1 00:00:05,720 --> 00:00:12,960 Speaker 1: Yeah, welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Jay Ley. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:28,120 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. Yeah. 5 00:00:33,159 --> 00:00:35,000 Speaker 1: I'm really pleased to say that joining us around a 6 00:00:35,040 --> 00:00:38,200 Speaker 1: table in New York is YenS Nordic Exante data founder 7 00:00:38,280 --> 00:00:41,040 Speaker 1: and CEO, and he joins us now. Good morny gents, 8 00:00:41,080 --> 00:00:43,800 Speaker 1: Thanks a lot, Thank you. So what's driving the resurgent 9 00:00:43,920 --> 00:00:48,320 Speaker 1: stronger dollar. Also think we had the usual catalyst high 10 00:00:48,360 --> 00:00:51,879 Speaker 1: interest rates is just that the market got very confused 11 00:00:51,960 --> 00:00:55,160 Speaker 1: in January because there was no impact of the high 12 00:00:55,280 --> 00:00:57,920 Speaker 1: use interest rates there on the dollar, right, so people 13 00:00:57,960 --> 00:01:00,920 Speaker 1: start to change the framework and time early. But the 14 00:01:00,960 --> 00:01:03,760 Speaker 1: framework that generally works is one where you as interest 15 00:01:03,920 --> 00:01:09,240 Speaker 1: rates do matter. So um, I think right now, it's 16 00:01:09,280 --> 00:01:11,400 Speaker 1: actually interesting what you point out that we've had some 17 00:01:11,400 --> 00:01:15,360 Speaker 1: stability in US interest rate to market. Nevertheless, the dollars 18 00:01:15,400 --> 00:01:18,160 Speaker 1: moving right, so the registrates with the catalyst, but now 19 00:01:18,200 --> 00:01:21,120 Speaker 1: we have some additional follow through and that really shows 20 00:01:21,160 --> 00:01:23,880 Speaker 1: that there was a huge short dollar position in the market. 21 00:01:24,080 --> 00:01:26,480 Speaker 1: And we see it in the data we track. Real 22 00:01:26,520 --> 00:01:30,640 Speaker 1: money investors got really short dollar into April, and they're 23 00:01:30,720 --> 00:01:33,480 Speaker 1: unwinding those shorts and getting back to the old frameworks. 24 00:01:33,520 --> 00:01:37,080 Speaker 1: So let's be clear here have rates recoupled with the 25 00:01:37,080 --> 00:01:40,440 Speaker 1: FX market one and to how much of this was 26 00:01:40,520 --> 00:01:44,000 Speaker 1: just squaring short positions in the FX market. Well, so 27 00:01:44,280 --> 00:01:47,000 Speaker 1: I think there's definitely an element of short covering. People 28 00:01:47,040 --> 00:01:50,520 Speaker 1: really thought, Okay, maybe we have the twin deficit theory, 29 00:01:50,560 --> 00:01:53,000 Speaker 1: the dangerous twin death of the zero dollar can only 30 00:01:53,040 --> 00:01:55,040 Speaker 1: go down when we have a twin deficit, and that 31 00:01:55,440 --> 00:01:57,840 Speaker 1: doesn't work. But I think the other thing that's going 32 00:01:57,880 --> 00:02:00,800 Speaker 1: on is that not only have we got we got 33 00:02:00,800 --> 00:02:03,520 Speaker 1: the sort of you as ye curve drifting gradually higher, 34 00:02:03,960 --> 00:02:06,640 Speaker 1: but we also have doubts about global growth, which is 35 00:02:06,800 --> 00:02:10,880 Speaker 1: very very different from from January when u AS interest 36 00:02:11,000 --> 00:02:13,359 Speaker 1: rates were rising, were global interest rates rising as well, 37 00:02:13,400 --> 00:02:15,760 Speaker 1: and we had incredible optimism about growth and Europe, And 38 00:02:15,760 --> 00:02:17,360 Speaker 1: that's coming out of the equation. We have a lot 39 00:02:17,440 --> 00:02:20,560 Speaker 1: of week data points in Europe now last several weeks, 40 00:02:21,200 --> 00:02:24,280 Speaker 1: and even globally there is concerned about are we heading 41 00:02:24,280 --> 00:02:27,800 Speaker 1: into a more modern growth phrase that will make us 42 00:02:27,880 --> 00:02:30,639 Speaker 1: growth stand out more and I think that's important, so 43 00:02:30,720 --> 00:02:32,799 Speaker 1: help us all out. So that this sort of framework 44 00:02:32,840 --> 00:02:36,120 Speaker 1: for thinking about the EFEX market through seventeen was investor 45 00:02:36,120 --> 00:02:39,959 Speaker 1: flows into Europe and places like that, also just structural issues, 46 00:02:40,000 --> 00:02:42,600 Speaker 1: current account surplus in Europe and the twin deficits you 47 00:02:42,600 --> 00:02:45,200 Speaker 1: mentioned in the United States. What's the framework for thinking 48 00:02:45,200 --> 00:02:47,880 Speaker 1: about the FFEX market now that's going to really reap 49 00:02:47,919 --> 00:02:52,040 Speaker 1: rewards through well. So I would say we have a 50 00:02:52,040 --> 00:02:55,800 Speaker 1: degree of sort of idiosyncratic strength in the US economy 51 00:02:55,919 --> 00:02:59,840 Speaker 1: that comes from the fiscal stimulus and the fact that 52 00:03:00,040 --> 00:03:03,720 Speaker 1: at the sort of very strong momentum we had globally 53 00:03:03,919 --> 00:03:06,680 Speaker 1: is in doubt. So that's the cocktail that is generally 54 00:03:06,800 --> 00:03:11,560 Speaker 1: a sort of classic dollar strengthening. And at the same time, 55 00:03:11,639 --> 00:03:14,000 Speaker 1: there's there's some of the flow forces you can call 56 00:03:14,040 --> 00:03:17,280 Speaker 1: it positioning, you can call it a reduction, and underlying 57 00:03:17,280 --> 00:03:21,079 Speaker 1: flows that are really not as dollar negatives there used 58 00:03:21,120 --> 00:03:24,160 Speaker 1: to be. Is the U s so big or so 59 00:03:24,200 --> 00:03:27,520 Speaker 1: odd that flows don't matter for US? I get the 60 00:03:27,560 --> 00:03:31,080 Speaker 1: flows matter for Swiss Frank does flows do they matter 61 00:03:31,120 --> 00:03:33,760 Speaker 1: for US dollar? I think they matter lots of I'm 62 00:03:33,760 --> 00:03:35,840 Speaker 1: gonna get a little bit nerdy here, but like in 63 00:03:35,880 --> 00:03:39,920 Speaker 1: the place and John Tucker, it's nerdy you're speaking to 64 00:03:40,000 --> 00:03:43,760 Speaker 1: Tom keen in in January. One thing that was going 65 00:03:43,800 --> 00:03:47,720 Speaker 1: on was a lot of US investors who had exposure 66 00:03:47,720 --> 00:03:53,160 Speaker 1: globally they were hedging it, so they was essentially changing 67 00:03:53,200 --> 00:03:55,760 Speaker 1: how how they have hedged those positions, and that was 68 00:03:55,800 --> 00:04:01,040 Speaker 1: something that essentially removed a source of dollar support. That 69 00:04:01,160 --> 00:04:05,320 Speaker 1: is changing again, right, So it's it's these sort of 70 00:04:05,360 --> 00:04:08,280 Speaker 1: flow perspectives that that can have an impact, and that 71 00:04:08,440 --> 00:04:11,680 Speaker 1: is definitely true for the dollar as well. And I 72 00:04:12,240 --> 00:04:15,880 Speaker 1: think on a global scale, whether you look at flows 73 00:04:15,960 --> 00:04:18,360 Speaker 1: or not, you're gonna be missing a big part of 74 00:04:18,400 --> 00:04:20,120 Speaker 1: the picture, including for the dollar, if you don't look 75 00:04:20,120 --> 00:04:22,200 Speaker 1: at flows. So we started to see some pain and 76 00:04:22,240 --> 00:04:25,240 Speaker 1: there's a flow story there, that's for sure. In emerging markets, 77 00:04:25,560 --> 00:04:29,240 Speaker 1: there are some idiosynchronic issues in places like Turkey and Argentina, 78 00:04:29,320 --> 00:04:32,679 Speaker 1: but more broadly, the big overweight into we AM, especially 79 00:04:32,680 --> 00:04:35,400 Speaker 1: in fixed income, wasn't hedged for a lot of people. 80 00:04:35,720 --> 00:04:39,320 Speaker 1: They wanted the effects exposure because it looked favorable for 81 00:04:39,360 --> 00:04:42,800 Speaker 1: so long, especially through seventeen. That's changed quite radically. Ends 82 00:04:42,839 --> 00:04:45,919 Speaker 1: How have your thoughts changed on emerging markets? Yeah, I 83 00:04:45,920 --> 00:04:48,760 Speaker 1: have to say like one of the things we look 84 00:04:48,839 --> 00:04:52,080 Speaker 1: at so closely is these global I M flow trends, 85 00:04:52,160 --> 00:04:55,880 Speaker 1: and there's been a shocking shift like incredibly strong flows 86 00:04:55,920 --> 00:04:59,000 Speaker 1: in January, like very close to record flows, and then 87 00:04:59,080 --> 00:05:03,440 Speaker 1: nothing since then. So this is this is another reason 88 00:05:03,440 --> 00:05:05,479 Speaker 1: why it's so important to look at these flow metrics 89 00:05:05,560 --> 00:05:09,799 Speaker 1: right because the macro data is sort of relatively smooth, 90 00:05:09,880 --> 00:05:12,800 Speaker 1: that doesn't change like black and white from one day 91 00:05:12,839 --> 00:05:15,400 Speaker 1: to the other, but the flows can. And that's an 92 00:05:15,400 --> 00:05:19,760 Speaker 1: example we've seen really going from incredibly strong to quiet 93 00:05:19,760 --> 00:05:21,839 Speaker 1: weak in a very short space of time. Do you 94 00:05:21,920 --> 00:05:24,840 Speaker 1: just presume higher real rates in the United States? And 95 00:05:24,880 --> 00:05:28,560 Speaker 1: when we've gone from Stanley Fischer's ultra accommodative to a 96 00:05:28,680 --> 00:05:32,960 Speaker 1: flat uh FED funds target rate inflation adjusted but at 97 00:05:32,960 --> 00:05:35,120 Speaker 1: the two space the five space, do you just assume 98 00:05:35,440 --> 00:05:39,120 Speaker 1: a continued build up of positive real rates that attracts 99 00:05:39,360 --> 00:05:43,240 Speaker 1: funds to dollar I do think that the Fed is 100 00:05:44,120 --> 00:05:46,000 Speaker 1: it's dangerous to say this, but I'm gonna say this 101 00:05:46,080 --> 00:05:48,440 Speaker 1: is pretty much an autopilot in the sense that quarterly 102 00:05:48,520 --> 00:05:53,159 Speaker 1: rate rises is what's gonna happen unless we have But 103 00:05:53,760 --> 00:05:57,480 Speaker 1: you've been doing this long enough to autopilot an autopilot 104 00:05:57,720 --> 00:06:03,480 Speaker 1: never works out. Yeah, that it have second is an 105 00:06:03,480 --> 00:06:10,880 Speaker 1: autopilot because you watch soccer games this weekend, so that's autopilot. 106 00:06:10,920 --> 00:06:13,760 Speaker 1: But think about it from the fat perspective, they've been 107 00:06:14,040 --> 00:06:19,200 Speaker 1: essentially achieved. Both their targets and real interest rates are 108 00:06:19,200 --> 00:06:21,880 Speaker 1: incredibly low. They want to get real interest rates higher, 109 00:06:22,520 --> 00:06:25,200 Speaker 1: and they're talking about the dots, whether it's it's free 110 00:06:25,240 --> 00:06:28,280 Speaker 1: hikes of four hikes this year. It's gonna be incredibly 111 00:06:28,279 --> 00:06:30,880 Speaker 1: difficult for them to take a stop. If they stop 112 00:06:30,920 --> 00:06:32,680 Speaker 1: at a meeting now, it's gonna look like, ah, the 113 00:06:32,800 --> 00:06:35,480 Speaker 1: cycle is over. It's going to be very hard to communicate. 114 00:06:35,720 --> 00:06:38,039 Speaker 1: It is going to be much much, much much easier 115 00:06:38,160 --> 00:06:40,919 Speaker 1: just to do one every quarter. That's going to happen 116 00:06:40,960 --> 00:06:43,440 Speaker 1: for this year. It's probably gonna happen into next year 117 00:06:43,480 --> 00:06:45,960 Speaker 1: as well. And that's the rate effect we're having to 118 00:06:46,040 --> 00:06:48,600 Speaker 1: deal with. And at the same time we're having rate 119 00:06:48,680 --> 00:06:51,119 Speaker 1: hikes pushed back in a number of places. They're getting 120 00:06:51,120 --> 00:06:54,720 Speaker 1: pushed back in the e CPS case, Bank of England's case, 121 00:06:55,200 --> 00:06:57,320 Speaker 1: maybe the Bank of Canada's case. Right, So that's why 122 00:06:57,360 --> 00:07:00,279 Speaker 1: you have real divergence now, very different from January where 123 00:07:00,279 --> 00:07:02,600 Speaker 1: all rates were moving upwards. Should we talk about a 124 00:07:02,600 --> 00:07:07,200 Speaker 1: central bank where policy is certainly not on autopilot? Argentina 125 00:07:07,680 --> 00:07:10,520 Speaker 1: last week, just wow, they have to improvise a little 126 00:07:10,960 --> 00:07:13,440 Speaker 1: rate hikes. I mean, once you start throwing out three 127 00:07:13,520 --> 00:07:16,600 Speaker 1: hundred four hundred basis point hikes, historically, I just think 128 00:07:16,600 --> 00:07:18,800 Speaker 1: you're guessing. You're just trying to get to a place 129 00:07:18,800 --> 00:07:21,680 Speaker 1: where the market starts taking you. Seriously, again, do you 130 00:07:21,720 --> 00:07:23,920 Speaker 1: worry about the ammunition that some of these emerging market 131 00:07:23,960 --> 00:07:26,360 Speaker 1: countries do have if we do get a rally in 132 00:07:26,400 --> 00:07:29,760 Speaker 1: the dollar. Yeah, well, it's it's definitely back to the 133 00:07:29,760 --> 00:07:33,680 Speaker 1: old days ERM crisis, all these EM crisis we had 134 00:07:33,680 --> 00:07:36,400 Speaker 1: where you you you you saw some countries having hundred 135 00:07:36,400 --> 00:07:38,680 Speaker 1: percent interest rates in the overnight space, right, So we 136 00:07:38,720 --> 00:07:41,000 Speaker 1: haven't had that for a long time because we've been 137 00:07:41,040 --> 00:07:44,560 Speaker 1: in siri interest rate environment and EM countries didn't need 138 00:07:44,600 --> 00:07:47,360 Speaker 1: to do much to have a little differentiation. So this 139 00:07:47,440 --> 00:07:51,080 Speaker 1: is a tricky game currency crisis, the psychology around it, 140 00:07:51,240 --> 00:07:53,720 Speaker 1: the central banks, it's definitely having to feel it out. 141 00:07:53,800 --> 00:07:57,000 Speaker 1: There's not going to be any signs behind it. So 142 00:07:57,080 --> 00:08:13,920 Speaker 1: much appreciated this morning. He is in the heart of 143 00:08:13,960 --> 00:08:16,560 Speaker 1: where we fought the French and Indian Wars a few 144 00:08:16,640 --> 00:08:21,840 Speaker 1: years ago. It is eastern West Virginia on the Potomac River. 145 00:08:22,560 --> 00:08:26,880 Speaker 1: It is Franklin, West Virginia, population of all of about 146 00:08:26,920 --> 00:08:30,640 Speaker 1: seven hundred and fifty and he is campaigning for each 147 00:08:30,840 --> 00:08:34,240 Speaker 1: of those seven hundred plus votes in frank And we 148 00:08:34,240 --> 00:08:37,960 Speaker 1: welcome the Attorney General of the state of West Virginia 149 00:08:38,120 --> 00:08:41,280 Speaker 1: in the Republican campaign, and this will be Mr Morrissey, 150 00:08:41,320 --> 00:08:43,640 Speaker 1: Patrick Wrsey. Wonderful to have you with you. Thank you 151 00:08:43,720 --> 00:08:46,320 Speaker 1: so much for the effort to join us as your 152 00:08:46,400 --> 00:08:50,840 Speaker 1: campaign this morning. Have you spoken with President Trump in 153 00:08:50,880 --> 00:08:55,000 Speaker 1: the last few days. I've not spoken with the President 154 00:08:55,080 --> 00:08:57,439 Speaker 1: in the last three days. Let me start by thanking 155 00:08:57,480 --> 00:09:00,560 Speaker 1: you for having me on today. It's an excite time 156 00:09:01,000 --> 00:09:04,800 Speaker 1: with the West Virginia primary tomorrow where there's a chance 157 00:09:04,840 --> 00:09:09,240 Speaker 1: to really elect a nominate should say, a conservative fighter. 158 00:09:09,559 --> 00:09:15,240 Speaker 1: And my principal competition is the convicted criminal Don Blanketship 159 00:09:15,240 --> 00:09:18,960 Speaker 1: and President Trump, as some people may have heard, recently 160 00:09:19,080 --> 00:09:23,440 Speaker 1: tweeted came out in opposition to Don Blanketship, and he's 161 00:09:23,440 --> 00:09:27,280 Speaker 1: supporting me. He mentioned another candidate as well. But I 162 00:09:27,320 --> 00:09:29,679 Speaker 1: think it's so important that folks get to the polls 163 00:09:30,160 --> 00:09:33,680 Speaker 1: and interesting that we can nominate someone to beat Joe Mansion. 164 00:09:34,360 --> 00:09:37,360 Speaker 1: The culture of West Virginia and the Fabrican history of it, 165 00:09:37,440 --> 00:09:39,720 Speaker 1: going back to Kennedy in the sixties and a Roman 166 00:09:39,720 --> 00:09:43,600 Speaker 1: Catholic being elected there in a vote of a very 167 00:09:43,679 --> 00:09:47,760 Speaker 1: Protestant state. What are you hearing from the electorate you're 168 00:09:47,800 --> 00:09:51,400 Speaker 1: in the trenches of this What is the hot button 169 00:09:51,880 --> 00:09:56,080 Speaker 1: for the people you're speaking to across the state. I 170 00:09:56,160 --> 00:09:58,720 Speaker 1: think people in this primary are looking for someone who's 171 00:09:58,760 --> 00:10:01,920 Speaker 1: a proven concern, were the fighter, someone who has the 172 00:10:01,960 --> 00:10:05,320 Speaker 1: ability to get things done. And during my whole tenure 173 00:10:05,360 --> 00:10:07,960 Speaker 1: as Attorney General, I was the one that led a 174 00:10:07,960 --> 00:10:11,880 Speaker 1: lot of the charges against the Barack Obama administration, defeating 175 00:10:11,960 --> 00:10:16,680 Speaker 1: President Obama's Clean Power Plan. His waters United States Rule 176 00:10:17,280 --> 00:10:20,600 Speaker 1: is a legal amnesty. So the looking for someone who 177 00:10:20,640 --> 00:10:22,640 Speaker 1: needs how to get things done, I think that's the 178 00:10:22,679 --> 00:10:25,040 Speaker 1: biggest part of it. And they want someone who has 179 00:10:25,080 --> 00:10:29,600 Speaker 1: conservative values of Washington running rough shot over their way 180 00:10:29,640 --> 00:10:32,360 Speaker 1: of life. What do you or whoever wins in this 181 00:10:32,480 --> 00:10:36,160 Speaker 1: primary going to do with the Democratic Party that's learned 182 00:10:36,160 --> 00:10:39,040 Speaker 1: its lessons from and I quote, We're going to put 183 00:10:39,040 --> 00:10:42,560 Speaker 1: a lot of coal miners and coal companies out of business. 184 00:10:42,600 --> 00:10:45,959 Speaker 1: That was Secretary Clinton putting her foot firmly in mouth 185 00:10:46,120 --> 00:10:49,640 Speaker 1: two years ago. Mr Mansion is a lot more sophisticated 186 00:10:49,679 --> 00:10:53,960 Speaker 1: than that. What is your strategy after the primary to 187 00:10:54,200 --> 00:10:58,080 Speaker 1: be a Republican senate state versus Joe Manchin? Right now? 188 00:10:59,600 --> 00:11:01,880 Speaker 1: What's that? The biggest thing that we're going to do 189 00:11:01,960 --> 00:11:06,080 Speaker 1: with Senator Mansion is really talk about his record, and 190 00:11:06,080 --> 00:11:08,880 Speaker 1: I'm going to contrast it against mine. I think I 191 00:11:08,880 --> 00:11:12,439 Speaker 1: actually represents the best opportunity to have a contrast against 192 00:11:12,480 --> 00:11:16,480 Speaker 1: Senator Mansion, because Senator Mansion on the major issues that 193 00:11:16,520 --> 00:11:19,440 Speaker 1: has met that have mattered to really let the state down. 194 00:11:19,520 --> 00:11:23,160 Speaker 1: And and you know it's not just about supporting Hillary 195 00:11:23,200 --> 00:11:26,280 Speaker 1: and Barack Obama. If you're Joe Mansion, it said he 196 00:11:26,360 --> 00:11:30,160 Speaker 1: really allowed Obama on rough shot over the state coal 197 00:11:30,240 --> 00:11:34,240 Speaker 1: issues and other matters. He has been a weak person 198 00:11:34,320 --> 00:11:37,400 Speaker 1: on Second Amendment rights and planned parenthood. And I think 199 00:11:37,440 --> 00:11:40,800 Speaker 1: I represent the contrast and all those issues that will 200 00:11:40,840 --> 00:11:43,520 Speaker 1: be much stronger. The other point we're gonna make is 201 00:11:43,520 --> 00:11:46,920 Speaker 1: that Joe Mansion was asleep at the switch during the 202 00:11:46,960 --> 00:11:50,960 Speaker 1: beginnings of the opiate crisis, and it took me setting 203 00:11:51,000 --> 00:11:53,400 Speaker 1: up a substance of these fighting unit. And I've been 204 00:11:53,440 --> 00:11:56,319 Speaker 1: out there working very hard because there's been too much 205 00:11:56,360 --> 00:11:58,319 Speaker 1: death in our state, and that will be a strong 206 00:11:58,400 --> 00:12:01,600 Speaker 1: contrast as well. Just your as coast to coast Patrick Mornriscy, 207 00:12:01,640 --> 00:12:04,000 Speaker 1: he's the Attorney General for the state of West Virginia. 208 00:12:04,320 --> 00:12:07,760 Speaker 1: In the thick of this primary vote in West Virginia 209 00:12:07,760 --> 00:12:12,520 Speaker 1: against controversial Dan Blanketship. If I look Patrick Morriscy at 210 00:12:12,559 --> 00:12:17,120 Speaker 1: Republican politics, if you want your president to campaign against you, 211 00:12:17,360 --> 00:12:20,520 Speaker 1: everybody was in the Saturday Night Live opening this weekend 212 00:12:20,520 --> 00:12:22,960 Speaker 1: except you. You're They're gonna call you up and put 213 00:12:23,000 --> 00:12:26,400 Speaker 1: you into the opening. As well, is the challenges that 214 00:12:26,480 --> 00:12:31,120 Speaker 1: the president is facing with this issue, that issue, this scandal, 215 00:12:31,280 --> 00:12:34,440 Speaker 1: that scandal. How do you play that in real time 216 00:12:34,800 --> 00:12:39,240 Speaker 1: in West Virginia. Now, I think West Virginians are very 217 00:12:39,280 --> 00:12:42,320 Speaker 1: supportive of the President and they appreciate all the good 218 00:12:42,320 --> 00:12:47,600 Speaker 1: work he's done on the regulatory front, nominating judges who 219 00:12:47,679 --> 00:12:50,640 Speaker 1: care about the rule of law. This is a president 220 00:12:50,640 --> 00:12:53,520 Speaker 1: who's accomplished a lot. The Trump tax cuts have been 221 00:12:53,600 --> 00:12:57,400 Speaker 1: very popular in West Virginia. So the state really knows 222 00:12:57,640 --> 00:13:01,880 Speaker 1: President Trump has its back, and so we're running with 223 00:13:01,960 --> 00:13:06,080 Speaker 1: the president supportive of his policies. He's already been in 224 00:13:06,080 --> 00:13:09,439 Speaker 1: West Virginia four times. I hope he comes back for 225 00:13:09,679 --> 00:13:13,040 Speaker 1: more time between the primary. Let me read the tweet here, 226 00:13:13,120 --> 00:13:16,520 Speaker 1: Patrick Morrissey, And there's three other tweets after you, President 227 00:13:16,640 --> 00:13:20,960 Speaker 1: actively tweeting today angry Democrats, the Russia witch hunt, my 228 00:13:21,120 --> 00:13:25,280 Speaker 1: highly respected nominee CIA director Gina Asville. But let me 229 00:13:25,320 --> 00:13:28,320 Speaker 1: read in full, Folks, to the great people of West Virginia, 230 00:13:28,400 --> 00:13:31,520 Speaker 1: we have together a really great chance to keep making 231 00:13:31,520 --> 00:13:36,520 Speaker 1: a big difference. Problem is Don Blanketship, currently running for Senate, 232 00:13:37,000 --> 00:13:40,440 Speaker 1: can't win the general election in your state? No way? 233 00:13:40,600 --> 00:13:48,679 Speaker 1: Exclamation freepoint Remember Alabama vote Representative Jenkins or Attorney General Morrissey. 234 00:13:48,840 --> 00:13:52,680 Speaker 1: What are you gonna do to distinguish yourself from Mr Jenkins, 235 00:13:52,960 --> 00:13:57,360 Speaker 1: Patrick Morrissey in the coming hours. You know, I think 236 00:13:57,400 --> 00:14:00,720 Speaker 1: that many voters in West Virginia knows it. I'm the 237 00:14:00,760 --> 00:14:03,600 Speaker 1: conservative fighter. We have a record of getting things done 238 00:14:04,040 --> 00:14:06,840 Speaker 1: now on the issues that matter. Evan Jenkins has a 239 00:14:06,920 --> 00:14:13,079 Speaker 1: very liberal background. He supported gun control, planned parenthood, Nancy Pelosi, 240 00:14:13,240 --> 00:14:16,920 Speaker 1: John Kerry even rallied for Hillary Clinton. So I think 241 00:14:17,000 --> 00:14:20,160 Speaker 1: voters already know that's not the person who will give 242 00:14:20,240 --> 00:14:23,880 Speaker 1: us the best contrast against Senator Mansion. And that's why 243 00:14:23,880 --> 00:14:26,960 Speaker 1: I think this this tweet is really a defining moment 244 00:14:26,960 --> 00:14:29,480 Speaker 1: in the campaign because I think it's going to make 245 00:14:29,520 --> 00:14:34,360 Speaker 1: it clear that Don Blankenship should be rejected and uh, 246 00:14:34,880 --> 00:14:36,800 Speaker 1: hopefully we're gonna be able to get through this tomorrow. 247 00:14:36,840 --> 00:14:39,200 Speaker 1: I feel good about it, but I think this presidential 248 00:14:39,200 --> 00:14:43,040 Speaker 1: tweet could make a difference. Patrick Mercy, one final question, 249 00:14:43,200 --> 00:14:47,320 Speaker 1: what did you learn from Pennsylvania Democrat? A conservative Democrat 250 00:14:47,400 --> 00:14:51,560 Speaker 1: took that district, that West Virginia like district southwest of 251 00:14:51,640 --> 00:14:54,600 Speaker 1: Pittsburgh the other day. What did you learn about that 252 00:14:54,680 --> 00:14:57,800 Speaker 1: and how have you used that experience to get turnout 253 00:14:57,840 --> 00:15:01,840 Speaker 1: in West Virginia. Well, I think it's important to nominate 254 00:15:01,880 --> 00:15:06,440 Speaker 1: a person who is going to get support throughout the 255 00:15:06,520 --> 00:15:11,120 Speaker 1: Republican Party. And I have deep support throughout the Republican Party. 256 00:15:11,280 --> 00:15:14,880 Speaker 1: The Conservatives are rowing behind my candidacy, and I think 257 00:15:14,920 --> 00:15:20,320 Speaker 1: we can attract Republicans, independence, conservative Democrats behind this polition 258 00:15:20,360 --> 00:15:23,640 Speaker 1: to win. And that's what I take out. You need 259 00:15:23,680 --> 00:15:27,120 Speaker 1: to motivate people. Um, and I'm the only proven conservative 260 00:15:27,120 --> 00:15:30,840 Speaker 1: in this race. Blanketship is not a conservative. Jenkinservan isn't 261 00:15:30,840 --> 00:15:33,600 Speaker 1: a conservative. I think that gives us a good opportunity. 262 00:15:33,720 --> 00:15:36,120 Speaker 1: Patrick Morrisey, thank you so much. Shout out to your 263 00:15:36,160 --> 00:15:40,040 Speaker 1: team for making this interview happened, Mr Morrissey, really on 264 00:15:40,120 --> 00:15:44,680 Speaker 1: the edge of West Virginia campaigning near Franklin, West Virginia. Uh. 265 00:15:44,720 --> 00:15:47,880 Speaker 1: And you know, just John, John Ferrell, I love when 266 00:15:47,880 --> 00:15:49,880 Speaker 1: our teams can do this that we make. You know, 267 00:15:49,960 --> 00:15:52,120 Speaker 1: you and I are fortunate to sit here in front 268 00:15:52,120 --> 00:15:54,960 Speaker 1: of the mic where you know it's one laugh right 269 00:15:55,040 --> 00:15:57,560 Speaker 1: after another. There was a lot of scrambling to make 270 00:15:57,600 --> 00:16:00,640 Speaker 1: that interview happen. Yeah, that logistics behind the scenes, delivering 271 00:16:00,640 --> 00:16:03,320 Speaker 1: and pulling through great to get the insight from what's 272 00:16:03,320 --> 00:16:16,520 Speaker 1: happening on the ground ahead of that primary. Diane swunk 273 00:16:16,600 --> 00:16:18,640 Speaker 1: with us with Grant Thornton, and I think it's a 274 00:16:18,680 --> 00:16:21,560 Speaker 1: good time, Dianiel the Monday after Job's report, we can 275 00:16:21,600 --> 00:16:24,680 Speaker 1: sit back and steal your Friday report. You're gonna publish 276 00:16:24,680 --> 00:16:27,480 Speaker 1: for Grant Thornton. And we like to do that, Diane, 277 00:16:27,520 --> 00:16:30,800 Speaker 1: and we're gonna do it with consumption. Now, consumption is Dana, 278 00:16:30,840 --> 00:16:36,160 Speaker 1: how much of the economy? Yeah, it's two over two 279 00:16:36,200 --> 00:16:39,800 Speaker 1: Thursday economy. This is it. The consumer is king? What 280 00:16:39,960 --> 00:16:44,280 Speaker 1: is the partial differential of consumption that gets your attention 281 00:16:44,400 --> 00:16:48,160 Speaker 1: is a unit? Is that the price we pay is it? 282 00:16:48,200 --> 00:16:52,520 Speaker 1: Is it the preponderance of a certain sector or group 283 00:16:52,640 --> 00:16:58,600 Speaker 1: or quintiles. Those are great questions, And what's really interesting 284 00:16:58,720 --> 00:17:01,160 Speaker 1: is how much more broad day consumption has gotten in 285 00:17:01,200 --> 00:17:04,680 Speaker 1: recent years. It was really highly concentrated and very high 286 00:17:04,680 --> 00:17:07,240 Speaker 1: income households. Much of the expansion of what we've seen 287 00:17:07,359 --> 00:17:10,040 Speaker 1: is a spreading. As jobs have spread, We've seen a 288 00:17:10,080 --> 00:17:13,159 Speaker 1: spreading of consumption throughout the economy, and people at paycheck 289 00:17:13,240 --> 00:17:15,960 Speaker 1: to paycheck who now have a paycheck are spending it. 290 00:17:16,280 --> 00:17:19,640 Speaker 1: I think what's really interesting about this year is we've 291 00:17:19,640 --> 00:17:22,760 Speaker 1: got a low saving rate going into the year, running 292 00:17:22,800 --> 00:17:26,320 Speaker 1: about three percent UM. The low hit in December two 293 00:17:26,320 --> 00:17:28,600 Speaker 1: point four percent was the lowest since the height of 294 00:17:28,640 --> 00:17:31,520 Speaker 1: the housing bubble in two thousand and five. And one 295 00:17:31,520 --> 00:17:34,560 Speaker 1: of the things that stuns me and worries me, even 296 00:17:34,560 --> 00:17:36,879 Speaker 1: though I think it could give us an upside surprise 297 00:17:36,960 --> 00:17:39,760 Speaker 1: on consumption, home equity lines are credit. I brought this 298 00:17:39,880 --> 00:17:42,000 Speaker 1: up last week when we were talking. I walked by 299 00:17:42,040 --> 00:17:45,680 Speaker 1: a normal bank, a regular bank, not a shadow bank, 300 00:17:45,760 --> 00:17:49,320 Speaker 1: not the secondary market. This is a normal bank in Chicago. 301 00:17:49,480 --> 00:17:52,800 Speaker 1: Every single window is painted saying, get your home equity 302 00:17:52,840 --> 00:17:55,280 Speaker 1: line of credit, make your dreams come true at your house, 303 00:17:55,359 --> 00:17:58,960 Speaker 1: go on your honeymoon, gone your European vacation, use your 304 00:17:59,040 --> 00:18:01,439 Speaker 1: extract at home equity line of credit, and use it 305 00:18:01,520 --> 00:18:03,680 Speaker 1: like an a t M like that. We once did 306 00:18:03,760 --> 00:18:06,959 Speaker 1: to see signs on a conservative bank like that, and 307 00:18:07,080 --> 00:18:09,920 Speaker 1: every single window painted that way. It's like a drug 308 00:18:09,960 --> 00:18:13,400 Speaker 1: dealer on a corner. And it worries me because this 309 00:18:13,480 --> 00:18:15,359 Speaker 1: is the one thing we have going for us is 310 00:18:15,400 --> 00:18:17,200 Speaker 1: the equity in our homes. We don't have a lot 311 00:18:17,200 --> 00:18:20,720 Speaker 1: of saving for retirement, but we restored that equity to 312 00:18:21,000 --> 00:18:23,920 Speaker 1: extreme now and to tap into it, which I think 313 00:18:24,000 --> 00:18:26,439 Speaker 1: is likely to occur this year, that would bring that 314 00:18:26,520 --> 00:18:29,399 Speaker 1: saving right down even lower. It means so much of this, 315 00:18:29,520 --> 00:18:32,560 Speaker 1: And I'm gonna go to Robert Barrow and Xavier Salaty 316 00:18:32,640 --> 00:18:37,320 Speaker 1: Martin's Classic Economic Growth, which is a great textbook about 317 00:18:37,320 --> 00:18:42,080 Speaker 1: the actual mathiness of this. Do those models work when 318 00:18:42,119 --> 00:18:46,000 Speaker 1: you have a fiscal expansion? To those models work when 319 00:18:46,040 --> 00:18:48,520 Speaker 1: you have a tax cut? In what that does to 320 00:18:48,680 --> 00:18:54,400 Speaker 1: consumption into people's behavior, something Robert Barrow is expert at. Yeah, Well, 321 00:18:54,440 --> 00:18:56,600 Speaker 1: it works in terms of who it affects on the 322 00:18:56,640 --> 00:18:59,600 Speaker 1: tax cut, So you have to start dicing the data. 323 00:18:59,680 --> 00:19:02,679 Speaker 1: As you already mentioned, which income stratic is affected the most. 324 00:19:02,920 --> 00:19:05,160 Speaker 1: We've got a lot of moving parts here. Oil price 325 00:19:05,280 --> 00:19:08,360 Speaker 1: is going up, crimping incomes at the same time that 326 00:19:08,680 --> 00:19:11,040 Speaker 1: what are people going to do with jobs, better credit 327 00:19:11,119 --> 00:19:13,800 Speaker 1: scores and easier access to credit? You know, I just 328 00:19:13,920 --> 00:19:17,280 Speaker 1: never beat against people going into debt. I remember when 329 00:19:17,280 --> 00:19:20,479 Speaker 1: I was in credit for nineteen years looking at consumer credit. 330 00:19:20,600 --> 00:19:23,080 Speaker 1: I used to always warn our bankers at the time 331 00:19:23,440 --> 00:19:25,120 Speaker 1: that the best way to die is in debt because 332 00:19:25,119 --> 00:19:27,480 Speaker 1: it means you've lived beyond your means your entire life. 333 00:19:27,840 --> 00:19:31,199 Speaker 1: And unfortunately most people behave that way. They don't behave 334 00:19:31,320 --> 00:19:34,359 Speaker 1: like a lifecycle model. And I think that's one of 335 00:19:34,359 --> 00:19:36,520 Speaker 1: the things I'm really concerned about, is that we could 336 00:19:36,560 --> 00:19:38,720 Speaker 1: take on a lot more debt, and that's hard to 337 00:19:38,760 --> 00:19:42,720 Speaker 1: capture in these models. They always diplomatic. Diane Swank suggesting 338 00:19:42,760 --> 00:19:45,280 Speaker 1: that Possiblely is she worked for Mr Diamond when he 339 00:19:46,040 --> 00:19:48,520 Speaker 1: had tickets to both the White Sox and the Cubs 340 00:19:48,520 --> 00:19:52,200 Speaker 1: with banking a few years ago. Are the banks better 341 00:19:52,280 --> 00:19:57,320 Speaker 1: prepared for a Swank build up? Oh? Absolutely, the banks. 342 00:19:57,440 --> 00:19:59,760 Speaker 1: The banks do have a lot more capital. The problem 343 00:19:59,840 --> 00:20:03,080 Speaker 1: is what's happening outside of the banking industry. Fintech is 344 00:20:03,119 --> 00:20:06,439 Speaker 1: a wild west of lending now and we're seeing a 345 00:20:06,480 --> 00:20:09,360 Speaker 1: lot happen outside of the banking industry. So far, home 346 00:20:09,400 --> 00:20:11,520 Speaker 1: equi lands of credit have not come outside of the 347 00:20:11,560 --> 00:20:13,879 Speaker 1: banking industry. So it gives me some reassurance they're going 348 00:20:13,920 --> 00:20:16,280 Speaker 1: to do it with some responsibility. But the rate at 349 00:20:16,280 --> 00:20:19,439 Speaker 1: which housing prices are going up is really worrisome, and 350 00:20:19,480 --> 00:20:22,960 Speaker 1: how much confidence they have that that will continue always 351 00:20:22,960 --> 00:20:25,920 Speaker 1: worries me. Dumb question, are we just pending our tax cut? 352 00:20:26,240 --> 00:20:28,480 Speaker 1: Are we just getting out front and you know, everybody's 353 00:20:28,480 --> 00:20:30,919 Speaker 1: sitting at home on a micro basis figuring out what 354 00:20:31,040 --> 00:20:33,760 Speaker 1: there's vaunted tex savings. Isn't we go out and spend 355 00:20:33,760 --> 00:20:37,320 Speaker 1: it on the new pickup truck? What's not clear that 356 00:20:37,359 --> 00:20:41,560 Speaker 1: we all have those tax cuts? But small detail. You're 357 00:20:41,640 --> 00:20:43,760 Speaker 1: actually made a really good point, as many people will 358 00:20:43,800 --> 00:20:46,360 Speaker 1: not realize the tax could they have until next year, 359 00:20:46,400 --> 00:20:49,040 Speaker 1: and so does some extent by borrowing, Yes, are they 360 00:20:49,080 --> 00:20:51,200 Speaker 1: thinking that way? I don't think so. I think by 361 00:20:51,359 --> 00:20:54,960 Speaker 1: the idea of remodeling and tapping into this credit um 362 00:20:55,080 --> 00:20:57,919 Speaker 1: is a different way of of spending and it's a 363 00:20:57,960 --> 00:21:00,240 Speaker 1: way of spending we've accustomed to. It could to rises 364 00:21:00,359 --> 00:21:03,480 Speaker 1: and things like vehicle sales. One of the biggest correlations 365 00:21:03,480 --> 00:21:05,560 Speaker 1: people say they want to buy right now is homes 366 00:21:05,600 --> 00:21:08,280 Speaker 1: and cars. Even though we think vehicle sales have peaked, 367 00:21:08,560 --> 00:21:11,960 Speaker 1: it could keep vehicle sales artificially supported as they pulled 368 00:21:11,960 --> 00:21:13,639 Speaker 1: their home micly line of credit out and buy a 369 00:21:13,680 --> 00:21:17,399 Speaker 1: new car. I'm bringing up one of my favorite charts, 370 00:21:18,080 --> 00:21:22,000 Speaker 1: which is service sector in good sector deflation. Folks, this 371 00:21:22,080 --> 00:21:24,560 Speaker 1: chart is so interesting, I'm gonna move around some of 372 00:21:24,600 --> 00:21:27,560 Speaker 1: the colored graphics and put it out on social media 373 00:21:27,600 --> 00:21:30,359 Speaker 1: Twitter for Bloomberg Radio you'll see it first. And the 374 00:21:30,400 --> 00:21:34,400 Speaker 1: answer is, finally, we've got to pop in good sectors deflation. 375 00:21:34,520 --> 00:21:37,800 Speaker 1: We have less deflation, yes, and we have not so 376 00:21:37,840 --> 00:21:40,560 Speaker 1: long ago. Is that maybe the shock of shocks for 377 00:21:40,600 --> 00:21:43,639 Speaker 1: the next eighteen months. I think that along with the 378 00:21:43,640 --> 00:21:47,119 Speaker 1: service sector inflation, the two together change the dynamics of 379 00:21:47,160 --> 00:21:50,080 Speaker 1: inflation entirely, which Jonathan pointed out at the beginning of 380 00:21:50,080 --> 00:21:52,919 Speaker 1: the show. That's what we're watching this week is inflation inflation. 381 00:21:53,359 --> 00:21:55,560 Speaker 1: And remember when you add tear us to the equation, 382 00:21:55,640 --> 00:21:58,679 Speaker 1: that's inflation with outwage gains, and so it really is 383 00:21:58,720 --> 00:22:01,920 Speaker 1: a complicated inflay picture and getting a much more. As 384 00:22:01,960 --> 00:22:04,240 Speaker 1: you already pointed out, the FED seems to have a 385 00:22:04,240 --> 00:22:06,520 Speaker 1: lot of hubrious about where they're at right now. They 386 00:22:06,560 --> 00:22:09,360 Speaker 1: may get quite humbled and in a very difficult decision 387 00:22:09,640 --> 00:22:12,440 Speaker 1: as inflation picks up. And I hope and it looks 388 00:22:12,480 --> 00:22:13,959 Speaker 1: like wages are going to pick up, but we need 389 00:22:14,040 --> 00:22:15,560 Speaker 1: to see it in the data. We need the whites 390 00:22:15,600 --> 00:22:18,439 Speaker 1: of the eyes of waging in the data to do 391 00:22:18,560 --> 00:22:21,600 Speaker 1: they manage it all for top line inflation, I mean, 392 00:22:23,720 --> 00:22:29,679 Speaker 1: the religion is core, this Cleveland, that Dallas that forget 393 00:22:29,720 --> 00:22:32,840 Speaker 1: about it. There's top line inflation. If you get an 394 00:22:32,920 --> 00:22:37,480 Speaker 1: ugly top line deflation, does that change the FED dialogue? Actually, 395 00:22:37,560 --> 00:22:40,280 Speaker 1: I think the FED has already made sure and committed 396 00:22:40,320 --> 00:22:43,040 Speaker 1: to the idea of overshooting. We talked about that last week. 397 00:22:43,080 --> 00:22:46,159 Speaker 1: The symmetry and the FED inflation data. They really do 398 00:22:46,320 --> 00:22:49,120 Speaker 1: take core seriously. If we were to get some wild 399 00:22:49,200 --> 00:22:51,440 Speaker 1: numbers that were consistent, they'd have to deal with them. 400 00:22:51,800 --> 00:22:54,880 Speaker 1: You know, that's something we do worry about. But at 401 00:22:54,880 --> 00:22:56,560 Speaker 1: the end of the day, they really are trying to 402 00:22:56,600 --> 00:22:59,680 Speaker 1: get to this core idea because that's the best predictor. 403 00:22:59,720 --> 00:23:01,879 Speaker 1: If you your inflation. It tends to converge to that 404 00:23:02,040 --> 00:23:04,480 Speaker 1: over time because if you have too much inflation and 405 00:23:04,560 --> 00:23:07,800 Speaker 1: something like oil prices, you slow down the overall um 406 00:23:07,880 --> 00:23:10,639 Speaker 1: spending pace in these economy and bring inflation back down. 407 00:23:10,680 --> 00:23:13,440 Speaker 1: So they do know that, they do take it into account. 408 00:23:13,640 --> 00:23:16,080 Speaker 1: But I think what's interesting is they're willing to overshoot 409 00:23:16,080 --> 00:23:18,640 Speaker 1: because we've not seen the wage gains yet and they don't. 410 00:23:18,640 --> 00:23:20,719 Speaker 1: They're going to really be thinking about what is their target? 411 00:23:20,760 --> 00:23:23,000 Speaker 1: How do they explain what their target is? And I 412 00:23:23,000 --> 00:23:25,000 Speaker 1: think that's going to be where the next great debate 413 00:23:25,080 --> 00:23:27,240 Speaker 1: is once we talk in June. One of the great 414 00:23:27,320 --> 00:23:29,879 Speaker 1: values with Diane Swank, folks is if you keep talking 415 00:23:29,880 --> 00:23:31,639 Speaker 1: to her, you come up with a chart that you 416 00:23:31,640 --> 00:23:34,879 Speaker 1: haven't looked at in X months where you go, oh, 417 00:23:34,920 --> 00:23:38,320 Speaker 1: I just put that turn out at Diane Swank on Twitter. 418 00:23:38,440 --> 00:23:42,560 Speaker 1: You can, oh, you see it right now. Service sector 419 00:23:42,680 --> 00:23:46,359 Speaker 1: and cp I with goods CPI really vaunting up to 420 00:23:46,400 --> 00:23:50,160 Speaker 1: a negative zero point three. That is a lesser deflation 421 00:23:50,680 --> 00:23:53,840 Speaker 1: than what we've seen back a good two three four years. 422 00:23:53,880 --> 00:23:56,720 Speaker 1: Dan Swank, thank you so much. With Grant Thornton always 423 00:23:56,800 --> 00:24:00,560 Speaker 1: valuable to speak to Miss Swank about these events that 424 00:24:00,640 --> 00:24:16,040 Speaker 1: are going on. We're going to rip up the script 425 00:24:16,160 --> 00:24:19,200 Speaker 1: right now with the Atlantic Council formerly the Asia Society, 426 00:24:19,920 --> 00:24:23,960 Speaker 1: Jamie Mentel, Jamie, as you know, Robert Kaplan calls of 427 00:24:24,000 --> 00:24:29,800 Speaker 1: Taiwan the Berlin of Asia. Over the weekend we had 428 00:24:30,000 --> 00:24:34,520 Speaker 1: Orwellian nonsense was the quote from the Bush administration over 429 00:24:34,640 --> 00:24:37,640 Speaker 1: China's requests of thirty six for in airlines change their 430 00:24:37,680 --> 00:24:42,880 Speaker 1: references to Taiwan. Wow, can something quickly change the debate 431 00:24:43,440 --> 00:24:46,679 Speaker 1: of the many debates that we have of Asia right now, Jamie, 432 00:24:46,760 --> 00:24:49,720 Speaker 1: let's go through this to get an update on Taiwan. Now, 433 00:24:49,960 --> 00:24:55,840 Speaker 1: how Taiwan is Taiwan entering two thousand and twenty, How 434 00:24:55,880 --> 00:25:01,200 Speaker 1: Taiwan is it still Taiwan's very Taiwan. And the reason 435 00:25:01,400 --> 00:25:06,120 Speaker 1: is that China and Taiwan traditionally have maintained this fiction 436 00:25:06,480 --> 00:25:08,680 Speaker 1: that there is one China. And in the old days 437 00:25:08,800 --> 00:25:12,840 Speaker 1: of Shang Kai Check and the Guamendong, the Taiwanese actually believed, 438 00:25:13,040 --> 00:25:16,040 Speaker 1: maybe they believed they were going to rule all of China. 439 00:25:16,080 --> 00:25:19,520 Speaker 1: And now Chinese still believe that Taiwan is part of China. 440 00:25:19,560 --> 00:25:22,320 Speaker 1: But the majority of people in Taiwan really think of 441 00:25:22,359 --> 00:25:27,080 Speaker 1: themselves as an independent culture. And an independent, quasi independent 442 00:25:27,160 --> 00:25:30,600 Speaker 1: country if they had free will to express their political wishes, 443 00:25:30,600 --> 00:25:34,120 Speaker 1: which they don't, And so no very few people in 444 00:25:34,160 --> 00:25:37,919 Speaker 1: Taiwan think that they will be our or want to 445 00:25:37,960 --> 00:25:42,240 Speaker 1: be part of of of China. So everybody recognizes that 446 00:25:42,280 --> 00:25:44,440 Speaker 1: the status quo is probably as good as it guests. 447 00:25:44,520 --> 00:25:48,160 Speaker 1: But China's under China's leaders under a lot of political 448 00:25:48,200 --> 00:25:52,800 Speaker 1: pressure to try to bring um Taiwan back into the mainline, 449 00:25:52,800 --> 00:25:56,520 Speaker 1: in part because they're victims of their own profit nationalist propaganda, 450 00:25:56,560 --> 00:26:00,800 Speaker 1: and they've fed that so thoroughly through the Chinese populous 451 00:26:00,800 --> 00:26:04,520 Speaker 1: that they can't now stand up. What happens? What are 452 00:26:04,520 --> 00:26:10,320 Speaker 1: the consequences if China acts on these threats that Taiwan 453 00:26:10,440 --> 00:26:17,000 Speaker 1: needs to be renamed by these airlines. Well, the way 454 00:26:17,119 --> 00:26:19,600 Speaker 1: China does a lot of these things, whether it's Taiwan 455 00:26:19,840 --> 00:26:22,760 Speaker 1: or the South China. See, it's all a bunch of 456 00:26:22,960 --> 00:26:26,960 Speaker 1: relatively small steps that people say, Well, it gives me 457 00:26:27,040 --> 00:26:29,600 Speaker 1: a bad taste in my in my mouth, it gives 458 00:26:29,600 --> 00:26:33,640 Speaker 1: me a bad feeling in my gut. But what's the alternative? 459 00:26:33,680 --> 00:26:37,119 Speaker 1: And so for all of these companies, they have to ask, 460 00:26:37,440 --> 00:26:41,800 Speaker 1: is it worth it for me to antagonize China, or 461 00:26:41,880 --> 00:26:45,200 Speaker 1: to make this one change, which is a tiny little 462 00:26:45,320 --> 00:26:52,160 Speaker 1: change on my our company's website, to mention you change 463 00:26:52,240 --> 00:26:56,600 Speaker 1: Liftanza has changed our website to show Taiwan is a problem. 464 00:26:57,760 --> 00:27:00,280 Speaker 1: And this is there's a bigger issue here, and that's 465 00:27:00,320 --> 00:27:04,120 Speaker 1: that when China is interacting with foreign companies, it's doing 466 00:27:04,119 --> 00:27:07,080 Speaker 1: it as a government. But when these companies are interacting 467 00:27:07,200 --> 00:27:10,960 Speaker 1: with China, they're doing it as individual companies. And that's 468 00:27:10,960 --> 00:27:15,320 Speaker 1: why even the biggest foreign companies, even companies like Apple, 469 00:27:15,440 --> 00:27:18,800 Speaker 1: let alone Google and Facebook, when they're faced with the 470 00:27:18,840 --> 00:27:23,320 Speaker 1: power of the Chinese state, they're helpless. And that connects 471 00:27:23,359 --> 00:27:27,240 Speaker 1: to the Trump administration. I have massive criticisms of what 472 00:27:27,280 --> 00:27:30,159 Speaker 1: the Trump administration is doing, but it does make sense 473 00:27:30,720 --> 00:27:33,240 Speaker 1: that the West, led by the United States, needs to 474 00:27:33,240 --> 00:27:36,520 Speaker 1: do a much better job of standing up in the 475 00:27:36,600 --> 00:27:41,000 Speaker 1: face of Chinese pressure campaigns because our companies certainly can't 476 00:27:41,000 --> 00:27:43,760 Speaker 1: do it on their own. Jamie Matzel, what role do 477 00:27:43,800 --> 00:27:46,800 Speaker 1: you believe that China played in what we believe to 478 00:27:46,880 --> 00:27:51,360 Speaker 1: be a more peaceful and a more conciliatory North Korea? 479 00:27:52,119 --> 00:27:57,440 Speaker 1: A very important role. When Donald Trump talks about pushing sanctions, 480 00:27:57,640 --> 00:28:02,600 Speaker 1: the Chinese are the ones who actually really implemented the sanctions, 481 00:28:02,680 --> 00:28:06,080 Speaker 1: and so without that pressure, it would have been very, 482 00:28:06,200 --> 00:28:10,440 Speaker 1: very difficult to bring North Korea to the for North 483 00:28:10,480 --> 00:28:12,640 Speaker 1: Korea actually to agree to come to offer to come 484 00:28:13,160 --> 00:28:17,800 Speaker 1: to the bargaining table. China also um facilitated the development 485 00:28:17,840 --> 00:28:21,480 Speaker 1: of nuclear weapons in North Korea by not stopping it, 486 00:28:21,960 --> 00:28:25,359 Speaker 1: which China completely had had the power to do. And 487 00:28:25,440 --> 00:28:29,560 Speaker 1: China still holds the cards because Donald Trump, in advance 488 00:28:29,680 --> 00:28:32,880 Speaker 1: of these negotiations with North Korea, has already given up 489 00:28:32,920 --> 00:28:36,080 Speaker 1: all of his leverage. And so in many ways, Trump 490 00:28:36,240 --> 00:28:39,520 Speaker 1: is the supplicants going into these meetings, because let's say 491 00:28:39,560 --> 00:28:42,360 Speaker 1: the meetings don't go well, he won't have the option 492 00:28:42,400 --> 00:28:46,200 Speaker 1: anymore to say, oh, we're gonna going to implement sanctions 493 00:28:46,880 --> 00:28:49,360 Speaker 1: in a in a tougher way, because China won't be 494 00:28:49,400 --> 00:28:52,040 Speaker 1: on board for that. Even South Korea won't be on 495 00:28:52,080 --> 00:28:55,480 Speaker 1: board for that. We've already rewarded the North Koreans um 496 00:28:55,640 --> 00:28:59,640 Speaker 1: with the legitimation of a leadership level summit. So Trump 497 00:28:59,720 --> 00:29:03,760 Speaker 1: and aways has very little to offer beyond. And that's 498 00:29:03,760 --> 00:29:07,040 Speaker 1: why you're getting from from the Trump administration that we're 499 00:29:07,040 --> 00:29:09,200 Speaker 1: going to offer these kind of crazy things like well, 500 00:29:09,280 --> 00:29:13,520 Speaker 1: maybe we'll withdraw our troops in South Korea, or do 501 00:29:13,680 --> 00:29:16,760 Speaker 1: some kind of deal that would allow North Korea to 502 00:29:16,800 --> 00:29:19,920 Speaker 1: maintain it's its nuclear weapons. So China still has a 503 00:29:20,040 --> 00:29:23,840 Speaker 1: lot of influence, and far more influence than Donald Trump 504 00:29:23,880 --> 00:29:26,800 Speaker 1: has in spite of whatever the President may be tweeting 505 00:29:27,440 --> 00:29:31,520 Speaker 1: the role of international inspectors, if indeed there's any kind 506 00:29:31,560 --> 00:29:39,240 Speaker 1: of deal on nuclear demilitarization, is that is that sufficiently understood? 507 00:29:39,280 --> 00:29:41,440 Speaker 1: I mean, is the complexity? I mean I was reading 508 00:29:41,440 --> 00:29:43,560 Speaker 1: in New York Times about how this is supposed to 509 00:29:43,600 --> 00:29:46,320 Speaker 1: make what's going on in around look like a cake 510 00:29:46,400 --> 00:29:48,520 Speaker 1: walk compared to what would happen if they were to 511 00:29:48,640 --> 00:29:52,400 Speaker 1: implement this kind of regime in North Korea. Yeah, it 512 00:29:52,400 --> 00:29:55,080 Speaker 1: would be very difficult. But the real question is does 513 00:29:55,160 --> 00:29:57,880 Speaker 1: North Korea have any intention of giving up its nuclear 514 00:29:57,920 --> 00:30:02,040 Speaker 1: weapons at all? And I have not seen any indication 515 00:30:02,400 --> 00:30:04,959 Speaker 1: that they do. What they are looking to do is 516 00:30:05,000 --> 00:30:09,880 Speaker 1: to become established as a perhaps more responsible nuclear armed state, 517 00:30:10,000 --> 00:30:13,840 Speaker 1: kind of what has happened with India um. And so 518 00:30:13,920 --> 00:30:17,000 Speaker 1: if there are inspectors, then maybe there could be, and 519 00:30:17,080 --> 00:30:19,720 Speaker 1: certainly there have been in the past. It's not like 520 00:30:19,760 --> 00:30:23,200 Speaker 1: those inspectors are going to be given free reign to 521 00:30:23,400 --> 00:30:28,080 Speaker 1: travel around North Korea and do surprise spots infections. I 522 00:30:28,080 --> 00:30:30,320 Speaker 1: mean that was that in many ways would be just 523 00:30:30,480 --> 00:30:34,440 Speaker 1: something if it happens, would be cosmetic and limited and 524 00:30:34,480 --> 00:30:37,200 Speaker 1: not at all serious. And that that also points to 525 00:30:37,280 --> 00:30:40,760 Speaker 1: this broader issue is that the North Koreans they have 526 00:30:40,840 --> 00:30:45,360 Speaker 1: a plan, a very carefully fought out and orchestrated strategic plan. 527 00:30:45,560 --> 00:30:48,840 Speaker 1: The South Koreans, President Moon has a has a plan. 528 00:30:49,040 --> 00:30:51,960 Speaker 1: It doesn't appear that the United States has much of 529 00:30:52,000 --> 00:30:56,600 Speaker 1: a plan other than a bunch of tactical decisions. And 530 00:30:56,640 --> 00:30:59,959 Speaker 1: my fear is that the United States is stumbling, the President, 531 00:31:00,400 --> 00:31:03,840 Speaker 1: led by the presence, dumbling unwittingly into in many ways, 532 00:31:03,840 --> 00:31:06,600 Speaker 1: of track where we're going to be forced to accept 533 00:31:07,120 --> 00:31:12,320 Speaker 1: the normalization of partial normalization of North Korea, um with 534 00:31:12,720 --> 00:31:15,680 Speaker 1: North Korea maintaining its nuclear weapons, and because there's over 535 00:31:15,720 --> 00:31:18,320 Speaker 1: the over a hundred thousand people in terrible conditions in 536 00:31:18,360 --> 00:31:23,200 Speaker 1: prison camps, we're also going to have to just accept 537 00:31:23,840 --> 00:31:29,560 Speaker 1: that the terrible, totalitarian, brutal behavior of the North Korean 538 00:31:29,640 --> 00:31:32,600 Speaker 1: regime to its own people. So Jamie mattswell, what would 539 00:31:32,600 --> 00:31:36,440 Speaker 1: you recommend the administration do? Why think we need to 540 00:31:36,480 --> 00:31:40,320 Speaker 1: have a comprehensive strategy for saying what is the goal. 541 00:31:40,600 --> 00:31:43,959 Speaker 1: And if our goal is getting North Korea to give 542 00:31:44,040 --> 00:31:47,040 Speaker 1: up its nuclear weapons, then we need to say, well, 543 00:31:47,040 --> 00:31:49,040 Speaker 1: how can we achieve that? And the only way that 544 00:31:49,080 --> 00:31:52,000 Speaker 1: we can achieve that is by two things. One is 545 00:31:52,120 --> 00:31:56,680 Speaker 1: trying to change the influences, the sticks and carrots on 546 00:31:56,800 --> 00:32:00,600 Speaker 1: China so that China comes to believe that it will 547 00:32:00,600 --> 00:32:02,760 Speaker 1: be its interests will be better served as North Korea 548 00:32:02,800 --> 00:32:05,600 Speaker 1: gives up its nuclear weapons. And to do that, we 549 00:32:05,640 --> 00:32:08,800 Speaker 1: need to build an alliance with all our other allies 550 00:32:08,800 --> 00:32:11,840 Speaker 1: in the Asia Pacific region UM to say that if 551 00:32:11,880 --> 00:32:14,520 Speaker 1: North Korea, if you're going to maintain your nuclear weapons, 552 00:32:14,520 --> 00:32:17,280 Speaker 1: then these other things are going to happen UM that 553 00:32:17,360 --> 00:32:20,240 Speaker 1: are going to be not in China's interest, like building 554 00:32:20,320 --> 00:32:24,040 Speaker 1: up nuclear mess nuclear missile shields in South Korea and 555 00:32:24,120 --> 00:32:30,160 Speaker 1: Japan uh trans trans Pacific Partnership, bringing our allies together 556 00:32:30,240 --> 00:32:35,280 Speaker 1: to establish higher standards for trade and Japanese military normalization 557 00:32:35,320 --> 00:32:39,960 Speaker 1: and protected and potential nuclear weaponization, because that is also 558 00:32:40,000 --> 00:32:41,560 Speaker 1: something that China would be here. But if we have 559 00:32:41,760 --> 00:32:44,880 Speaker 1: just the status quo, everybody gets what they want, probably 560 00:32:44,920 --> 00:32:47,640 Speaker 1: except for the United States. Jimmy Mats thank you so 561 00:32:47,720 --> 00:32:50,280 Speaker 1: much greatly, appreciated with the Atlantic Councils when you just 562 00:32:50,360 --> 00:33:01,040 Speaker 1: brilliant on Taiwan there. Thanks for listening to the Bloomberg 563 00:33:01,120 --> 00:33:07,040 Speaker 1: Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, 564 00:33:07,440 --> 00:33:11,640 Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at 565 00:33:11,680 --> 00:33:15,960 Speaker 1: Tom Keene before the podcast. You can always catch us worldwide. 566 00:33:16,400 --> 00:33:17,480 Speaker 1: I'm Bloomberg Radio