioned in the piece. I think the other reason, though, 0:05:12.080 --> 0:05:14.799 is that a lot of folks believe that Trump's rhetoric 0:05:14.839 --> 0:05:18.560 around tariffs was really a negotiating ploy, and there was 0:05:18.920 --> 0:05:22.640 a kind of comfort, I think, in hindsight, false comfort, 0:05:23.040 --> 0:05:25.880 in the conventional wisdom that while Trump talked a big 0:05:25.920 --> 0:05:27.960 game on tariffs, what he really cared about was the 0:05:27.960 --> 0:05:31.960 stock market, and he views that as kind of like 0:05:32.000 --> 0:05:35.280 an imprimature of his own success. At the stock market's high, 0:05:35.520 --> 0:05:37.919 Trump gets on social media and brags about it. I 0:05:37.920 --> 0:05:40.240 think the belief was that had dropped too low, Trump 0:05:40.279 --> 0:05:42.440 would stop whatever he was doing to drive it down 0:05:42.440 --> 0:05:44.080 and do whatever he could to talk it back up. 0:05:44.279 --> 0:05:46.880 And that really hasn't happened much this time around. So 0:05:46.960 --> 0:05:49.719 I think people just misread and misunderstood. I would certainly 0:05:49.680 --> 0:05:52.200 include myself in this camp the degree to which Trump 0:05:52.640 --> 0:05:55.359 was intent upon raising up these tariffs, and so my 0:05:55.440 --> 0:05:58.560 piece explores why that might be and what we might 0:05:58.600 --> 0:05:59.640 have missed the first time around. 0:05:59.760 --> 0:06:01.760 Yeah, I got to tell you, you know this idea, and 0:06:01.800 --> 0:06:04.040 you say this that to take the president, at least 0:06:04.080 --> 0:06:06.120 the first time around, you know, take them seriously, but 0:06:06.160 --> 0:06:08.240 not literally. And now we realize, wait, no, no, no, 0:06:08.279 --> 0:06:10.520 he really wants us to take them literally. That was 0:06:10.560 --> 0:06:13.520 all wrong. And so since our read on President Trump 0:06:14.360 --> 0:06:17.240 was not necessarily on the money or the guardrails were 0:06:17.320 --> 0:06:20.280 there during the first term, and it's different this time around. 0:06:20.320 --> 0:06:22.200 We don't really know, Josh, what comes next? 0:06:22.240 --> 0:06:24.159 Do we no? 0:06:24.240 --> 0:06:27.000 And when I say we, that includes Trump's inner circle, 0:06:27.040 --> 0:06:28.520 because you know, we talked to a lot of them, 0:06:28.600 --> 0:06:31.920 and a lot of them were blindsided. I actually moderated 0:06:31.960 --> 0:06:35.880 a panel discussion on Liberation Day with one of his 0:06:35.960 --> 0:06:39.960 former top advisors, Steve Bannon, and I asked Bannon on stage, 0:06:40.480 --> 0:06:42.120 do you know what's coming? What countries are going to 0:06:42.120 --> 0:06:43.400 get hit? And he said, well, this is all still 0:06:43.480 --> 0:06:45.880 up in the air. It's still being litigated. So even 0:06:45.920 --> 0:06:48.440 Trump's closest to allies didn't really know what was coming then, 0:06:48.800 --> 0:06:52.040 and I'm pretty confident don't know what's coming next. Because 0:06:52.279 --> 0:06:55.080 Trump is an impulsive guy. He reacts to what other 0:06:55.120 --> 0:06:59.159 countries do, and so really anything could happen looking forward. 0:06:59.240 --> 0:07:00.640 So what I tried to do was kind of go 0:07:00.760 --> 0:07:03.160 back to what I think of his first principles when 0:07:03.160 --> 0:07:06.000 it comes to Trump and tariff, and explore a little 0:07:06.040 --> 0:07:08.160 bit what his motivation might be and what he might 0:07:08.160 --> 0:07:08.599 be thinking. 0:07:08.680 --> 0:07:10.160 So let's talk a little bit about that and kind 0:07:10.160 --> 0:07:12.480 of go more with what Bannon told you then and 0:07:12.560 --> 0:07:14.400 what you've learned from Steve Benn and we should know. 0:07:14.480 --> 0:07:17.480 You're also the author of Devil's Bargain, a book that 0:07:17.680 --> 0:07:20.640 really goes deep on Steve Bannon, among other books that 0:07:20.760 --> 0:07:24.440 you've written. Josh, So you've spent many years reporting on him, 0:07:24.480 --> 0:07:26.320 writing about him, you know him really Well, what did 0:07:26.360 --> 0:07:30.000 we learn about his goals? President Trump's goals through Steve Bannon? 0:07:30.160 --> 0:07:32.160 Well, you know, I think I've spent the last couple 0:07:32.240 --> 0:07:34.560 of weeks going around to people in Trump's orbit, people 0:07:34.640 --> 0:07:36.880 on Wall Street, people on politics, and saying, what do 0:07:36.960 --> 0:07:40.120 you think is what do you think is driving Trump's 0:07:40.160 --> 0:07:44.000 obsession with tariff's, How does he view them and why 0:07:44.080 --> 0:07:46.520 is he moving in a direction that seems to run 0:07:46.640 --> 0:07:48.800 counter to the economic interests of the United States and 0:07:48.840 --> 0:07:50.840 his own administration, Or at least that's the argument that 0:07:50.880 --> 0:07:52.960 a lot of people have been making. I thought one 0:07:53.000 --> 0:07:56.760 of the best answers came from Steve Bannon. Bannon said that, 0:07:56.840 --> 0:08:00.440 you know, Trump looks at the United States, which in 0:08:00.480 --> 0:08:02.480 the same way that he looks like mar A Lago's 0:08:02.560 --> 0:08:06.640 private club as this prime piece of real estate, and 0:08:06.760 --> 0:08:10.160 that foreign countries should have to pay more, essentially a 0:08:10.280 --> 0:08:14.840 VIP rate to have access to America's market, and that 0:08:15.120 --> 0:08:18.640 made me recall like an odd thing that had happened 0:08:18.720 --> 0:08:22.440 during this Business Week Trump interview last July. In the 0:08:22.440 --> 0:08:25.200 middle of the interview, the club manager for mar A 0:08:25.280 --> 0:08:29.679 Lago wandered in, and Trump stopped the interview, called him over, 0:08:30.280 --> 0:08:34.199 and had him sort of boast to us, the Bloomberg 0:08:34.280 --> 0:08:38.160 reporters about how Trump was raising club dues at mar 0:08:38.200 --> 0:08:42.080 A Lago from seven hundred thousand dollars to a million dollars. 0:08:42.559 --> 0:08:45.520 And you know, in hindsight, I really do think that 0:08:45.520 --> 0:08:48.080 that shed some light on the way that Trump's mind 0:08:48.160 --> 0:08:51.080 works when it comes to tariffs. He was making clear 0:08:51.120 --> 0:08:53.760 to us at the time. You know, Trump felt vindicated. 0:08:53.840 --> 0:08:58.240 He'd been ostracized from politics briefly after January sixth, but 0:08:58.320 --> 0:09:01.040 he'd managed to kind of return, climb back and win 0:09:01.080 --> 0:09:04.240 the GOP nomination in a route people now wanted to 0:09:04.280 --> 0:09:07.120 be close to him, important people, business leaders, And so 0:09:07.160 --> 0:09:09.520 he was raising the price of admissions to his club. 0:09:10.000 --> 0:09:13.000 And I think the same view kind of prevails for 0:09:13.040 --> 0:09:15.320 Trump when it comes to the United States trading with 0:09:15.400 --> 0:09:18.439 foreign countries. That Trump views the US market as a 0:09:18.480 --> 0:09:21.040 prime piece of real estate. He's gotten into office, and 0:09:21.080 --> 0:09:22.600 now what he's going to do is sort of raise 0:09:23.000 --> 0:09:26.040 the membership fees for countries who want to do business 0:09:26.120 --> 0:09:28.560 with the United States. That's really what these tariffs are. 0:09:29.679 --> 0:09:32.400 Never mind the economic effects, the side effects, and the 0:09:32.480 --> 0:09:36.000 ripple effects that this has had on international trade patterns, 0:09:36.000 --> 0:09:38.720 on equities markets around the world, on the uncertainty it's 0:09:38.800 --> 0:09:42.520 caused for US and foreign businesses, that's what seems to 0:09:42.559 --> 0:09:44.800 be driving Trump. And I found that a pretty compelling 0:09:44.880 --> 0:09:47.360 answer from Bannon and a pretty compelling insight into the 0:09:47.360 --> 0:09:50.000 way that Trump's mind works when he thinks about these 0:09:50.000 --> 0:09:50.560 big issues. 0:09:50.679 --> 0:09:53.120 Josh, I'm curious and all your reporting, and I mean 0:09:53.120 --> 0:09:56.480 this with no disrespect in terms of the president, not you, 0:09:57.000 --> 0:10:00.240 but I mean thanks Carol no no, no, no, no, no yeah, 0:10:00.720 --> 0:10:03.719 or you know our door, but I mean sorry, they 0:10:03.720 --> 0:10:06.280 came out wrong. That's one of those days. What I 0:10:06.360 --> 0:10:08.480 mean is, you know, I was thinking about his fascination 0:10:08.600 --> 0:10:10.840 with McKinley, right, and if you really go back and 0:10:10.880 --> 0:10:12.760 read history books and so on and so forth, you 0:10:12.880 --> 0:10:16.480 realize how that just turned out so badly. Does the 0:10:16.520 --> 0:10:21.319 president read history? Does he read you know? I am curious. 0:10:21.760 --> 0:10:23.920 I know there's a lot that probably crosses his desks, 0:10:23.960 --> 0:10:26.600 and he relies on advisors as a lot of presidents 0:10:26.640 --> 0:10:28.280 do right for some reason, so on and so forth. 0:10:28.679 --> 0:10:30.920 But a lot of past presidents have also been incredible 0:10:30.960 --> 0:10:33.720 readers right and trying to understand situations. What do we 0:10:33.760 --> 0:10:36.280 know about President Trump in terms of how he assesses 0:10:36.320 --> 0:10:36.920 a situation? 0:10:38.280 --> 0:10:41.920 You know, I have wondered this myself. Trump definitely does read, 0:10:41.960 --> 0:10:45.080 but what he tends to read are paper printouts of 0:10:45.160 --> 0:10:47.280 like computer screens. Like I was in his office once 0:10:47.320 --> 0:10:49.800 interviewing him, and he had a folder of like paper 0:10:49.800 --> 0:10:52.360 printouts from the Drudge Report. So I don't think he's 0:10:52.400 --> 0:10:55.480 reading history books about the McKinley era yet. At the 0:10:55.480 --> 0:10:57.439 same time, and you can go back and actually read 0:10:57.480 --> 0:11:01.440 the unredacted transcript of our interview Trump from July, he 0:11:01.559 --> 0:11:05.840 makes several specific citations to things like the McKinley Tariff 0:11:05.880 --> 0:11:08.640 Act of eighteen ninety, So clearly he had been either 0:11:08.679 --> 0:11:10.760 reading or well briefed on a lot of what he 0:11:10.800 --> 0:11:14.400 was talking about, this kind of late nineteenth century American 0:11:14.480 --> 0:11:17.160 history and McKinley and tariffs. So it's kind of a 0:11:17.160 --> 0:11:19.520 mystery to me, and one I've wondered a lot about 0:11:20.760 --> 0:11:24.120 who exactly imparted this information to him, How he absorbed it, 0:11:24.920 --> 0:11:27.560 but clearly it's something that he's really keyed on and 0:11:27.600 --> 0:11:30.439 continues to key on. It shaped and effected his worldview, 0:11:30.559 --> 0:11:33.920 and it's obviously affecting US policy like right now in 0:11:33.960 --> 0:11:35.839 the moment. So it's something I hope to keep kind 0:11:35.840 --> 0:11:38.360 of doing more reporting on. But I have to be honest, 0:11:38.559 --> 0:11:40.880 it's a little baffling to me to understand quite how 0:11:40.920 --> 0:11:43.680 he became so obsessed with McKinley. I suspect it was 0:11:43.679 --> 0:11:46.600 somebody around him, an advisor, whether Peter Navarro or a Steve 0:11:46.640 --> 0:11:50.360 Bannon someone like that who really is pro tariffs, had 0:11:50.440 --> 0:11:52.079 kind of filled his head with this stuff. But Trump 0:11:52.600 --> 0:11:55.360 was pretty bought in then and still seems pretty brought 0:11:55.400 --> 0:11:55.839 in now. 0:11:56.080 --> 0:11:58.600 So, Josh, based on the reporting that you've done, the 0:11:58.640 --> 0:12:01.600 time you've spent with the president in recent years, the 0:12:01.640 --> 0:12:04.439 time you've spent with Steve benn and other close advisors 0:12:04.840 --> 0:12:07.360 to the president, what do you think our audience needs 0:12:07.400 --> 0:12:12.120 to understand about the longevity of tariffs and how they 0:12:12.120 --> 0:12:15.359 will be present in our lives during this administration. 0:12:16.400 --> 0:12:19.520 I think the main thing is is, like tariffs are 0:12:19.559 --> 0:12:23.679 a core Donald Trump belief going back as long as 0:12:23.720 --> 0:12:26.920 he has commented on public policy. So I think he 0:12:27.080 --> 0:12:29.480 means this. He isn't doing these things or taking these 0:12:29.520 --> 0:12:32.679 positions opportunistically. This is core to his being and how 0:12:32.720 --> 0:12:33.880 he sees the world. 0:12:34.200 --> 0:12:35.280 As I right in the BusinessWeek. 0:12:35.520 --> 0:12:38.400 You know, generally, when presidents have a big idea, all presidents, 0:12:38.559 --> 0:12:41.200 they tend to cling to it come hell or high water, 0:12:41.440 --> 0:12:43.920 whether things are going well or whether they're not going well. 0:12:43.960 --> 0:12:46.480 And so I would expect Trump, you know, while he 0:12:46.520 --> 0:12:48.920 may relent on the margins, while he may adjust things 0:12:49.280 --> 0:12:51.560 on the tariff front, to stick with these is a 0:12:51.640 --> 0:12:54.480 key policy tool throughout his administration. So I think it's 0:12:54.559 --> 0:12:56.319 something people are going to have to watch and continue 0:12:56.320 --> 0:12:56.840 to grapple with. 0:12:57.120 --> 0:13:00.000 That was Bloomberg Business Week National correspondent Josh Green. 0:13:04.080 --> 0:13:08.080 You're listening to the Bloomberg Business Weekdaily Podcast. Catch us 0:13:08.160 --> 0:13:11.640 live weekday afternoons from two to five pm Eastern Listen 0:13:11.640 --> 0:13:15.240 on Applecarplay and Android Auto with the Bloomberg Business app, 0:13:15.360 --> 0:13:18.880 or watch us live on YouTube. 0:13:18.960 --> 0:13:22.840 We are certainly living in uncertain times. CEOs are commenting 0:13:22.880 --> 0:13:25.560 about it as earning season got underway this past week, 0:13:25.960 --> 0:13:28.800 United CEO went so far as to offer not one, 0:13:29.040 --> 0:13:32.719 but two possible earning scenarios, saying its twenty twenty five 0:13:32.760 --> 0:13:36.560 outlook remains achievable, but also warning that a recession could 0:13:36.600 --> 0:13:38.760 nearly have its profit forecast. 0:13:39.040 --> 0:13:41.400 This uncertainty is the result of the trade war and 0:13:41.440 --> 0:13:44.160 tariff tit for tat. The longer it goes on, the 0:13:44.240 --> 0:13:46.520 harder it is to ignore the nagging feeling that the 0:13:46.520 --> 0:13:49.359 global economic order is being redone. 0:13:49.440 --> 0:13:52.760 So we wanted to once again check in with Edward Fishman, 0:13:52.840 --> 0:13:56.640 his senior research scholar professor at Columbia University School of 0:13:56.679 --> 0:13:59.480 International and Public Affairs. We recently talked with him about 0:13:59.480 --> 0:14:01.960 his new book Points, American Power in the Age of 0:14:02.000 --> 0:14:05.240 Economic Warfare, and he is back here in our studio. 0:14:05.320 --> 0:14:07.400 It is good to have you here because as this 0:14:07.440 --> 0:14:10.000 continues to go on, the longer it goes on, we 0:14:10.040 --> 0:14:13.240 continue to think about what are the economic repercussions that 0:14:13.320 --> 0:14:15.760 could be the future of the US. How are you 0:14:16.640 --> 0:14:18.960 thinking about that? How is it kind of evolving the 0:14:19.000 --> 0:14:19.880 longer this goes on. 0:14:20.120 --> 0:14:22.840 So look, a big theme of my book, Chow Points, 0:14:22.920 --> 0:14:25.280 is that there are these choke points in the global economy, 0:14:25.320 --> 0:14:28.000 areas where one country has a dominant position and there 0:14:28.000 --> 0:14:30.640 are few, if any substitutes, and these choke points have 0:14:30.760 --> 0:14:34.040 been what have been primarily used for economic warfare. The 0:14:34.120 --> 0:14:37.280 dollar and the US financial system is the most important 0:14:37.360 --> 0:14:39.280 choke point in the global economy. It's the one that 0:14:39.320 --> 0:14:42.840 America has relied on for sanctions against Iran Russia. And 0:14:42.920 --> 0:14:43.800 the thing that has been. 0:14:43.720 --> 0:14:46.880 Because by everything being dollar denominated, that means in order 0:14:46.920 --> 0:14:49.800 to transact, right, it's got to go through dollars, and 0:14:49.840 --> 0:14:54.240 basically we have control over our dollar denominated assets and 0:14:54.320 --> 0:14:56.120 those points throughout the financial system. 0:14:56.280 --> 0:14:57.840 That's right, I mean, I think if you just look 0:14:57.840 --> 0:14:59.920 at it from a numbers basis, I mean, America is 0:15:00.080 --> 0:15:02.880 something like ten percent of global trade, and ninety percent 0:15:02.920 --> 0:15:05.800 of foreign exchange transactions involves a dollar, So the dollars 0:15:05.840 --> 0:15:08.480 being used in transactions that have nothing to do with 0:15:08.680 --> 0:15:11.560 US goods being traded from one country to another. So 0:15:12.200 --> 0:15:14.880 I think the thing that has been most concerning to me, frankly, 0:15:14.960 --> 0:15:17.640 over the last week or two of when Trump has 0:15:17.680 --> 0:15:20.280 really escalated the use of tariffs is we have seen, 0:15:20.320 --> 0:15:21.680 I think, for the first time, at least in my 0:15:21.720 --> 0:15:25.080 professional life, real concerns that the dollar may be losing 0:15:25.080 --> 0:15:27.560 some of its safe haven status. And this obviously is 0:15:27.560 --> 0:15:30.240 concerning from the perspective that we all understand in terms 0:15:30.240 --> 0:15:32.840 of the dollar's role as the world's reserve currency is 0:15:32.920 --> 0:15:35.320 necessary for the way that we run our political economy, 0:15:35.320 --> 0:15:37.160 the way that we fund budget depth sits. But I 0:15:37.160 --> 0:15:39.880 think also from a geopolitical perspective, there are concerns that 0:15:39.920 --> 0:15:42.080 if we were to undermine the dollar's role in the 0:15:42.120 --> 0:15:45.880 international financial system, it would significantly constrain the ability of 0:15:45.920 --> 0:15:49.440 the US government to impose impactful sanctions on foreign countries. 0:15:50.000 --> 0:15:52.680 The impactful sanctions is certainly one part of this, but 0:15:52.720 --> 0:15:56.800 the other part of this is the global economic world order, 0:15:56.920 --> 0:15:59.520 or the economic world order, I should say, and just 0:15:59.560 --> 0:16:02.640 the fact that the US and the dollar have really 0:16:02.640 --> 0:16:05.920 stood at the intersection of so much. When you talk 0:16:05.960 --> 0:16:09.080 about that being at risk, what exactly do you mean, 0:16:09.160 --> 0:16:10.360 what in your view could happen? 0:16:10.720 --> 0:16:10.920 Right? 0:16:11.440 --> 0:16:14.160 So, what would it mean for the dollar to lose 0:16:14.160 --> 0:16:16.760 its position as the world's reserve currency. I think, at 0:16:16.800 --> 0:16:19.680 the very baseline level of it, the dollar by virtue 0:16:19.680 --> 0:16:22.640 of basically there being limitless demand for American treasuries. We 0:16:22.720 --> 0:16:25.320 have not had to balance our budget in decades, right, 0:16:25.680 --> 0:16:27.760 so I think we're the dollar actually to just be 0:16:28.080 --> 0:16:31.000 another currency, and US treasuries just to be another form 0:16:31.040 --> 0:16:33.800 of sovereign debt. We'd actually have to worry about things 0:16:33.840 --> 0:16:35.880 like what does our fiscal situation look like in the 0:16:35.960 --> 0:16:36.920 United States. 0:16:36.680 --> 0:16:38.640 Explain that, carry that out for people who and be like, 0:16:38.680 --> 0:16:40.880 I'm not making the connection because I think so much 0:16:40.920 --> 0:16:42.280 of what's happening in the last week and a half. 0:16:42.320 --> 0:16:45.920 We have to understand how this all connects, right, because 0:16:46.360 --> 0:16:48.600 I think people I don't know just walk it through 0:16:48.600 --> 0:16:48.920 for us. 0:16:48.960 --> 0:16:49.200 Sure. 0:16:49.280 --> 0:16:52.800 Yeah, so right now, we run deficits of budget deficits 0:16:52.840 --> 0:16:54.920 every year. It's something like seven percent of goal of GDP, 0:16:55.040 --> 0:16:58.400 which is significantly higher than it has been historically. What 0:16:58.440 --> 0:17:01.920 that means is we take in less revenue than we 0:17:01.960 --> 0:17:03.200 spend as a federal government. 0:17:03.360 --> 0:17:03.520 Right. 0:17:03.600 --> 0:17:05.800 The way that we plug that deficit, the way that 0:17:05.880 --> 0:17:09.960 we finance the spending that doesn't come from American taxpayers 0:17:10.000 --> 0:17:13.320 is through issuing debt that then is in the form. 0:17:13.160 --> 0:17:13.960 Of US treasuries. 0:17:14.040 --> 0:17:14.200 Right. 0:17:14.600 --> 0:17:17.520 Part of the reason that there's effectively limitless demand for 0:17:17.640 --> 0:17:20.080 US treasuries is because of the dollar's role as a 0:17:20.119 --> 0:17:23.199 world's reserve currency, because it's considered this safe asset that 0:17:23.960 --> 0:17:26.520 in any time of need, basically you can always turn 0:17:26.560 --> 0:17:29.080 it into cash. At a relatively stable level. But what 0:17:29.080 --> 0:17:31.640 we've seen in the last week is something that's quite unusual, 0:17:31.680 --> 0:17:35.199 where treasure yields have gone up as the dollar's value 0:17:35.240 --> 0:17:38.600 has actually weakened. As normally you'd expect as treasure yields 0:17:38.600 --> 0:17:40.200 to go up, that the dollar would strengthen because there'd 0:17:40.240 --> 0:17:42.800 be more demand for American assets. What this suggests is 0:17:42.840 --> 0:17:45.239 that there's something going on that there might be this 0:17:45.320 --> 0:17:48.720 new risk premium being built in to American assets that 0:17:48.720 --> 0:17:49.720 hasn't existed before. 0:17:49.960 --> 0:17:52.240 The new risk premium. Notwithstanding, what would you say to 0:17:52.280 --> 0:17:55.240 somebody who's listening right now or watching right now and says, 0:17:55.240 --> 0:17:57.920 wait a second, this would be could be a good 0:17:57.920 --> 0:18:00.399 thing for the United States to start only spending the 0:18:00.400 --> 0:18:04.480 money that it has every year. It's a fair point. 0:18:04.600 --> 0:18:07.320 At the same time, it would require a massive change 0:18:07.359 --> 0:18:10.320 in how all of our lives work, right, because the 0:18:10.680 --> 0:18:13.200 lion's share of American federal outlays every year are in 0:18:13.280 --> 0:18:17.320 things like Medicare, Social Security entitlement programs that Americans rely on. 0:18:17.400 --> 0:18:19.719 Yeah, I think Elon Musk has brought that to attention 0:18:19.840 --> 0:18:21.800 many times over the last couple of months when talking 0:18:21.840 --> 0:18:24.400 doge Right, although that has not been a focus of dose. 0:18:24.480 --> 0:18:26.800 Right, it is anything you've seen expansion in things like 0:18:26.840 --> 0:18:29.879 Medicare advantage payments, right, that has been covered innother Bloomberg 0:18:30.119 --> 0:18:33.520 media recently. So, look, I think that we would have 0:18:33.560 --> 0:18:36.919 to have a substantial cut in government spending and, by 0:18:36.960 --> 0:18:39.840 the way, a concomitant rise in taxes. But I think 0:18:39.840 --> 0:18:42.159 there's a broader point that's more near term, because there 0:18:42.160 --> 0:18:45.000 are people in the Trump administration orbit who actually view 0:18:45.320 --> 0:18:48.280 the dollar's role as the world's reserve currency as bad 0:18:48.359 --> 0:18:50.680 for the US economy. Not an exorbitant privilege, but something 0:18:50.680 --> 0:18:54.080 that undermines our export competitiveness. Because just to spell this 0:18:54.119 --> 0:18:54.960 out and sort of playing. 0:18:54.880 --> 0:18:58.520 Specially, it's more expensive exactly, right, But what. 0:18:58.440 --> 0:19:02.080 We're seeing is that, yes, if the dollar is valued 0:19:02.640 --> 0:19:05.600 at a lower level, then there will be specific sectors 0:19:05.600 --> 0:19:07.800 of the American economy that may be more competitive on 0:19:07.840 --> 0:19:08.520 global markets. 0:19:08.560 --> 0:19:08.720 Right. 0:19:09.240 --> 0:19:12.960 But everyone is hurt by a weeker dollar because also 0:19:13.080 --> 0:19:15.119 all of us in the United States are paid in dollars. 0:19:15.200 --> 0:19:19.200 So if our dollars are less valuable, we have lower 0:19:19.200 --> 0:19:22.520 purchasing power and we are poor, right, we are paychecks 0:19:22.560 --> 0:19:24.640 go less, they don't buy as much for us. 0:19:24.720 --> 0:19:27.479 Isn't it also important to talk about trade deficits. Everybody 0:19:27.480 --> 0:19:31.360 thinks bad, bad, trade deficit. But that also has implications 0:19:31.359 --> 0:19:34.520 as well in terms of demand for dollars, right, And 0:19:34.960 --> 0:19:41.080 it also we want to be buying things because that 0:19:41.119 --> 0:19:45.160 gives people dollars and they in turn can buy US 0:19:45.160 --> 0:19:48.080 based assets. Right, there's like this relationship as well. 0:19:48.200 --> 0:19:48.560 That's right. 0:19:48.640 --> 0:19:48.800 Yeah. 0:19:48.840 --> 0:19:51.280 I mean the flip side of a trade deficit is 0:19:51.320 --> 0:19:55.560 that we have you know, financial asset financing that's coming 0:19:55.640 --> 0:19:56.480 into the United States. 0:19:56.560 --> 0:19:56.720 Right. 0:19:56.760 --> 0:20:00.360 We have other countries who are investing in American assets. Right, 0:20:00.400 --> 0:20:02.600 So that is you know why you need you know, 0:20:02.840 --> 0:20:04.840 the current account and the capital account have to balance, 0:20:04.840 --> 0:20:07.560 so current. A current account deficit will mean a capital 0:20:07.560 --> 0:20:09.040 account surplus, right. 0:20:08.920 --> 0:20:09.880 So that's right. 0:20:09.960 --> 0:20:13.840 I think if you truly were able to balance American trade, 0:20:14.200 --> 0:20:17.920 you would, by definition have less capital coming into the 0:20:18.000 --> 0:20:18.520 United States. 0:20:18.560 --> 0:20:20.119 Can I also ask you we have don't we have 0:20:20.160 --> 0:20:21.399 a service surplus? 0:20:21.560 --> 0:20:22.320 We do? Yes? 0:20:22.400 --> 0:20:23.720 And is that a good or bad thing? 0:20:24.400 --> 0:20:25.199 I think it's a great thing. 0:20:25.240 --> 0:20:27.679 I mean, look, I think there's been this, you know, 0:20:27.920 --> 0:20:30.399 you know memes now about should Americans be you know, 0:20:30.440 --> 0:20:34.159 screwing in screws in iPhones or something like that. I 0:20:34.160 --> 0:20:38.280 think most Americans frankly would rather work a services job 0:20:38.359 --> 0:20:40.120 for the same pay than working in a factory. 0:20:40.440 --> 0:20:43.119 Well, that was the whole idea with globalization in the 0:20:43.160 --> 0:20:45.640 nineteen nineties, if you go back, and that was sort 0:20:45.640 --> 0:20:51.000 of the promise that we were told by politicians, let's 0:20:51.560 --> 0:20:56.199 move the jobs to other countries, and what we'll do 0:20:56.280 --> 0:20:58.879 is we'll retrain the workforce here so they can do 0:20:58.960 --> 0:21:02.480 more vis oriented jobs and jobs that are in a 0:21:02.480 --> 0:21:05.400 different part of the economy. That didn't end up happening. 0:21:06.119 --> 0:21:08.320 Well, I mean, to be fair, up until recently, we've 0:21:08.320 --> 0:21:10.440 been at full employment, you know, so we haven't had 0:21:10.600 --> 0:21:12.639 massive unemployment in the United States. 0:21:12.680 --> 0:21:15.320 True, But I mean if you go back even to 0:21:15.359 --> 0:21:18.919 the first Trump administration and the analysis of why he 0:21:19.040 --> 0:21:21.399 won States and why Democrats lost in a lot of 0:21:21.400 --> 0:21:24.320 these areas, there was a lot of criticism that these 0:21:24.359 --> 0:21:27.560 were areas that had been hollowed out with the loss 0:21:27.560 --> 0:21:30.800 of jobs moving abroad. And that seems to be still 0:21:31.200 --> 0:21:33.520 what the president is speaking to at this point, to 0:21:33.720 --> 0:21:38.240 go back to an era where those manufacturing jobs come back. 0:21:38.760 --> 0:21:39.000 Yes. 0:21:39.119 --> 0:21:43.160 Look, I think that clearly there have been regional effects 0:21:43.240 --> 0:21:45.800 that have not been distributed equally, and they are parts 0:21:45.840 --> 0:21:48.000 of for instance, my home state of Pennsylvania, that have 0:21:48.000 --> 0:21:50.520 been really hit hard by this process, right, And so 0:21:50.840 --> 0:21:52.720 I do think that the federal government has not done 0:21:52.760 --> 0:21:56.280 a particularly good job at figuring out how to you know, 0:21:56.320 --> 0:21:59.240 continue to provide a decent standard of living for people 0:21:59.359 --> 0:22:01.880 in these regions of the United States. But I would say, though, 0:22:01.920 --> 0:22:05.360 and if we're going to take Trump's arguments about manufacturing seriously, 0:22:05.400 --> 0:22:07.640 I think the best argument isn't so much about unemployment, 0:22:07.680 --> 0:22:10.200 because as we've discussed, we have been at full employment. 0:22:10.200 --> 0:22:13.159 There is a lot of sector service sector employment in 0:22:13.200 --> 0:22:13.800 the United States. 0:22:13.840 --> 0:22:13.919 Right. 0:22:14.359 --> 0:22:16.840 The best argument is really the national security argument, where 0:22:17.200 --> 0:22:21.600 there are potentially some aspects of manufacturing where you would 0:22:21.640 --> 0:22:23.000 want domestic sources. 0:22:23.040 --> 0:22:23.200 Right. 0:22:23.240 --> 0:22:25.040 And by the way, even Joe Biden, going back to 0:22:25.080 --> 0:22:29.280 his presidency, imposed one hundred percent tariffs on Chinese electric 0:22:29.400 --> 0:22:32.280 vehicles because there was a view that we didn't want 0:22:32.440 --> 0:22:35.760 buid to eat Tesla's lunch. Right, We didn't want Chinese 0:22:35.840 --> 0:22:39.280 evs that were better, more efficient, cheaper than you know, 0:22:39.520 --> 0:22:41.879 the evs made by Tesla and GM to come in 0:22:41.920 --> 0:22:44.600 and swamp the American market because it's a security concern 0:22:44.600 --> 0:22:47.360 if we're dependent on Chinese cars right. So I think 0:22:47.359 --> 0:22:50.000 there are specific sectors where this is. This is a 0:22:50.040 --> 0:22:52.800 relevant point for national security, the harder I mean, we. 0:22:52.760 --> 0:22:56.040 Have defense manufacturers forts exactly. 0:22:56.119 --> 0:22:58.760 I agree, And I've written an essay in the Boston 0:22:58.760 --> 0:23:02.680 Globe a month ago in association with my book Choke 0:23:02.720 --> 0:23:05.080 Points about the pharmaceutical supply chain. This is something that 0:23:05.200 --> 0:23:09.000 certainly the United States needs, not only more domestic sources 0:23:09.000 --> 0:23:11.600 of manufacturing, but what I would call trusted supply chains. 0:23:11.640 --> 0:23:11.760 Right. 0:23:11.760 --> 0:23:14.280 You don't want to be reliant on China for you know, 0:23:14.280 --> 0:23:18.680 pharmaceutical additives, right. Do we want to do everything domestically? 0:23:18.680 --> 0:23:20.879 Do we want autarchy? I don't think so. But do 0:23:20.920 --> 0:23:23.680 we want to be less reliant on adversaries like China? 0:23:23.760 --> 0:23:26.000 I think that's a very worthy national security goal. 0:23:26.160 --> 0:23:29.000 So, going back to your book, book Choke Points, I'm 0:23:29.000 --> 0:23:31.359 thinking about China and how they are wielding kind of 0:23:31.400 --> 0:23:34.280 their choke points. I thought about the tariffs and the 0:23:35.720 --> 0:23:38.600 kind of salvel that they lobbied back at the United 0:23:38.640 --> 0:23:41.280 States when it comes to rare earth minerals like that 0:23:41.440 --> 0:23:44.560 is very targeted and many would say very very smart 0:23:44.600 --> 0:23:47.080 because of their incredible control over It's not that we 0:23:47.119 --> 0:23:49.159 don't have it, but they are set up in a 0:23:49.240 --> 0:23:51.399 much more productive system, right in terms of refining and 0:23:51.440 --> 0:23:54.600 so on and so forth. Walk us through that and 0:23:54.640 --> 0:23:55.880 how they are fighting back. 0:23:56.000 --> 0:23:57.800 Yes, thank you for bringing this up, Carol, because I 0:23:57.800 --> 0:23:59.760 think one of the things I've been most frustrated about 0:24:00.200 --> 0:24:02.159 of the coverage of the US China situation in the 0:24:02.240 --> 0:24:05.640 last week is this discussion of a trade war. Right, 0:24:06.000 --> 0:24:08.600 We're not seeing a trade war. We're seeing something much broader. 0:24:08.600 --> 0:24:11.760 We're seeing a multi domain economic war in which tariffs 0:24:11.800 --> 0:24:13.880 are just one weapon that's being used, and in fact, 0:24:13.880 --> 0:24:16.000 they're not even the most powerful weapon. Yeah, you look 0:24:16.000 --> 0:24:19.040 at how China's retaliating. Right, Yes, they have tariffs that 0:24:19.080 --> 0:24:22.160 they put on American imports. But if you're just going 0:24:22.160 --> 0:24:24.960 tariff for tariff, America has more to tariff than China 0:24:24.960 --> 0:24:26.720 has to tariff, because we're importing a lot more from 0:24:26.760 --> 0:24:29.480 China than they're importing from US. But what China has 0:24:29.520 --> 0:24:31.960 been doing since twenty eighteen, since the first salvo of 0:24:31.960 --> 0:24:35.520 tariffs came into place, They've been preparing things like export 0:24:35.560 --> 0:24:38.840 controls on critical minerals that America relies on, from everything 0:24:38.880 --> 0:24:42.840 from batteries to ammunition. Right, they've been sanctioning US companies, 0:24:42.840 --> 0:24:46.480 so PVH got sanctioned. Recently, a Skidio, the biggest drone 0:24:46.480 --> 0:24:49.359 manufacturer in Silicon value, was sanctioned, and now they've got 0:24:49.359 --> 0:24:52.400 a ration batteries. Each customer now only gets one battery 0:24:52.400 --> 0:24:54.879 per drone, right, which is pretty absurd when you think 0:24:54.920 --> 0:24:57.760 about it. Yeah, Ilumina, the big DNA sequencing company, got 0:24:57.800 --> 0:25:01.200 sanctioned by China. You're also seeing things like anti monopoly 0:25:01.240 --> 0:25:04.359 investigations into Nvidia and Alphabet right, So China is not 0:25:04.480 --> 0:25:08.480 retaliating in sort of a symmetric manner, only they're also 0:25:08.560 --> 0:25:09.640 fighting asymmetrically. 0:25:09.800 --> 0:25:13.040 That was Edward Fishman, senior research scholar and professor at 0:25:13.119 --> 0:25:17.119 Columbia University School of International and Public Affairs. We recently 0:25:17.119 --> 0:25:19.920 talked with him on his new book, Choke Points American 0:25:19.960 --> 0:25:22.000 power in the Age of Economic Warfare. 0:25:28.240 --> 0:25:32.080 This is the Bloomberg Business Week Daily podcast. Listen live 0:25:32.200 --> 0:25:35.080 each weekday starting at two pm Eastern up on applecar 0:25:35.200 --> 0:25:38.000 Play and the Android Auto with the Bloomberg Business app. 0:25:38.080 --> 0:25:40.800 You can also listen live on Amazon Alexa from our 0:25:40.880 --> 0:25:45.040 flagship New York station, Just Say Alexa played Bloomberg eleven thirty. 0:25:46.000 --> 0:25:48.320 We got news this past week that President Trump has 0:25:48.359 --> 0:25:51.639 launched a probe into the need for tariffs on critical minerals, 0:25:51.840 --> 0:25:54.719 the latest action in an expanding trade war that has 0:25:54.760 --> 0:25:57.240 targeted key sectors of the global economy. 0:25:57.640 --> 0:26:00.440 The order covers a range of minerals, including rare earth 0:26:00.480 --> 0:26:03.960 elements that the US government considers quote building blocks of 0:26:04.000 --> 0:26:08.040 our defense industrial base and crucial to building jet engines, 0:26:08.160 --> 0:26:11.840 missile guidance systems, advanced computers, as well as radar, optics 0:26:11.880 --> 0:26:13.440 and communications equipment. 0:26:14.119 --> 0:26:16.720 So we wanted to go deep on rare earths to 0:26:16.840 --> 0:26:19.040 understand how they fit into the trade war, if there 0:26:19.080 --> 0:26:22.720 are alternatives, how much leverage they give to China, and more. 0:26:23.359 --> 0:26:26.000 To do this, we caught up with Graceland Baskern, director 0:26:26.040 --> 0:26:28.639 of the Critical Mineral Security Program at the Center for 0:26:28.680 --> 0:26:32.800 Strategic and International Studies, and we were also joined by 0:26:32.840 --> 0:26:37.639 Bloomberg News Metals and Mining reporter Joe Doe. Joe, rare 0:26:37.800 --> 0:26:42.600 earths on the surface sounds like they're rare, but I'm 0:26:42.680 --> 0:26:46.560 learning that they're not actually that rare, right, They're not rare. 0:26:47.160 --> 0:26:48.880 They come from the earth. Though they come from the earth, 0:26:48.880 --> 0:26:49.920 that part is true. 0:26:49.960 --> 0:26:53.520 It's hard to find them in density, right. So the 0:26:53.640 --> 0:26:56.240 rare earths are like literally in your backyard, you just 0:26:56.320 --> 0:26:58.439 like dug up some dirt. You could be like, oh, 0:26:58.440 --> 0:27:01.080 there are rare earths in this, but you know, we 0:27:01.119 --> 0:27:03.840 live in New York, right, But it's the same as like, oh, 0:27:03.880 --> 0:27:06.600 well I take zinc as you know, a vitamin or 0:27:06.960 --> 0:27:09.639 you know whatever. It might be, right, but in terms 0:27:09.640 --> 0:27:13.119 of industrial scale, right, because you need rare earth to 0:27:13.200 --> 0:27:16.080 create things like permanent magnets, and permanent magnets allow for 0:27:16.960 --> 0:27:20.159 wind turbines to keep moving and for electric motors to 0:27:20.240 --> 0:27:23.600 keep moving. I mean that's really all like the main 0:27:23.640 --> 0:27:27.119 thing regular people should know. To find the density is 0:27:27.240 --> 0:27:29.560 quite difficult. It's not like they're just in. 0:27:29.480 --> 0:27:32.879 Your backyard, like a huge pile graceland. Come on in, 0:27:34.200 --> 0:27:38.880 your background is pretty incredible. A mining economist, critical minerals 0:27:38.880 --> 0:27:42.000 in trade. You began your career in South Africa's platinum belt, 0:27:42.480 --> 0:27:44.840 spent five years at the World Bank in South Africa. 0:27:44.960 --> 0:27:47.280 So tell us a little bit about like what don't 0:27:47.320 --> 0:27:50.760 we really know about rare earth minerals, and then we 0:27:50.800 --> 0:27:53.639 want to kind of roll into this how the US 0:27:54.000 --> 0:27:57.680 China trade war plays into all of this. But come 0:27:57.720 --> 0:27:59.480 on in and welcome, Welcome. 0:28:00.240 --> 0:28:02.280 Thanks so much for having me. So you know, as 0:28:02.320 --> 0:28:05.560 Joe said, rare earths aren't rare, They're everywhere. But why 0:28:05.640 --> 0:28:08.200 we're really vulnerable for them is that once you dig 0:28:08.240 --> 0:28:10.160 them out of the ground, you have to separate them, 0:28:10.560 --> 0:28:14.280 and that those separation facilities are primarily in China. So 0:28:14.400 --> 0:28:18.240 for heavy rare earths, they actually separate over ninety percent 0:28:18.359 --> 0:28:21.359 of the world's heavy raarers and about eighty percent of 0:28:21.480 --> 0:28:24.440 light rarers. Now the problem is is that that means 0:28:24.480 --> 0:28:27.480 once they go to China, China can apply any sort 0:28:27.480 --> 0:28:30.400 of export restriction to them, and they actually started doing 0:28:30.480 --> 0:28:34.520 this about fifteen years ago when China first cut off 0:28:34.680 --> 0:28:37.840 Japan from rare earth exports because they got into an 0:28:37.920 --> 0:28:41.400 argument about a fishing trawler. So we have seen minerals 0:28:41.400 --> 0:28:44.560 and even rare earths at the very beginning be weaponized 0:28:44.600 --> 0:28:47.959 over time. For US, it's a national security challenge because 0:28:48.320 --> 0:28:51.200 rare earths go into almost every form of defense technology, 0:28:51.400 --> 0:28:54.120 from fighter jets and warships to missiles and tanks. 0:28:54.400 --> 0:28:57.200 Gracelin, can we build the facilities here in the US 0:28:57.640 --> 0:29:00.880 that could process those rare earth so then the United 0:29:00.920 --> 0:29:02.520 States gains control over some of the. 0:29:02.480 --> 0:29:06.320 Share absolutely and we are building them. The problem is 0:29:06.320 --> 0:29:08.640 that none of these facilities come online overnight. 0:29:08.960 --> 0:29:10.960 So over the last five years. 0:29:10.640 --> 0:29:13.880 The Department of Defense, through something called the Defense Production Act, 0:29:14.040 --> 0:29:17.200 has given out over three hundred million dollars to build 0:29:17.200 --> 0:29:20.440 these facilities in Texas, in Canada, and for some rare ers, 0:29:20.520 --> 0:29:23.320 it'll be the first major facility outside of China. 0:29:24.080 --> 0:29:27.280 Canada that maybe five years ago that worked. We're not 0:29:27.280 --> 0:29:29.360 going to talk about that right now, but that made 0:29:29.400 --> 0:29:31.920 my ears perk up because of what's going on between 0:29:31.920 --> 0:29:33.040 the US and Canada right now. 0:29:33.080 --> 0:29:35.200 But can we produce enough and jo come on back 0:29:35.240 --> 0:29:37.680 in here enough in terms of to meet the demand 0:29:37.680 --> 0:29:40.160 that we need here in the US for things. 0:29:40.160 --> 0:29:42.959 Not right now? Yeah, I mean this is you know 0:29:43.160 --> 0:29:46.040 where Gracelin's getting at here is very similar to the 0:29:46.040 --> 0:29:49.280 story of steel and copper and like all these other 0:29:49.520 --> 0:29:52.360 things anything manufacturing right like this is the approach of 0:29:52.400 --> 0:29:55.360 the Trump administration is bring all manufacturing back to the 0:29:55.480 --> 0:29:58.560 United States of America. To maybe take a phrase from 0:29:58.560 --> 0:30:02.719 our president, sounds great, it doesn't work right like, you 0:30:02.760 --> 0:30:04.880 can do it, but as Grayson says, it's going to 0:30:04.920 --> 0:30:07.200 take you a while. I mean, MP materials is like 0:30:07.240 --> 0:30:10.480 the big critical minerals company in the United States. Yeah, 0:30:10.520 --> 0:30:14.200 and they're still shipping a significant amount of their rare 0:30:14.280 --> 0:30:17.240 earth pulled out of the ground to China to be processed. Yes, 0:30:17.320 --> 0:30:21.200 they're currently working on integrating everything and having their own processing, 0:30:21.240 --> 0:30:22.800 But you talk to anybody in the market and they're 0:30:22.800 --> 0:30:25.640 like that, even when they get fully scaled up to 0:30:25.680 --> 0:30:27.640 what they say they want to do, it's just not 0:30:27.840 --> 0:30:28.200 enough on. 0:30:28.160 --> 0:30:31.200 Their own graycelon. So it sounds like China has a 0:30:31.360 --> 0:30:34.720 great weapon in this trade war to get the US 0:30:34.800 --> 0:30:37.640 to maybe bend a little bit. Is that fair? 0:30:39.240 --> 0:30:42.200 Absolutely, So let's talk about the export restrictions that just 0:30:42.240 --> 0:30:44.560 came out this week. So they're not actually a ban. 0:30:45.040 --> 0:30:47.560 If you think about restrictions, you start with something that 0:30:47.560 --> 0:30:50.080 we call non automatic licensing, which means you have to 0:30:50.120 --> 0:30:52.120 apply to get a permit to be able to export 0:30:52.160 --> 0:30:55.400 the minerals. Then you have tariffs, you have quotas, those 0:30:55.400 --> 0:30:57.480 are your mid tier, and then you have a ban. 0:30:57.800 --> 0:31:01.320 What China did this week was the lightest form of restriction, 0:31:01.400 --> 0:31:03.240 for lack of a better word, is they put in 0:31:03.280 --> 0:31:06.720 the non automatic licensing. But if the trade war continues 0:31:06.760 --> 0:31:11.560 to accelerate, they can continue to tighten those restrictions and ultimately, 0:31:11.600 --> 0:31:14.440 because there are so few facilities that can give us 0:31:14.440 --> 0:31:17.120 the rarers that we need outside of China. That's going 0:31:17.160 --> 0:31:20.840 to undermine our national security. It's in things like semiconductors, 0:31:20.880 --> 0:31:23.240 so it's going to affect our economic security, and it's 0:31:23.280 --> 0:31:25.520 going to affect our energy security, given that they are 0:31:25.520 --> 0:31:27.320 in many forms of energy technology. 0:31:27.560 --> 0:31:30.480 So as your read on what China did by taking 0:31:30.520 --> 0:31:35.080 the easiest member measure and or the least punitive measure 0:31:35.800 --> 0:31:38.880 a strong diplomatic sign to the US that we're open 0:31:38.960 --> 0:31:39.960 to negotiating. 0:31:42.160 --> 0:31:45.160 I think it's a sign to both China and the US, Like, ultimately, 0:31:45.320 --> 0:31:48.680 these companies are all Chinese and cutting off exports altogether 0:31:49.040 --> 0:31:53.000 would be economically consequential to them. So it's a sign 0:31:53.040 --> 0:31:55.280 there that, look that there is room that we need 0:31:55.320 --> 0:31:58.440 to get ready, we need to buffer, you know, be 0:31:58.600 --> 0:32:01.440 ready for potential changes. But it is also assigned to 0:32:01.480 --> 0:32:03.560 the US that they didn't go all the way to 0:32:03.640 --> 0:32:05.720 the very end and ban exports immediately. 0:32:05.920 --> 0:32:07.600 Joe, how long in your view do you think the 0:32:07.720 --> 0:32:10.040 US will have to rely on China for processing? 0:32:12.000 --> 0:32:12.600 A long time? 0:32:12.680 --> 0:32:16.160 I mean I want to talk in one hand, counting. 0:32:15.920 --> 0:32:19.040 Or not anywhere in the New Yar term, and to 0:32:19.120 --> 0:32:21.280 jump off what Graceland just said, they didn't put an 0:32:21.320 --> 0:32:24.040 export ban or an export control on everything, Like the 0:32:24.040 --> 0:32:27.320 two most common rare earths are untouched by this. 0:32:27.560 --> 0:32:27.760 Right. 0:32:28.080 --> 0:32:31.520 So the way I've heard the subscribe from Graceland and 0:32:31.560 --> 0:32:33.320 from other people in the rare earth's space, right the 0:32:33.320 --> 0:32:38.240 critical mineral space is like Chinese policymakers are incredibly sharp. 0:32:38.480 --> 0:32:42.040 They know the score, they know what impacts what. And 0:32:42.080 --> 0:32:46.800 when this came out, initially people in the market were saying, oh, whoa, okay, 0:32:46.840 --> 0:32:49.200 they're going to restrict these you know, seven or so 0:32:49.760 --> 0:32:52.720 rare earth critical minerals. But then what they started realizing was, 0:32:52.760 --> 0:32:56.840 oh my gosh, this includes like actual magnets, this also 0:32:56.880 --> 0:33:00.400 includes actual products that are shipped to the United Sts dates. 0:33:00.640 --> 0:33:04.360 And that's when, especially in the defense community, people were 0:33:04.400 --> 0:33:07.640 calling up and saying, whoa hold on? This is an 0:33:07.680 --> 0:33:10.479 interesting shot across the bout because you might remember gallium 0:33:10.520 --> 0:33:14.320 and Germanium had export controls put on back in the fall, 0:33:14.800 --> 0:33:18.480 and that was like a follow up to prior year 0:33:18.560 --> 0:33:22.080 where China had said they were looking at it. I mean, 0:33:22.320 --> 0:33:24.440 we had reporting a year ago that said when the 0:33:24.480 --> 0:33:28.800 gallium Germanium shot came from China. That was the panic 0:33:28.840 --> 0:33:32.680 button that went off across the DOE, the DoD and 0:33:32.760 --> 0:33:34.960 all the other departments. So we had one very high 0:33:35.000 --> 0:33:38.080 senior White House official who told us that was the 0:33:38.160 --> 0:33:41.800 moment when everybody finally got it and understood how serious 0:33:41.840 --> 0:33:45.760 this was. And that was under the Biden administration. So 0:33:45.800 --> 0:33:48.400 this isn't new right like China. It is my point 0:33:48.400 --> 0:33:50.760 of they know the score, which is they'll roll out 0:33:50.800 --> 0:33:53.080 something here, they'll roll out something there, and it's it's 0:33:53.120 --> 0:33:55.520 a warning sign, right. It's like, hey, we're doing this, 0:33:55.680 --> 0:34:00.920 and we're making the people that matter most realize it first. 0:34:00.160 --> 0:34:03.920 And contextualize this for us because in the negotiations between 0:34:03.960 --> 0:34:06.080 the US and China, which do not exist right now, 0:34:06.160 --> 0:34:09.040 but we'll ostensibly have to exist when it comes to 0:34:09.920 --> 0:34:13.399 resolving this trade war. That's the whole idea here. How 0:34:13.440 --> 0:34:15.839 important is the card of rare earth. 0:34:18.400 --> 0:34:20.839 Rare earth will be important, minerals will be important. If 0:34:20.840 --> 0:34:23.319 we take a step back, and you know, with Joe 0:34:23.360 --> 0:34:25.360 Is said as how this is escalated. Even from the 0:34:25.360 --> 0:34:30.080 previous administration of germanium gallium antimony was banned in the fall, 0:34:30.320 --> 0:34:33.000 we saw tungsten came at the start of this year, 0:34:33.440 --> 0:34:34.160 is that we. 0:34:34.200 --> 0:34:35.440 Are actually vulnerable. 0:34:35.560 --> 0:34:38.600 You know, we kind of sometimes throw all minerals into 0:34:38.760 --> 0:34:40.880 rare earths or rares into minerals, but when I go 0:34:41.000 --> 0:34:45.000 beyond rare earth, we're getting increasing restrictions coming out and 0:34:45.200 --> 0:34:47.759 all of these commodities that we're being hit by or 0:34:47.800 --> 0:34:50.920 ones that we often don't have alternate supply of, but 0:34:51.200 --> 0:34:54.280 we may have limited stockpiles of and that we need 0:34:54.320 --> 0:34:57.799 for our fundamental security. So expect to see minerals, I think, 0:34:57.840 --> 0:35:02.200 feature very strongly in the conversation, including raarers, because of 0:35:02.239 --> 0:35:05.479 the fact that we are dependent on China for close 0:35:05.520 --> 0:35:07.600 to two dozen critical minerals. 0:35:07.800 --> 0:35:10.280 All right, So final thoughts here, just got about a minute, 0:35:10.280 --> 0:35:13.359 minute and a half here left. So Joe, I don't know. 0:35:13.520 --> 0:35:16.479 I guess to watch the negotiations between US and China, 0:35:16.560 --> 0:35:19.160 right and what they say specifically in this area. This 0:35:19.239 --> 0:35:22.600 is a really really important sign in terms of what's happening. 0:35:22.719 --> 0:35:25.879 Yeah, we've all focused on tariffs for the past week, 0:35:26.200 --> 0:35:28.399 and for the past two or three days, we've really 0:35:28.440 --> 0:35:30.960 focused on the China terraffs because everything else apparently is 0:35:31.000 --> 0:35:33.040 on pause. One hundred and twenty five percent or whatever 0:35:33.040 --> 0:35:35.359 the latest number is, right, and what we've seen from 0:35:35.480 --> 0:35:38.000 China in this context, the rare earth of what they've 0:35:38.040 --> 0:35:42.360 done is they have different tools to respond to punitive 0:35:42.440 --> 0:35:45.400 terriffs from the President of the United States, because on 0:35:45.440 --> 0:35:47.319 some level, when you're just saying one hundred and twenty 0:35:47.360 --> 0:35:50.160 five percent tariff on all imports coming from your country, 0:35:50.280 --> 0:35:53.279 it's like the market's like, well, what does that actually mean? 0:35:53.480 --> 0:35:57.240 Right in China's response, they come back in very specific ways, 0:35:57.600 --> 0:35:58.640 and this is one of them. 0:35:58.640 --> 0:36:01.000 Very just I get it, target it right. 0:36:00.920 --> 0:36:03.360 So like, great, you hit us with a big, big tariff, 0:36:03.360 --> 0:36:05.359 guess what we're going to do this this one very 0:36:05.400 --> 0:36:09.160 specifically here, and maybe initially nobody in the market notices it, 0:36:09.200 --> 0:36:12.200 but people like Graceland and others are like, whoa, hey, 0:36:12.560 --> 0:36:13.520 let's take a look at this. 0:36:13.960 --> 0:36:16.880 That's Bloomberg News Medals and Mining reporter Joe Doe and 0:36:16.960 --> 0:36:20.719 Graceland Baskrin, director of the Critical Minerals Security Program at 0:36:20.719 --> 0:36:23.160 the Center for Strategic and International Studies. 0:36:23.200 --> 0:36:25.760 I think it's really interesting everybody's once again talking about 0:36:25.760 --> 0:36:27.879 where earth minerals although as do you like to say, 0:36:27.920 --> 0:36:30.160 not so over here? Yeah, But the point is that, 0:36:30.360 --> 0:36:33.200 right that we heard from our conversation that they're found 0:36:33.200 --> 0:36:34.799 in kind of small batches, and that's why it makes 0:36:34.800 --> 0:36:37.040 it a little bit complicated and so much in terms of 0:36:37.080 --> 0:36:40.200 I guess the refining is happening over in China, but 0:36:40.360 --> 0:36:42.319 there could be some very significant implications. 0:36:42.400 --> 0:36:44.799 Yeah, there could. I mean, as Graceland told us in 0:36:44.840 --> 0:36:47.799 our conversation with her, Japan was kind of ready for 0:36:47.840 --> 0:36:50.839 this because of this territorial dispute that they had like 0:36:50.840 --> 0:36:54.759 twenty eleven ish, So they now have this one year 0:36:55.360 --> 0:36:57.400 stockpile of what they consider critical. 0:36:57.560 --> 0:36:57.759 Right. 0:36:58.000 --> 0:37:00.680 We don't have that here. Companies here don't have that. 0:37:01.080 --> 0:37:07.080 And in fact, Graceland and her organization on Monday came 0:37:07.120 --> 0:37:10.640 out with this new report and it answers the question 0:37:11.280 --> 0:37:13.440 about filling a gap in a shortfall, and she basically 0:37:13.480 --> 0:37:16.560 says no, there's no separation of rare earth happening right now. 0:37:16.600 --> 0:37:22.280 In the United States, you're listening to the Bloomberg Business 0:37:22.280 --> 0:37:26.239 Weekdaily Podcast. Catch us live weekday afternoons from two to 0:37:26.320 --> 0:37:29.680 five pm Eastern Listen on Apple CarPlay and Android Auto 0:37:29.760 --> 0:37:40.320 with the Bloomberg Business app, or watch us live on YouTube. 0:37:41.600 --> 0:37:44.040 We continue to focus on news out of Washington, DC, 0:37:44.600 --> 0:37:47.640 the explosion and changing of tariff terms have led to 0:37:47.680 --> 0:37:50.920 a lot of volatility in global financial markets and questions 0:37:50.960 --> 0:37:52.240 about the global outlook. 0:37:52.480 --> 0:37:55.160 It also risks adding to the inflation concerns here in 0:37:55.160 --> 0:37:58.480 the United States. Bottom line, it's a tough environment. As 0:37:58.520 --> 0:38:00.880 we heard this past week from Golden and Sachs CEO 0:38:01.040 --> 0:38:04.560 David Solomon on his earnings call with analysts. 0:38:04.239 --> 0:38:06.920 This uncertainty around the path forward and fears over the 0:38:06.920 --> 0:38:10.719 potentially escalating effects of the trade war have created material 0:38:10.800 --> 0:38:14.400 risks to the US and global economy. We are encouraged 0:38:14.440 --> 0:38:17.320 by the administration's recent actions to pursue a more gradual 0:38:17.440 --> 0:38:22.120 policy process that allows for considered negotiations with many countries, 0:38:22.600 --> 0:38:24.920 but how policies will evolve is still unknown. 0:38:25.280 --> 0:38:29.560 Of course, that was Goldbn's CEO David Solomon. Unknowns uncertainties 0:38:30.040 --> 0:38:32.800 not easy, any of it for the Fed to determine 0:38:32.800 --> 0:38:36.240 monetary policy going forward. And as Bloomberg's Christine Harper writes 0:38:36.239 --> 0:38:39.160 in a Bloomberg opinion piece looking back at former Fetchair, 0:38:39.200 --> 0:38:42.200 Paul Volker's career could provide lessons for President Trump and 0:38:42.320 --> 0:38:45.800 his administration. Christine, by the way, is Bloomberg News editorial 0:38:45.880 --> 0:38:48.600 board member co author with Paul Volker, of the book 0:38:48.760 --> 0:38:51.280 about his life. It's entitled Keeping at It, The Quest 0:38:51.320 --> 0:38:54.080 for Sound Money and Good Government. Christine joins us here 0:38:54.120 --> 0:38:55.920 in studio. I said, when you walked in, we've been 0:38:55.960 --> 0:38:59.319 thinking about you a lot, because we've talked about Paul 0:38:59.360 --> 0:39:02.840 Volker before with you in kind of stressful times and 0:39:02.880 --> 0:39:07.359 certainly these higher infleetionary times. Paul Volker, you write about 0:39:07.400 --> 0:39:10.319 two episodes during his life that are important. One takes 0:39:10.360 --> 0:39:12.920 us back to the administration of Richard Nixon in nineteen 0:39:13.000 --> 0:39:14.399 seventy one. Go there with us. 0:39:14.640 --> 0:39:17.520 Yeah, So he was part of he was a younger 0:39:17.640 --> 0:39:20.680 member of the Nixon administration. He was Under Secretary of 0:39:20.760 --> 0:39:23.719 Monetary Affairs, which he actually remembers as being one of 0:39:23.800 --> 0:39:25.520 the greatest job in the world. 0:39:26.520 --> 0:39:27.160 He loved it. 0:39:28.600 --> 0:39:33.440 But at that time, the US had this unsustainable requirement 0:39:33.680 --> 0:39:37.520 that it honored this thirty five dollars per ounce price 0:39:37.560 --> 0:39:42.120 for gold. And at that point, after decades of overseas 0:39:42.160 --> 0:39:46.759 spending of dollars on the Marshall Plan and various investments 0:39:46.800 --> 0:39:51.960 overseas countries abroad had so many dollars that everybody kind 0:39:51.960 --> 0:39:54.640 of knew there wasn't really enough gold to back at all. 0:39:55.160 --> 0:39:59.279 And so it was up to the Nixon administration to 0:39:59.360 --> 0:40:02.880 sort of admit that and come out with an announcement, 0:40:03.000 --> 0:40:06.319 and it was a unilateral declaration on a Sunday night 0:40:06.360 --> 0:40:10.160 in August in nineteen seventy one. Vulgar was very involved 0:40:10.160 --> 0:40:12.720 in a whole weekend of talks about it at Camp David. 0:40:13.400 --> 0:40:16.719 In the lead up. Everybody was surprised. It was known 0:40:16.760 --> 0:40:20.760 as the Nixon Shock, and they they recognized that suddenly 0:40:20.800 --> 0:40:23.680 taking the value of gold off of any kind of 0:40:23.719 --> 0:40:26.640 anchor meant that there could be just chaos and the 0:40:26.760 --> 0:40:29.840 value of the dollar could plummet. So they put on 0:40:29.920 --> 0:40:32.520 all these wage and price controls at the same time, 0:40:32.680 --> 0:40:35.759 they created tariffs. They tried to do all these things 0:40:35.800 --> 0:40:39.000 to manage the fallout, and also Vulker was immediately sent 0:40:39.080 --> 0:40:41.959 overseas to start talking to the financial leaders of every 0:40:41.960 --> 0:40:43.000 country major country. 0:40:43.080 --> 0:40:44.080 An extensive plan. 0:40:44.280 --> 0:40:48.200 There was an extensive plan to be sure. They weren't perfect. 0:40:48.239 --> 0:40:51.040 They did some crazy things, and they had this Treasury 0:40:51.080 --> 0:40:53.360 secretary at the time, John Connolly, who only lasted for 0:40:53.360 --> 0:40:58.160 eighteen months under Nixon, who was a sort of Texas character, 0:40:58.280 --> 0:41:01.680 and he he was a little nuts. But then George 0:41:02.040 --> 0:41:04.560 Schultz came along and they had a much more focused 0:41:04.600 --> 0:41:07.960 sort of way of dealing with it. So it wasn't perfect, 0:41:08.000 --> 0:41:10.320 but it was compared to what we're seeing with Trump 0:41:10.360 --> 0:41:13.120 and these tariffs. It was there was a rationale to 0:41:13.160 --> 0:41:16.200 it that everybody could understand. There was real economic thinking 0:41:16.280 --> 0:41:16.799 behind it. 0:41:17.000 --> 0:41:19.440 So that was nineteen seventy one. Fast forward to nineteen 0:41:19.480 --> 0:41:23.600 seventy nine when Vulker becomes Jimmy Carter's fed chair. Fed chair. 0:41:23.680 --> 0:41:26.160 Yeah, because the result of having no anchor to the 0:41:26.200 --> 0:41:28.879 dollar was that there was inflation. I mean, there were 0:41:29.040 --> 0:41:31.480 other reasons for the inflation and for the problems, but 0:41:32.200 --> 0:41:35.400 you know, the value of the dollar was thinking inflation 0:41:35.560 --> 0:41:39.800 was incredibly high. It was it was destroying the American economy, 0:41:40.280 --> 0:41:44.000 and so Jimmy Carter brought in Paul Vulker, even though 0:41:44.040 --> 0:41:46.360 Vulker told him before he when he sort of was 0:41:46.640 --> 0:41:49.560 talked to for the job, I'm going to do whatever 0:41:49.600 --> 0:41:52.200 it takes to kill inflation. That might mean to higher 0:41:52.280 --> 0:41:54.360 interest rates, it could be really bad for the economy, 0:41:54.400 --> 0:41:57.960 and Jimmy Carter chose him anyway. So it pretty much 0:41:58.280 --> 0:42:01.600 was one of the factors that say Jimmy Carter's reelection 0:42:01.800 --> 0:42:04.680 because the economy got really it was really tough, but 0:42:05.080 --> 0:42:08.520 it was successful bringing down inflation, and the sort of 0:42:08.640 --> 0:42:12.719 vulgar commitment to price stability right was so powerful, and 0:42:12.800 --> 0:42:17.640 so you know, the integrity he had in pursuing that 0:42:17.760 --> 0:42:22.800 aim was so completely believable that from then on, instead 0:42:22.800 --> 0:42:24.640 of the gold standard, the dollar was known as being 0:42:24.680 --> 0:42:25.680 on the vulgar standard. 0:42:25.719 --> 0:42:28.000 It's pretty wild. I mean, are we in the process 0:42:28.040 --> 0:42:31.280 of kind of losing that concept and idea. 0:42:31.520 --> 0:42:33.160 So that was sort of the point I was making 0:42:33.200 --> 0:42:35.480 in my piece was that, you know, really what the 0:42:35.520 --> 0:42:38.439 vulgar standard amounts to is this belief that there are 0:42:38.440 --> 0:42:41.759 public servants in America, whether they're you know, appointed or 0:42:41.760 --> 0:42:45.279 political or civil servants, but who are going to do 0:42:45.320 --> 0:42:48.120 what's right for America and make sure there's price stability 0:42:48.160 --> 0:42:50.759 and make sure there's sort of economic rationale behind things. 0:42:50.840 --> 0:42:52.960 Of course, it's not always been perfect. There have been mistakes, 0:42:53.280 --> 0:42:55.879 but when there are crises, you see over and over 0:42:55.920 --> 0:42:58.640 again these political figures will sort of retreat to the 0:42:58.640 --> 0:43:02.000 background and let experts like you know, when George Bush 0:43:02.080 --> 0:43:04.480 was dealing with the financial crisis, it was really Hank 0:43:04.520 --> 0:43:09.480 Paulson and Bernanki who were handling it for America but 0:43:09.600 --> 0:43:12.120 Butch wasn't kind of you know, back then there wasn't 0:43:12.160 --> 0:43:14.080 so much tweeting, but he wasn't like getting in the 0:43:14.080 --> 0:43:17.400 middle of it so much. And and you know, even 0:43:17.440 --> 0:43:22.560 when Bill Clinton was dealing with, you know, the bond 0:43:22.600 --> 0:43:24.959 market turmoil at the beginning of his you know, he 0:43:25.160 --> 0:43:29.640 recognized that Bob Rubin had more expertise. And so we've 0:43:29.640 --> 0:43:33.160 had presidents that listened to economic experts. This feels different 0:43:33.200 --> 0:43:36.200 because really a lot of anybody who looks at what 0:43:36.239 --> 0:43:41.160 the administration put out has immediately mocked the you. 0:43:41.080 --> 0:43:45.399 Know confidence certainly in the United States, right and. 0:43:45.560 --> 0:43:49.200 The yeah, and I mean when they saw the the 0:43:49.400 --> 0:43:51.879 formula that was used to justify the tariffs, I mean, 0:43:52.200 --> 0:43:55.480 none of it makes sense. The various explanations coming out 0:43:55.480 --> 0:43:59.400 from the administrations contradict each other. So even if you 0:43:59.480 --> 0:44:03.640 think that the general idea of being presenting a new 0:44:03.760 --> 0:44:07.799 trade order in the world makes sense, the way they're 0:44:07.800 --> 0:44:11.400 going about it is so haphazard that, you know, as 0:44:11.480 --> 0:44:14.000 David Solomon was saying, like nobody knows what's happening, and 0:44:14.040 --> 0:44:16.760 it's very hard to make any sort of forward planning. 0:44:17.560 --> 0:44:20.400 As Carol mentioned, we're seeing this hit consumer confidence. Yeah, 0:44:20.480 --> 0:44:23.160 you know, going into this term, a question that we 0:44:23.200 --> 0:44:26.160 asked a lot of our guests, Christine, was do we 0:44:26.200 --> 0:44:28.400 see maybe the markets, the bond market or the equity 0:44:28.400 --> 0:44:32.520 market or both become checks to what the president is doing, 0:44:32.600 --> 0:44:35.000 at least when it comes to his economic agenda. In 0:44:35.040 --> 0:44:37.000 your view, did we see that happen last week? 0:44:37.440 --> 0:44:40.520 Well, I'm not an expert on what's making the administration 0:44:40.600 --> 0:44:41.399 do anything, but. 0:44:41.640 --> 0:44:43.560 I don't think anybody is except for the president. 0:44:44.120 --> 0:44:46.680 I've just seen the reporting saying that Trump said, you 0:44:46.719 --> 0:44:49.000 know that the bond market was getting a little queasy 0:44:49.120 --> 0:44:52.560 or whatever words he used about guardrails here. Yeah, I 0:44:52.560 --> 0:44:56.160 mean the borrowing costs of the United States government is 0:44:56.200 --> 0:45:00.880 a huge guardrail. I mean, none of the administration policies 0:45:00.920 --> 0:45:03.520 are going to succeed if suddenly we're paying a huge 0:45:03.560 --> 0:45:07.400 amount more in interest every year. So you know, you 0:45:07.640 --> 0:45:09.680 can cut as many federal jobs as you want, you 0:45:09.719 --> 0:45:12.160 can cut all the services from the federal government. But 0:45:12.200 --> 0:45:16.279 if we're if all that you know, savings is you know, 0:45:16.400 --> 0:45:19.399 overtaken by having to pay more on interest on our debt. 0:45:19.440 --> 0:45:21.040 I don't know where where that's getting us. 0:45:21.120 --> 0:45:22.920 What do you think the president could do in terms 0:45:22.960 --> 0:45:25.960 of you know, or he and his key economic advisors 0:45:26.000 --> 0:45:29.080 to maintain the confidence in the US by citizens of 0:45:29.120 --> 0:45:31.279 the US and also the global world. Well, based on 0:45:31.320 --> 0:45:32.600 what well. 0:45:32.480 --> 0:45:34.560 I think, you know, it does seem that a more 0:45:34.600 --> 0:45:37.120 consistent approach would be helpful. If that's what you hear 0:45:37.160 --> 0:45:41.040 from business leaders, that's what you hear from foreign leaders. 0:45:41.280 --> 0:45:43.839 They want to understand what the aims are here. They 0:45:43.880 --> 0:45:47.480 want to clear path forward and you know, not a 0:45:47.560 --> 0:45:51.800 daily change in the in the tariff regime and plans 0:45:51.840 --> 0:45:56.560 and you know, not sort of terroriffts by tweet that doesn't. 0:45:56.440 --> 0:45:58.040 Whether I want to ask you what if you think 0:45:58.120 --> 0:46:02.320 what if that's his aim is to just constantly upset 0:46:02.400 --> 0:46:05.120 people and keep them kind of on edge, whether it's 0:46:05.160 --> 0:46:08.480 global leaders, whether he definitely has shown a difference to 0:46:08.680 --> 0:46:11.200 the equity market, it's certainly the bond market that caught 0:46:11.239 --> 0:46:13.880 his attention. But what if that is his strategy? What 0:46:14.000 --> 0:46:16.799 could be as you think about you've covered so much 0:46:16.840 --> 0:46:20.400 in terms of crises and just made off crypto like 0:46:20.480 --> 0:46:23.520 just so many things your purview, How do you like, 0:46:24.160 --> 0:46:26.320 how how are we thinking about kind of the US 0:46:26.360 --> 0:46:28.360 as an economic and financial. 0:46:28.040 --> 0:46:30.640 Might Yeah, I mean the US is sort of based 0:46:30.680 --> 0:46:33.800 on this idea that you can your money is safe 0:46:33.920 --> 0:46:36.720 lending to the US government. And if we have a 0:46:36.760 --> 0:46:41.440 policy that nobody understands or trusts and seems all to 0:46:41.480 --> 0:46:44.719 be designed to satisfy the whims of one person, it's 0:46:44.760 --> 0:46:46.719 going to be harder and harder for us to maintain that, 0:46:46.800 --> 0:46:50.560 and that would be really damaging for Americans. So ideally, 0:46:50.640 --> 0:46:52.160 what would be good to see you, to say, back 0:46:52.160 --> 0:46:54.880 to your question, is for you know, the president to 0:46:54.960 --> 0:46:56.960 start listening to some of his I mean, it does 0:46:57.000 --> 0:46:59.719 sound like Treasury Secretary of Scott Pisens taking sort of 0:46:59.719 --> 0:47:02.959 the on the lead on this. The markets certainly trust 0:47:03.040 --> 0:47:05.400 him a bit more. He's talked a lot more about it, 0:47:05.520 --> 0:47:08.239 kind of a gradual approach, and so, you know, I 0:47:08.239 --> 0:47:10.279 think there's hope. That's why markets seem to be a 0:47:10.320 --> 0:47:14.480 little quieter today that you know, maybe some reason will prevail. 0:47:14.560 --> 0:47:17.799 It's but I mean, the president is very impulsive and 0:47:17.840 --> 0:47:20.879 so it's it's very hard to know what will really happen. 0:47:21.000 --> 0:47:23.439 Yeah, what are potential long term risks in your view 0:47:23.920 --> 0:47:28.239 if during this administration the US moves away from this 0:47:28.400 --> 0:47:33.680 vulgar standard, right, does that have ramifications beyond the selection? 0:47:34.160 --> 0:47:34.319 Well? 0:47:34.400 --> 0:47:35.840 Sure, I mean, I think what you see is that 0:47:35.920 --> 0:47:38.400 the borrowing costs of the US go up because you know, 0:47:38.840 --> 0:47:42.279 people whether it's American citizens or people overseas, just start 0:47:42.320 --> 0:47:44.839 putting their money, the money that they want to make 0:47:44.840 --> 0:47:47.360 sure is there no matter what, They're not necessarily going 0:47:47.400 --> 0:47:49.360 to put it in treasuries or or all of it 0:47:49.440 --> 0:47:52.239 in treasuries. They might start finding other places. That's good 0:47:52.280 --> 0:47:56.560 for you know, other countries and their debt or other markets, 0:47:56.760 --> 0:47:59.920 but it's bad for the US borrowing. And you know, 0:48:00.160 --> 0:48:04.960 you just see inflation cause because you'll have higher costs 0:48:04.960 --> 0:48:07.759 for Americans having to try to buy things overseas. I 0:48:07.800 --> 0:48:11.560 think there's just all these privileges Americans have gotten used 0:48:11.560 --> 0:48:14.000 to knowing that the dollar was sort of needed by 0:48:14.040 --> 0:48:17.160 everybody in the world and sought sought after, and the 0:48:17.160 --> 0:48:20.399 same with you know, US treasuries is at risk, I think, 0:48:20.520 --> 0:48:22.200 I mean, it's not going to go away immediately, but 0:48:23.120 --> 0:48:24.920 we've taken it for granted for a long time. 0:48:25.040 --> 0:48:26.799 Phil like J. Powell could find himself in a really 0:48:26.800 --> 0:48:29.759 complicated right in terms of if tavis make things more 0:48:29.800 --> 0:48:32.719 expensive and there's more inflation pressures in what could be 0:48:32.760 --> 0:48:35.160 potentially a slow in growth environment. Yeah, that's tricky. 0:48:35.200 --> 0:48:37.840 Yeah, I mean you saw that in the seventies after 0:48:37.920 --> 0:48:40.680 the Nixon chaka you So basically these bouts of stagflation 0:48:40.760 --> 0:48:42.400 and it was really hard. I mean the FED at 0:48:42.400 --> 0:48:44.839 the time wasn't able to deal with the inflation. They 0:48:44.840 --> 0:48:48.759 were too concerned about the slow growth and they you know, 0:48:49.040 --> 0:48:51.440 basically Arthur Burns, that FED German at the time, was 0:48:51.440 --> 0:48:55.960 a close political ally of Richard Dixon, and many people 0:48:56.000 --> 0:49:00.320 believe he just let inflation, you know, happen because he 0:49:00.640 --> 0:49:03.560 wanted to make sure Nixon could get re elected and 0:49:03.640 --> 0:49:06.040 that turned out to be a really big problem for 0:49:06.080 --> 0:49:07.160 the US economy. 0:49:08.080 --> 0:49:11.080 Twenty five seconds. If Paul Volker was here, what would 0:49:11.120 --> 0:49:14.239 you want to ask him about this environment? Just quickly? Well, 0:49:14.280 --> 0:49:14.839 I know he would. 0:49:14.960 --> 0:49:16.759 I mean, at the big point he wanted to make 0:49:16.760 --> 0:49:21.719 in the book was the importance of competent government. It 0:49:21.800 --> 0:49:24.239 was a true public servit right, Yeah, And so he 0:49:24.480 --> 0:49:26.719 realized sort of like the big takeaway at the end 0:49:26.760 --> 0:49:28.600 of his life was we need to have good, well 0:49:28.640 --> 0:49:31.440 trained people staffing the US government. So I think he 0:49:31.480 --> 0:49:34.760 would be really upset at all the ways we're treating 0:49:35.160 --> 0:49:35.960 federal workers. 0:49:36.360 --> 0:49:39.480 Christine Harper is Bloomberg News editorial board member and the 0:49:39.520 --> 0:49:42.920 co author with Paul Vulker, of the book about his life. 0:49:43.120 --> 0:49:45.920 It's called Keeping at It, The Quest for Sound Money 0:49:46.040 --> 0:49:46.880 and Good Government. 0:49:51.400 --> 0:49:55.239 This is the Bloomberg Business Week Daily Podcast. Listen live 0:49:55.360 --> 0:49:58.239 each weekday starting at two pm Eastern on Apple car 0:49:58.320 --> 0:50:01.160 Play and the Android Auto with the Bloomberg Business App. 0:50:01.239 --> 0:50:04.000 You can also listen live on Amazon Alexa from our 0:50:04.040 --> 0:50:08.120 flagship New York station, Just Say Alexa played Bloomberg eleven. 0:50:07.840 --> 0:50:10.520 Thirty following our list of fifty companies to watch. We 0:50:10.560 --> 0:50:13.560 talked about that back in January. Here are ten names 0:50:13.600 --> 0:50:16.440 you should know for better or worse. Specifically for the 0:50:16.480 --> 0:50:19.879 second quarter, Bloomberg Intelligence Alice have dug into their scenarios 0:50:20.120 --> 0:50:22.960 to identify the most interesting companies. Tim from a larger 0:50:23.000 --> 0:50:26.680 group of high confidence focus ideas. 0:50:26.360 --> 0:50:30.399 Biscuits, handbags, chatbots. I'm just going to say to share 0:50:30.400 --> 0:50:32.560 the names that made the grade with us. As Tim Craighead, 0:50:32.760 --> 0:50:36.560 he's Bloomberg Intelligence Senior European Strategists's director of Research Content. 0:50:36.600 --> 0:50:39.759 He joins us from London. Check out this story at 0:50:39.800 --> 0:50:42.120 Bloomberg dot com Slash business Week, also, of course, on 0:50:42.160 --> 0:50:45.360 the Bloomberg terminal. First up before we get to the handbags, 0:50:45.400 --> 0:50:48.200 the biscuits and the chatbots. Remind us how you continue 0:50:48.239 --> 0:50:50.360 to come up with the lists of stocks and companies 0:50:50.360 --> 0:50:52.360 to watch. How do you get there? What's the process? 0:50:52.600 --> 0:50:56.439 Now? Great to be on with you. It's all about 0:50:56.440 --> 0:51:00.719 our focus ideas. These are high conviction, fundamental calls that 0:51:00.760 --> 0:51:05.239 we think are different from what the market is thinking discounting. 0:51:05.920 --> 0:51:09.400 And there's catalyst a head that we think will turn 0:51:09.440 --> 0:51:15.160 the market's mindset towards ours. And in this instance, the 0:51:15.280 --> 0:51:19.440 catalyst the triggers that we're thinking about are all coming 0:51:19.520 --> 0:51:22.359 up in the second quarter. So that's how the list 0:51:22.400 --> 0:51:23.040 comes together. 0:51:23.360 --> 0:51:25.480 And what I have to say, we always look forward 0:51:25.520 --> 0:51:27.920 to it, Tim, because you guys really do do the 0:51:27.920 --> 0:51:31.040 homework and the research. But it's not just buy this 0:51:31.120 --> 0:51:34.160 company or not that you're saying by or sell. But 0:51:34.239 --> 0:51:36.640 it's not like, okay, this is just all good news. 0:51:36.719 --> 0:51:39.719 You also are like, here's some concerns and here's why 0:51:39.760 --> 0:51:42.040 this one there might be some clouds over it. 0:51:43.520 --> 0:51:47.120 Absolutely, and these are solid fundamental calls. Investors are going 0:51:47.120 --> 0:51:49.360 to make up their own mind of buying or selling. 0:51:49.400 --> 0:51:53.120 What we're looking for is where there's a disconnect in 0:51:53.200 --> 0:51:55.960 terms of what the market is thinking about relative to 0:51:56.000 --> 0:51:59.000 what we think is going on. And you're right with 0:51:59.120 --> 0:52:01.359 this list of ten and there's three of them, so 0:52:01.520 --> 0:52:04.160 thirty percent where we've got concerns. 0:52:04.200 --> 0:52:07.600 Indeed, so not a lot has changed, but quite a 0:52:07.600 --> 0:52:09.360 bit has changed, I'll say, in the past couple of 0:52:09.360 --> 0:52:11.880 months since you first came up with that list of fifty, what. 0:52:12.000 --> 0:52:16.760 Like, we've talked about tariffs or some TARIFFSIPC, those sorts 0:52:16.800 --> 0:52:17.200 of things. 0:52:17.920 --> 0:52:20.000 So how did you take those things into account when 0:52:20.000 --> 0:52:23.080 coming up with this list or even when doing the 0:52:23.120 --> 0:52:24.880 analysis that brought us these names. 0:52:26.320 --> 0:52:29.160 Well, certainly there are some that have nothing to do 0:52:29.400 --> 0:52:32.640 with those those key headlines, and we can get to those. 0:52:32.719 --> 0:52:38.600 But certainly those issues of tariffs, US policies that are 0:52:38.600 --> 0:52:41.200 being put into place, as well as deep seek and 0:52:41.200 --> 0:52:45.200 how that's changing the tenor of AI have fed into 0:52:45.239 --> 0:52:51.440 certain elements here. So to take the tariff issue, either 0:52:51.520 --> 0:52:56.200 one of you, certainly listeners have shopped on Timu in 0:52:56.239 --> 0:53:01.319 the States and beyond ultra low priced e commerce platform. Well, 0:53:01.360 --> 0:53:05.920 that's owned by a company called PDD and it's Chinese. 0:53:06.200 --> 0:53:10.680 It's one of the big Chinese tech companies, and they're 0:53:10.719 --> 0:53:16.560 going to be impacted by whatever constraints continue to coalesce 0:53:16.600 --> 0:53:20.520 around tariffs. At the same time, they're also looking to 0:53:20.640 --> 0:53:25.400 expand TIMU beyond the US, and that's a lot of 0:53:25.440 --> 0:53:29.200 money that's being spent. We think that there's margin erosion 0:53:29.239 --> 0:53:33.040 that's going to happen here and different, but sticking in 0:53:33.080 --> 0:53:38.120 the low priced retail front. But brick and mortar, Doalarrama 0:53:38.880 --> 0:53:40.800 is a Canadian dollar store. 0:53:40.880 --> 0:53:43.400 Okay, this is one we never heard of. Full disclosure. 0:53:43.480 --> 0:53:48.080 Yeah, fair enough. Well you're not very well. You know, 0:53:48.160 --> 0:53:49.960 you're one of the Americans who's not saying you're a 0:53:50.000 --> 0:53:55.080 Canadian at this point. I suppose. So you've got Dollar 0:53:55.160 --> 0:54:00.200 Rama that it's estimates, it's earnings expectations if held up. 0:54:00.320 --> 0:54:05.080 But Dollar Tree, dollar stores, others have seen some cuts 0:54:05.120 --> 0:54:09.880 and we think be it with slowing wage growth, inflation 0:54:09.960 --> 0:54:14.480 picking up issues from the standpoint of trade policies, that 0:54:14.520 --> 0:54:20.200 you're going to see estimate erosion with Dollarrama. You mentioned 0:54:20.840 --> 0:54:24.920 it in just a moment ago. Tesla doing relatively well 0:54:25.520 --> 0:54:29.120 versus the other auto companies. It's arguably one of the 0:54:29.120 --> 0:54:34.160 best placed companies when it comes to getting through navigating 0:54:35.000 --> 0:54:40.000 the tariff issues. But beyond that, there's a new model. 0:54:40.080 --> 0:54:44.840 Why that's starting to ramp up and you'll see sales 0:54:45.160 --> 0:54:48.799 we think, start to accelerate through the second quarter. And 0:54:49.239 --> 0:54:52.839 nobody's paying an attention to the battery storage business that 0:54:52.880 --> 0:54:55.600 they've got, which is a really big business. We think 0:54:55.640 --> 0:55:00.600 that's going to grow into the utility space. Those all 0:55:00.840 --> 0:55:03.600 sort of revolve around the Tarif issue and not to 0:55:03.680 --> 0:55:07.959 keep going here, but AI Deep Seek all of that's 0:55:08.000 --> 0:55:11.160 a big focus. We have a lot of companies on 0:55:11.200 --> 0:55:15.120 the fifty to watch for the year, but teleperformance is 0:55:15.160 --> 0:55:18.920 a new idea for us. And this is a call center. 0:55:19.360 --> 0:55:22.920 This is old school you know who do you get 0:55:22.960 --> 0:55:26.760 the phone call from? Related to whatever? 0:55:27.040 --> 0:55:30.600 Alright, hang up on wait, no, no. 0:55:30.280 --> 0:55:33.480 No, no. This is actually one of the world's largest 0:55:33.480 --> 0:55:37.279 call centers. It's based in France. We've got you know, 0:55:37.360 --> 0:55:41.240 operations everywhere. But we think they're going to get efficiencies 0:55:41.239 --> 0:55:44.960 from AI. Think about being a call center person and 0:55:45.040 --> 0:55:48.480 how much better you're going to be with the information 0:55:48.600 --> 0:55:50.960 that AI is going to be able to generate for 0:55:51.040 --> 0:55:54.279 you as you're making your next phone call or you know, 0:55:54.440 --> 0:55:57.280 the phone calls coming in. From a customer service perspective, 0:55:57.680 --> 0:56:00.359 we think it's an opportunity be it every bud he's 0:56:00.440 --> 0:56:03.360 thinking if you look at the stock and the earnings estimates, 0:56:03.400 --> 0:56:06.080 that this company isn't a bad shape. 0:56:06.239 --> 0:56:08.439 Tim When you do these lists, you guys also get 0:56:08.480 --> 0:56:12.320 into often management change and restructuring opportunities, and you have 0:56:12.360 --> 0:56:14.200 a couple of companies along those lines as well. 0:56:15.320 --> 0:56:19.839 We do think along the lines of driving on your 0:56:19.920 --> 0:56:22.520 vacation as you start to think about the summer and 0:56:22.560 --> 0:56:25.080 you're on the highway going south and you take a 0:56:25.120 --> 0:56:28.000 break and you go to a cracker barrel. Have either 0:56:28.000 --> 0:56:28.920 one of you all done that? 0:56:29.560 --> 0:56:32.560 Not many, many years? I have many. 0:56:33.600 --> 0:56:37.360 I think I have family tips like it's. 0:56:36.360 --> 0:56:39.520 So regional in the US though, yeah it is. 0:56:39.840 --> 0:56:46.640 But they've suffered three years of earnings expectation cuts. There's 0:56:46.800 --> 0:56:51.600 not many positive opinions on Wall Street. But we see 0:56:51.600 --> 0:56:56.719 a wholesale change here, menu revamp, services, and the way 0:56:56.760 --> 0:57:00.880 that they're dealing with their employees has been revamp. We 0:57:00.880 --> 0:57:05.399 see a revival and earnings changing. And the same thing 0:57:05.440 --> 0:57:08.040 at a very different scale could be said about Caring. 0:57:09.040 --> 0:57:11.320 This is a luxury goods company. You know, the biggest 0:57:11.320 --> 0:57:14.600 brand that they have is Gucci, and again they've suffered 0:57:14.640 --> 0:57:19.200 three years of earnings estimate cuts and we think that 0:57:19.280 --> 0:57:22.960 with a new CEO at Gucci, a new head of design, 0:57:23.560 --> 0:57:27.480 that there's rejuvenation at the brand that's gonna start to 0:57:27.520 --> 0:57:30.400 show through. And second quarter is gonna be quite critical. 0:57:30.720 --> 0:57:31.080 All right. 0:57:31.240 --> 0:57:34.439 So along with Europe, China is another stock market that's 0:57:34.520 --> 0:57:36.640 garnering a lot of attention right now. We have talked 0:57:36.720 --> 0:57:40.040 so much about Europe and opportunities versus the United States, 0:57:40.600 --> 0:57:43.400 but let's talk to China. What's geared to Beijing's stimulus 0:57:43.440 --> 0:57:45.720 measures and who might benefit as a result. 0:57:46.800 --> 0:57:50.240 We think that this is a big deal. It's interesting. 0:57:50.320 --> 0:57:52.480 I was in our Hong Kong office back about six 0:57:52.520 --> 0:57:55.320 months ago and there was a lot of discussion about 0:57:55.680 --> 0:58:00.000 ABC anything but China. That's now shifted. I was back 0:58:00.440 --> 0:58:03.160 about three or four weeks ago, and it's now it's 0:58:03.200 --> 0:58:05.720 the ABC. But it's like all of word China, and 0:58:07.440 --> 0:58:11.280 Beijing is indeed putting through more stimulus measures. They're trying 0:58:11.280 --> 0:58:13.840 to be proactive about how to deal with the tariffs, 0:58:14.800 --> 0:58:16.520 but they know they have to deal with their own 0:58:16.560 --> 0:58:21.000 problems about demographics and the policies and the property crisis, 0:58:21.160 --> 0:58:24.880 and with a lot of stimulus measures, this is now 0:58:25.080 --> 0:58:28.400 starting to show evidence of the turnaround, and with that, 0:58:28.960 --> 0:58:31.240 you've got more interested in the stock market. And the 0:58:31.280 --> 0:58:35.800 way that global investors are getting into Chinese stocks is 0:58:35.840 --> 0:58:38.560 through the Hong Kong Stock Exchange. With a number of 0:58:40.160 --> 0:58:44.280 overseas programs. IPOs are starting to come back to life. 0:58:44.440 --> 0:58:46.680 We think Hong Kong Stock Exchange is going to see 0:58:46.960 --> 0:58:52.120 positive estomer revisions. At the same time, Beijing is lowering 0:58:52.200 --> 0:58:56.480 interest rates, and with lower interest rates, that can pressure 0:58:57.120 --> 0:59:02.320 earnings estimates for banks because you've got lower interest coming through, 0:59:02.520 --> 0:59:04.760 and we think that there's a net interest margin or 0:59:04.800 --> 0:59:08.120 profit margin erosion that's going to hit companies like the 0:59:08.200 --> 0:59:12.520 Agricultural Bank of China ag Bank, along with a couple 0:59:12.560 --> 0:59:16.600 of the other big state owned enterprise banking companies. So 0:59:16.880 --> 0:59:20.560 that's that's a negative, notwithstanding the positive view we have 0:59:20.760 --> 0:59:22.560 on China turning things around. 0:59:22.760 --> 0:59:24.920 Well on that and these are not two names that 0:59:24.960 --> 0:59:28.040 are on this list, but Tesla's and you spoke about 0:59:28.040 --> 0:59:30.560 that a little bit by d M. Shall me. I 0:59:30.640 --> 0:59:36.240 don't know if Americans fully understand and grasps the innovations 0:59:36.360 --> 0:59:39.240 being made in the vehicles coming from those companies. 0:59:40.120 --> 0:59:43.640 It is amazing. We did a report and if you've 0:59:43.640 --> 0:59:46.400 got a terminal. You can find these own a bi 0:59:46.560 --> 0:59:51.640 space Deep Deep Deep Ive reports. One on Made in 0:59:51.720 --> 0:59:54.840 China twenty twenty five and what this looked at was 0:59:54.920 --> 0:59:59.440 some in depth analysis on the industrial policy that Beijing 0:59:59.480 --> 1:00:02.800 and put in in twenty fifteen to drive innovation across 1:00:02.840 --> 1:00:06.800 a whole host of industries. One of those industries was 1:00:07.240 --> 1:00:13.280 autos with a focus on moving towards electrification and BYD 1:00:13.760 --> 1:00:17.080 is the poster child. And if you don't know, BYD 1:00:17.240 --> 1:00:22.200 actually stands for build your Dream and the technology that 1:00:22.280 --> 1:00:26.520 they are now putting into their cars is second to none, 1:00:26.840 --> 1:00:30.840 and the price points are quite compelling. They just announced 1:00:30.880 --> 1:00:37.400 a charging device that are charging infrastructure that allows you 1:00:37.480 --> 1:00:39.640 to get a full charge in five minutes. 1:00:40.960 --> 1:00:41.439 That's quick. 1:00:41.480 --> 1:00:44.000 That's quicker than a that's quicker than a gas than 1:00:44.160 --> 1:00:47.640 they pumping gas in your car. It's pretty cool. 1:00:48.320 --> 1:00:51.320 Listen, always always love going through these lists with you 1:00:51.400 --> 1:00:53.640 and love when you guys have an update or new list. 1:00:53.920 --> 1:00:56.120 We should point out too, there's a couple of healthcare 1:00:56.160 --> 1:01:00.439 companies where innovation is the theme, and so we highly 1:01:00.440 --> 1:01:04.120 recommend everybody check out the complete story and the complete 1:01:04.160 --> 1:01:06.240 list of companies. You can read it on the Bloomberg 1:01:06.280 --> 1:01:08.040 and at Bloomberg dot com slash BusinessWeek. 1:01:08.160 --> 1:01:12.040 That's Tim craighead of Bloomberg Intelligence, on the companies that 1:01:12.160 --> 1:01:13.360 you need to watch. 1:01:13.600 --> 1:01:15.480 Yeah, I think it's kind of interesting. We should point out. 1:01:15.560 --> 1:01:18.880 We reminded everybody that we talked to Tim a few 1:01:18.920 --> 1:01:21.400 weeks ago. It is in the current issue at Bloomberg 1:01:21.520 --> 1:01:24.600 BusinessWeek magazine that you can catch on the terminal at 1:01:24.600 --> 1:01:28.440 Bloomberg dot com slash business Week and of course on newstands. 1:01:28.440 --> 1:01:31.040 But you know, these are things that they lay out. 1:01:31.040 --> 1:01:34.680 They look at fundamentals, and he was standing by, you know, 1:01:34.760 --> 1:01:37.600 certainly this list, and I think about Tesla on it 1:01:37.680 --> 1:01:41.680 because you know, slumping below fifty percent share of California 1:01:41.760 --> 1:01:44.600 electric car market. I feel like every day there are 1:01:44.600 --> 1:01:47.640 some headlines talking about the challenges at Tesla. 1:01:47.720 --> 1:01:49.320 Tim, you want to talk about Tesla, I want to 1:01:49.320 --> 1:01:51.440 talk about cracker Barrel. That's good. 1:01:51.440 --> 1:01:52.840 You're always hungry, it is. 1:01:52.840 --> 1:01:55.000 Actually, don't I don't. I think I went once in 1:01:55.040 --> 1:01:58.240 college and I don't think i've been since. 1:01:58.440 --> 1:02:00.080 You kind of go when you have to always, I 1:02:00.080 --> 1:02:01.640 always going like out a road trip. 1:02:01.400 --> 1:02:04.680 Well, yeah, exactly when we were talking to Tim, I 1:02:04.720 --> 1:02:05.920 was looking up on the map. I was like, where 1:02:05.960 --> 1:02:09.040 are these things? Anyway? There actually are some in New Jersey, Carrol. 1:02:09.160 --> 1:02:11.640 Anyway, check out the list, folks, it's really interesting. If 1:02:11.680 --> 1:02:13.840 you want to get the complete one, as we said, 1:02:13.840 --> 1:02:20.840 you can find it on Bloomberg and at Bloomberg dot Com. 1:02:21.040 --> 1:02:25.040 You're listening to the Bloomberg Business Weekdaily podcast. Catch US 1:02:25.120 --> 1:02:28.600 live weekday afternoons from two to five pm Eastern. Listen 1:02:28.600 --> 1:02:32.200 on Applecarplay and Android Auto with the Bloomberg Business app, 1:02:32.320 --> 1:02:34.040 or watch US live on YouTube. 1:02:34.280 --> 1:02:38.440 President Trump escalated his administration's fight with Harvard University by 1:02:38.480 --> 1:02:41.680 threatening its tax exempt status after the school defied the 1:02:41.680 --> 1:02:45.440 government's demands to change its policies in exchange for billions 1:02:45.440 --> 1:02:48.200 of dollars of federal funding. And we should point out 1:02:48.600 --> 1:02:50.000 Harvard is fighting back. 1:02:49.880 --> 1:02:51.960 And you'll recall that a bit less than a month ago, 1:02:52.080 --> 1:02:55.080 President Trump said that the Education Department's one point six 1:02:55.240 --> 1:02:58.360 trillion dollars student loan portfolio would be handled by the 1:02:58.400 --> 1:03:01.800 Small Business Administration. The move coming amid worries that his 1:03:01.880 --> 1:03:05.720 efforts to overhaul the federal government could reduce programs and services. 1:03:05.800 --> 1:03:08.080 Well, we've got a great pair of voices to talk higher. 1:03:08.200 --> 1:03:11.920 Ed Janet Lauren is higher education finance reporter for Bloomberg News, 1:03:12.320 --> 1:03:15.680 and Gillian Berman is Assistant Managing editor News and Enterprise 1:03:15.720 --> 1:03:18.680 over at MarketWatch. She's also the author of a new book, 1:03:19.120 --> 1:03:22.360 Sunk Cost, Who's to Blame for the Nation's broken student 1:03:22.400 --> 1:03:24.080 loan system? And How to Fix It? 1:03:24.200 --> 1:03:25.800 Janet, do you want to start with you and Harvard? 1:03:26.280 --> 1:03:27.920 Because I think it's fair to say shots fired. 1:03:29.080 --> 1:03:32.439 Yes, for sure. Harvard released a letter that was sent 1:03:32.520 --> 1:03:36.920 to it last Friday by the government by a multitask force, 1:03:37.120 --> 1:03:40.400 multi agency task force, sort of stepping up their demands 1:03:40.400 --> 1:03:42.480 if they want to continue their flow of billions of 1:03:42.520 --> 1:03:46.360 dollars in federal research funding. They released that letter along 1:03:46.360 --> 1:03:48.760 with one from two law firms, saying they were not 1:03:48.880 --> 1:03:52.960 going to accept their demands and said there were certain 1:03:53.000 --> 1:03:56.040 lines that they could not cross in terms of academic freedom. 1:03:56.080 --> 1:03:59.240 They had a whole list of things such as the 1:03:59.280 --> 1:04:04.000 government wanted to curbs on doing things and admissions and 1:04:04.040 --> 1:04:08.440 governance and hiring in lots of things. And they said no. 1:04:09.240 --> 1:04:12.160 And a couple of hours later, the federal government said 1:04:12.240 --> 1:04:16.600 we're freezing two point two billion dollars in loans. 1:04:16.680 --> 1:04:17.720 I'm sorry, in grants. 1:04:18.080 --> 1:04:19.960 It's a big deal. And it's a lot of money. 1:04:20.320 --> 1:04:22.720 And you say, well, but they have a fifty three 1:04:23.040 --> 1:04:26.640 billion dollar endowment, why can't they spend it? Well, seventy 1:04:26.720 --> 1:04:31.840 percent of it is restricted and it isn't a bank account. 1:04:31.960 --> 1:04:35.400 But certainly you know they have some liquidity. You know, 1:04:35.440 --> 1:04:38.000 they have a one point five billion dollar line of credit. 1:04:38.040 --> 1:04:41.680 We saw last week they issued bonds of seven hundred 1:04:41.720 --> 1:04:43.640 and fifty million dollars. But it is a lot of 1:04:43.640 --> 1:04:46.880 money because eleven percent of their entire budget comes from 1:04:46.920 --> 1:04:48.760 the federal government in these research grants. 1:04:49.200 --> 1:04:51.280 I got to say, when we tak higher education, there's 1:04:51.280 --> 1:04:53.160 just a lot of money either way you look at 1:04:53.160 --> 1:04:56.000 and now someone like Harvard has a huge endowment, which 1:04:56.000 --> 1:04:59.160 gives it an incredible cushion. Having said that, I want 1:04:59.160 --> 1:05:01.040 to pull out a little bit and talk about the 1:05:01.080 --> 1:05:04.160 money that is in higher education. We all remember, is 1:05:04.200 --> 1:05:07.160 it ten fifteen years ago that headline that came across 1:05:07.520 --> 1:05:12.560 that said college debt was higher than credit card debt, 1:05:12.640 --> 1:05:14.360 And we all stopped and be like, how did we 1:05:14.400 --> 1:05:16.880 get here? Jillian, come on in on that starry story. 1:05:16.920 --> 1:05:18.600 This is what you get into because I think we 1:05:18.640 --> 1:05:21.080 spend so much time, how did we get to this point? 1:05:21.320 --> 1:05:22.000 How did we. 1:05:22.280 --> 1:05:24.680 Yeah, so, you know, there there are several different factors, 1:05:24.680 --> 1:05:27.400 but that headline you talked talked about really came in 1:05:27.440 --> 1:05:29.360 the wake of the Great Recession, and that was a 1:05:29.440 --> 1:05:32.560 huge moment for the explosion in student debt. We saw 1:05:32.760 --> 1:05:35.640 states pull back from funding their public colleges, which means 1:05:35.680 --> 1:05:38.960 students and families had to take on more of that funding. Obviously, 1:05:39.080 --> 1:05:42.280 families didn't have as much money to tap themselves or 1:05:42.320 --> 1:05:44.960 equity in their homes. And then also because of the 1:05:45.120 --> 1:05:48.080 you know, the sort of loose labor market, students who 1:05:48.160 --> 1:05:50.919 graduated with this debt had trouble finding jobs that could 1:05:50.960 --> 1:05:51.760 help them repay it. 1:05:51.800 --> 1:05:52.680 So the Great. 1:05:52.440 --> 1:05:54.280 Recession was, you know, sort of a really big moment 1:05:54.360 --> 1:05:55.240 for student debts. 1:05:55.560 --> 1:05:59.040 It's a unique problem to the US, though, and this 1:05:59.080 --> 1:06:02.320 is something that doesn't have than in other countries. But 1:06:02.360 --> 1:06:05.720 at the same time, we also have the best one 1:06:05.720 --> 1:06:09.120 could say, we have among the best universities in the world, 1:06:09.920 --> 1:06:13.080 not every one of them, but certainly these are institutions 1:06:13.080 --> 1:06:16.080 that are recognized internationally. What is so different about the 1:06:16.160 --> 1:06:18.320 US system that allows something like this to happen. 1:06:18.800 --> 1:06:22.160 Yeah, So the way that we fund colleges in the 1:06:22.280 --> 1:06:24.880 US is largely through students, so you know, it's sort 1:06:24.920 --> 1:06:27.360 of like a voucher. The student decides where they want 1:06:27.400 --> 1:06:29.560 to take that government money. And a lot of other 1:06:29.640 --> 1:06:33.840 countries where you know, we think about having little student debt, 1:06:33.960 --> 1:06:37.440 the government is doing more direct funding of the schools themselves. 1:06:37.760 --> 1:06:39.760 And you know that design of the system here in 1:06:39.760 --> 1:06:42.280 the US that was on purpose. We like to have, 1:06:42.400 --> 1:06:45.160 you know, what we call like diversity of institutions and 1:06:45.520 --> 1:06:47.200 you know, sort of the ability for the market to 1:06:47.240 --> 1:06:47.680 play out. 1:06:49.040 --> 1:06:53.640 So in the Trump administration has said they're interested in, 1:06:54.080 --> 1:06:57.640 of course, shutting down the Education Department, which after two 1:06:57.680 --> 1:07:01.960 thousand and nine began just for single loans and now 1:07:02.040 --> 1:07:03.720 we're at a huge amount. I think it would be 1:07:03.760 --> 1:07:07.360 the fifth largest US bank in America. Is moving it 1:07:07.400 --> 1:07:10.840 away from the Education Department to another agency Trump a 1:07:11.240 --> 1:07:14.880 Small Business SBA. Would that be reasonable? 1:07:15.960 --> 1:07:18.720 It depends who you ask. I think, you know, the 1:07:18.760 --> 1:07:21.080 way there hasn't been much detail, first of all about 1:07:21.080 --> 1:07:22.880 that plan, but I think the way that they envision 1:07:22.920 --> 1:07:25.800 it is, you know, maybe moving some of the staff 1:07:25.800 --> 1:07:28.080 at the Department of Education that handles this stuff over 1:07:28.120 --> 1:07:31.560 to SBA. Even still, I think people who work on 1:07:31.600 --> 1:07:33.480 these things are are worried that it could cause a 1:07:33.480 --> 1:07:37.000 lot of disruption. We already have some evidence that the 1:07:37.040 --> 1:07:40.360 staff cuts have caused disruption for borrowers and for students 1:07:40.360 --> 1:07:43.080 as they try to access those funds. So I think 1:07:43.080 --> 1:07:44.200 it could post some challenges. 1:07:44.480 --> 1:07:47.120 You know, I kind of approach this differently now that 1:07:47.120 --> 1:07:50.400 I have kids, because now I need to save for college. 1:07:50.440 --> 1:07:52.479 I's going to cost you a million dollars a year? 1:07:52.680 --> 1:07:55.320 Well, that's just wondering. I mean, everybody's sitting around here 1:07:55.640 --> 1:07:56.560 does have to think about it. 1:07:56.600 --> 1:07:57.480 Funny but not funny. 1:08:00.080 --> 1:08:01.520 I know you're not done yet. 1:08:01.680 --> 1:08:03.880 No, I'm not done yet, because there's you know, it's 1:08:03.920 --> 1:08:06.080 we're also an environment where it's like okay, now go 1:08:06.120 --> 1:08:06.840 get the masters. 1:08:07.080 --> 1:08:08.800 You know, where I was in college, it was like okay, 1:08:09.240 --> 1:08:11.880 twenty in the twenties to thirty thousand dollars per year. 1:08:11.960 --> 1:08:13.320 Now we're at what carroll. 1:08:13.720 --> 1:08:19.640 Sixty seventy eighty d everything all in total cost of attendance. 1:08:19.720 --> 1:08:21.599 Yeah, you know, I was thinking that it couldn't get 1:08:21.600 --> 1:08:24.960 any more expensive, Jillian, but that obviously wasn't the case. 1:08:25.320 --> 1:08:26.760 The system has to break at some point. 1:08:26.840 --> 1:08:30.559 No, yeah, I mean people keep saying that, and we'll see. 1:08:30.640 --> 1:08:33.280 I think that some of the disruption, you know, caused 1:08:33.280 --> 1:08:35.640 by the cuts at the Department of Education, may you know, 1:08:35.720 --> 1:08:38.680 push some things in another direction. Also, you know a 1:08:38.680 --> 1:08:41.000 lot of people have done some reporting on how gen 1:08:41.120 --> 1:08:44.439 Z is really less interested in college and so you 1:08:44.439 --> 1:08:46.879 know that could put some enrollment pressure on these schools 1:08:47.240 --> 1:08:49.760 and force them to bring down the cost. 1:08:49.800 --> 1:08:52.320 How much fault do you put at universities and colleges 1:08:52.360 --> 1:08:53.960 where the price just seems to go up and up 1:08:54.000 --> 1:08:55.439 and up, and they're like, we've got to pay because 1:08:55.479 --> 1:08:58.000 it's for teachers, it's for facilities. 1:08:57.880 --> 1:09:00.880 XYZ deans and food college. 1:09:00.680 --> 1:09:03.519 That it has outpaced inflation many times over. 1:09:03.840 --> 1:09:06.519 Yeah, I mean, I think the argument that I take 1:09:06.560 --> 1:09:08.200 in the book is that in a lot of cases, 1:09:08.240 --> 1:09:11.160 the colleges are sort of like responding to incentives created 1:09:11.200 --> 1:09:13.519 by the system. So, I mean, one big example is 1:09:13.560 --> 1:09:16.400 if you talk about graduate school. In the mid two thousands, 1:09:16.720 --> 1:09:19.400 the government allowed for people to start borrowing up to 1:09:19.439 --> 1:09:21.679 the cost of attendance for graduate school, and then kind 1:09:21.680 --> 1:09:25.360 of shortly after that, the number of master's degree programs 1:09:25.520 --> 1:09:27.120 exploded at universities. 1:09:27.280 --> 1:09:31.200 And there's a financial like pipeline right exactly. 1:09:31.280 --> 1:09:33.920 Yeah, and at the time, like even Republican lawmakers, you know, 1:09:34.080 --> 1:09:37.519 didn't really think that much about the consequences of that decision, 1:09:37.600 --> 1:09:39.320 you know, and if you were to ask them now 1:09:39.360 --> 1:09:40.240 that that would be a no go. 1:09:41.160 --> 1:09:44.040 What about loan limits? Are those those that have been 1:09:44.080 --> 1:09:48.320 talked about. Certainly they're in place for undergraduates, but for 1:09:48.320 --> 1:09:51.320 for graduates students instead of up to the cost of attendance. 1:09:51.320 --> 1:09:52.439 What do you think would happen there? 1:09:53.040 --> 1:09:56.160 So that I think, you know, some congressional Republicans are 1:09:56.160 --> 1:09:58.880 interested in doing something like that. You know, I think 1:09:59.160 --> 1:10:00.760 in a lot of ways it makes sense. And then 1:10:00.920 --> 1:10:02.800 you know, of course there's other people who will tell you, well, 1:10:03.040 --> 1:10:05.160 if that happens, then you're going to be sending people 1:10:05.200 --> 1:10:08.519 to the private market where you know, often they're fear protection. 1:10:08.680 --> 1:10:11.000 So it's like a tricky, tricky balance. 1:10:10.800 --> 1:10:12.439 Or not as many will go to school, right or 1:10:12.439 --> 1:10:14.040 not as many we'll go to school, which which some 1:10:14.080 --> 1:10:16.080 have argued. You know, we all laugh about it, but 1:10:16.120 --> 1:10:17.719 it's not funny. But you know, you need a plumber, 1:10:17.760 --> 1:10:21.000 an electrician or somebody in the construction industry. There's like 1:10:21.080 --> 1:10:23.639 you're fighting for these people, and they all talk about 1:10:23.640 --> 1:10:25.640 it that there's nobody there to do these things and 1:10:25.680 --> 1:10:27.519 whether or not we go back to trades people. You know, 1:10:27.560 --> 1:10:29.080 that's another argument. 1:10:29.200 --> 1:10:30.040 Right right, exactly. 1:10:30.200 --> 1:10:34.680 Yeah, So, Jillian, we talk about this in the context 1:10:34.760 --> 1:10:37.439 of what's happening in Washington right now, and a lot 1:10:37.479 --> 1:10:40.360 has changed in this administration, and I we're at a 1:10:40.360 --> 1:10:42.920 point where I think it's fair to say that the 1:10:42.920 --> 1:10:46.920 Trump administration is in a combative stance with colleges and 1:10:47.040 --> 1:10:49.639 universities right now. How do you look at what's happening 1:10:49.640 --> 1:10:53.040 in Washington is really reshaping higher education in the US? 1:10:53.800 --> 1:10:55.479 Yeah, I mean, I think, you know, part of the 1:10:56.400 --> 1:10:59.360 reason that there's been some political will for the kind 1:10:59.360 --> 1:11:01.919 of stuff that the trum administration is doing is because 1:11:01.960 --> 1:11:04.000 of questions around the value of higher ed. You know, 1:11:04.000 --> 1:11:06.920 if people thought that they were getting their money's worth, 1:11:07.320 --> 1:11:10.280 it would be harder to attack these institutions. So, you know, 1:11:10.360 --> 1:11:13.680 I think it will raise some questions about you know, 1:11:13.680 --> 1:11:14.679 about that going forward. 1:11:14.880 --> 1:11:17.160 In your view, Janet, is it realistic to think that 1:11:18.280 --> 1:11:20.720 in an institution like Harvard, for example, could lose its 1:11:20.760 --> 1:11:21.839 tax exempt status. 1:11:22.840 --> 1:11:25.800 It's hard to predict anything these days, but what it 1:11:25.880 --> 1:11:30.080 do do an institution like Harvard, So Harvard doesn't pay 1:11:30.120 --> 1:11:33.120 property taxes? I mean, unless it's a business expense, like 1:11:33.120 --> 1:11:35.720 if they run a parking garage, they would pay taxes. 1:11:36.240 --> 1:11:39.920 They're able to issue tax exempt bonds. They do pay 1:11:39.920 --> 1:11:43.800 an endownment tex As of twenty seventeen. Their donors get 1:11:43.800 --> 1:11:46.000 a tax break. If you give money to Harvard, you 1:11:46.000 --> 1:11:47.880 get a tax break. So there's a lot of things, 1:11:48.000 --> 1:11:50.599 and especially going to the bond market. They just had 1:11:50.720 --> 1:11:53.639 taxable debt, but they do have the ability to have 1:11:53.840 --> 1:11:56.640 non tax exempt debt. 1:11:57.040 --> 1:11:59.559 So, Jillian, where do you see this going right, because 1:11:59.600 --> 1:12:03.160 it just feels like the velocity continues, the debt continues 1:12:03.200 --> 1:12:05.640 to grow, it continues to be a story we you know, 1:12:05.800 --> 1:12:07.960 talk about it, and it really is difficult on a 1:12:08.000 --> 1:12:12.360 younger generation who want to buy homes perhaps and have families, 1:12:12.880 --> 1:12:15.160 but they're stuck paying off their college loans and that 1:12:15.160 --> 1:12:16.360 has an economic impact. 1:12:16.920 --> 1:12:19.759 Unfortunately. You know, it seems like we may be stuck 1:12:19.840 --> 1:12:22.080 in the pattern that we're in for a while. You know, 1:12:22.160 --> 1:12:24.840 there's there's not a lot of political will to change 1:12:24.840 --> 1:12:26.680 the system that the people who have the power to 1:12:26.720 --> 1:12:28.880 do it really are Congress, and you know, part of 1:12:28.920 --> 1:12:32.400 the reason why we've had so many changes in policy 1:12:32.439 --> 1:12:35.200 and borrowers experience so much whiplash is because the executive 1:12:35.200 --> 1:12:37.800 branch has tried to do it, but you know, they 1:12:37.800 --> 1:12:39.639 only have so much power, so it just gets reversed 1:12:39.760 --> 1:12:40.280 the next time. 1:12:40.680 --> 1:12:42.760 Do you anticipate that more kids might go outside the 1:12:42.800 --> 1:12:45.120 United States for college and that that could at some 1:12:45.160 --> 1:12:46.120 point have an impact? 1:12:46.160 --> 1:12:46.320 Oh? 1:12:46.360 --> 1:12:49.000 Interesting, I you know, I don't know. That's definitely often 1:12:49.040 --> 1:12:51.439 abdicated as a as a cheaper option, So we'll see. 1:12:51.560 --> 1:12:53.720 Yeah, you know, it's talking though, as somebody recently, and 1:12:53.840 --> 1:12:56.000 even the schools outside the US are been that much 1:12:56.080 --> 1:12:56.799 less expensive. 1:12:57.160 --> 1:12:59.840 I was going to say, then you've got to pay 1:12:59.840 --> 1:13:02.000 for them to get overseas a plane ticket. 1:13:02.200 --> 1:13:04.800 Yeah, sounds like you've been thinking about this. Janet, Hey 1:13:04.880 --> 1:13:07.599 Jillian before we let you go. You know, if we're 1:13:07.600 --> 1:13:10.880 talking in five years, do you think this problem will 1:13:10.880 --> 1:13:11.960 have gotten better gotten worse? 1:13:12.000 --> 1:13:13.280 Will there be some cost? Part two? 1:13:13.880 --> 1:13:17.880 I think maybe unfortunately the way it's looking not better. 1:13:17.960 --> 1:13:20.519 Necessarily classes not half full in any way. 1:13:20.560 --> 1:13:22.280 Classes, I mean, I guess you know, you know what, 1:13:22.320 --> 1:13:24.800 there have been some states that have you know, really 1:13:24.800 --> 1:13:28.240 tried to invest more in helping their residents go to college. 1:13:28.280 --> 1:13:32.160 And we actually have seen evidence that the cost of 1:13:32.240 --> 1:13:34.439 public college on average is going down a little bit. 1:13:34.479 --> 1:13:36.640 So it's unclear if that trend's going to continue, but 1:13:36.800 --> 1:13:37.360 maybe it will. 1:13:37.479 --> 1:13:40.920 I remember was it Bloomberg who did the survey and 1:13:40.960 --> 1:13:43.640 they said or was it Jared Dillion? I don't know 1:13:43.760 --> 1:13:46.360 it was either, Like, unless it's Harvard or an ivy 1:13:46.439 --> 1:13:48.920 league that state schools increasing year. 1:13:49.080 --> 1:13:50.160 That's that's Jared's view. 1:13:50.280 --> 1:13:52.759 Basically, you get more bang for your back in terms 1:13:52.800 --> 1:13:53.760 of but I thought we did some. 1:13:53.680 --> 1:13:56.120 Research to Yeah, I think you guys, Yeah, had had 1:13:56.120 --> 1:13:58.760 a great piece about right, sort of the value of 1:13:58.800 --> 1:13:59.840 a lot of different public. 1:13:59.560 --> 1:14:02.120 Life, why the return on investment? Right, and in terms 1:14:02.160 --> 1:14:04.160 of like so maybe you know, people start to think 1:14:04.240 --> 1:14:06.960 more closely. Yeah, it's fascinating. I can't tell you how 1:14:06.960 --> 1:14:08.759 many times it comes up. And whenever we have anybody 1:14:08.800 --> 1:14:10.880 right from a college is like, why does it cost 1:14:10.920 --> 1:14:11.400 so much? 1:14:12.160 --> 1:14:13.799 They don't always have a great answer. 1:14:14.160 --> 1:14:17.439 Janet Lauren is higher education finance reporter for Bloomberg News, 1:14:17.479 --> 1:14:20.759 and Jillian Berman is Assistant Managing editor News and Enterprise 1:14:20.800 --> 1:14:23.360 at MarketWatch. She's also the author of a new book, 1:14:23.680 --> 1:14:26.599 Sunk Costs, Who's to Blame for the Nation's broken student 1:14:26.640 --> 1:14:28.720 loan system? And how to fix it. 1:14:30.040 --> 1:14:35.400 This is the Bloomberg Business Week Daily podcast, available on Apple, Spotify, 1:14:35.520 --> 1:14:39.240 and anywhere else you get your podcasts. Listen live weekday 1:14:39.280 --> 1:14:43.280 afternoons from two to five pm Eastern on Bloomberg dot com, 1:14:43.320 --> 1:14:47.240 the iHeartRadio app, tune In, and the Bloomberg Business App. 1:14:47.479 --> 1:14:50.360 You can also watch us live every weekday on YouTube 1:14:50.479 --> 1:14:52.599 and always on the Bloomberg terminal