WEBVTT - Surveillance: Kaplan Sees Temporary Inflation Spikes 0:00:09.880 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Ley. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.800 Bloomberg dot Com, and of course on the Bloomberg Robert 0:00:27.840 --> 0:00:30.240 Caplan is the president of the Dallas FED. He is 0:00:30.280 --> 0:00:32.520 also a big Kansas City Chiefs fan. And we thank 0:00:32.560 --> 0:00:37.040 you for getting up and continuing on, even though that 0:00:37.159 --> 0:00:41.000 was a rough one. Well, it's always next year will 0:00:41.040 --> 0:00:44.640 be well. There's a debate on their way about what 0:00:44.760 --> 0:00:49.159 kind of inflation dangers are out there from additional government spending. UH. 0:00:49.240 --> 0:00:52.280 And if inflation does break out, you heard John call 0:00:52.360 --> 0:00:54.960 you the elephant in the room, you gotta deal with it. 0:00:55.440 --> 0:00:58.400 So what is your estimation if we get the kind 0:00:58.400 --> 0:01:01.720 of additional stimulus there talking about from Washington, what kind 0:01:01.760 --> 0:01:08.440 of inflation danger does that present? There's no question that 0:01:08.560 --> 0:01:13.720 if we're able to get people brought i'llly vaccinated. UH, 0:01:13.760 --> 0:01:16.520 if we're able to defeat the variants of the virus UH, 0:01:16.520 --> 0:01:19.199 and we have a reopening as we go through this year, 0:01:20.200 --> 0:01:23.800 that along with fiscal support, is going to mean that 0:01:24.480 --> 0:01:27.720 that we have strong GDP growth. We're gonna we're gonna 0:01:28.080 --> 0:01:32.640 make big improvements on unemployment. And it wouldn't be surprising 0:01:32.680 --> 0:01:37.040 to see the cyclical elements of inflation build. Uh. And 0:01:37.319 --> 0:01:40.759 and I think that you're gonna have some supply outages. 0:01:40.800 --> 0:01:47.040 We're already seen evidence of it. UH, semiconductors, metals, would products. Uh. 0:01:47.280 --> 0:01:48.920 You may see a little bit of even in in 0:01:49.080 --> 0:01:51.920 oil markets. But but I don't think those are going 0:01:51.960 --> 0:01:54.520 to be persistent. I don't think those are going to 0:01:54.600 --> 0:01:57.640 be long term. But I think there's no question the 0:01:57.720 --> 0:02:02.200 cyclical forces we will build and over time. The question 0:02:02.280 --> 0:02:06.080 for me is how strong are the accelerating forces of 0:02:06.120 --> 0:02:12.919 technology and technology enabled disruption, which have been muting inflationary 0:02:12.960 --> 0:02:16.840 pressures for some time. How do those two cyclical instructural 0:02:16.840 --> 0:02:19.040 forces play out over time? That's what I'm gonna be 0:02:19.040 --> 0:02:24.519 watching for the The The temporary jump been inflation or 0:02:24.720 --> 0:02:27.480 rise won't surprise me. The question for me will be 0:02:27.680 --> 0:02:30.119 how persistent is it? And I for me, I think 0:02:30.120 --> 0:02:32.839 the jury is out on that right now. Well, they're 0:02:32.840 --> 0:02:35.240 talking about a package that would be three times the 0:02:35.320 --> 0:02:38.280 size of what the CBO projects the output gap to be. 0:02:38.520 --> 0:02:42.640 Is that too much? So I'm gonna not surprised, won't 0:02:42.680 --> 0:02:46.359 surprise you. I'm gonna deliberately stay away from that topic. Uh. 0:02:47.080 --> 0:02:51.959 What right now at the Dallas FED, before any new 0:02:52.000 --> 0:02:56.600 package is enacted, we're already our forecast for GDP growth 0:02:56.639 --> 0:03:01.000 this year is approximately five percent. Uh. It's gonna be 0:03:01.120 --> 0:03:04.360 again loaded towards the latter parts of the year. And 0:03:04.440 --> 0:03:09.480 it assumes that we're able to vaccinate the the population 0:03:09.560 --> 0:03:12.960 broadly and uh and defeat these variants and get more 0:03:13.280 --> 0:03:16.040 mobility and engagement. I think what I'm hearing in my 0:03:16.240 --> 0:03:22.480 district is what we need first and foremost, which is 0:03:22.520 --> 0:03:25.840 being discussed as you know in these package debates. We 0:03:26.200 --> 0:03:30.600 need more money to help achieve these vaccinations. That's the 0:03:30.720 --> 0:03:34.600 key right now. Uh. And it's gonna take mobile units, 0:03:34.639 --> 0:03:37.760 it's gonna take more personnel. But if you can get 0:03:37.760 --> 0:03:41.000 people broadly vaccinated and get more mobility engagement, that's what 0:03:41.040 --> 0:03:44.040 will open the small businesses and get a lot of 0:03:44.080 --> 0:03:46.320 these a lot of these people that are out of 0:03:46.360 --> 0:03:50.200 work back to work, and more money to reopen schools. 0:03:50.200 --> 0:03:53.360 In person, schools I'm talking to need to be retrofitted. 0:03:53.800 --> 0:03:57.720 And we've got a historically high level of women who 0:03:57.760 --> 0:04:02.040 have left the workforce working mothers uh. And we need 0:04:02.120 --> 0:04:06.080 schools to be reopened. Uh. And and some investment also 0:04:06.160 --> 0:04:09.800 in childcare to get those women back into the workforce. 0:04:09.920 --> 0:04:12.560 That's critical. So those are some of the priorities I 0:04:12.600 --> 0:04:18.040 hear about. Obviously, extended unemployment benefits to bridge when we're 0:04:18.120 --> 0:04:20.360 until we're able to get people back to work. That's 0:04:20.400 --> 0:04:23.560 another priority I'm hearing. But those are some of the 0:04:23.600 --> 0:04:26.240 things I mentioned. I'll stay away from the debate in Washington. 0:04:26.760 --> 0:04:29.559 We've got three trillion authorized so far for COVID relief 0:04:29.640 --> 0:04:33.200 and another two trillion is what they're talking about. The 0:04:33.360 --> 0:04:37.320 argument has been from Federal Reserve officials that that's sustainable 0:04:37.400 --> 0:04:40.880 because interest rates are so low and as long as 0:04:40.880 --> 0:04:43.120 we keep the economy growing faster than the debt will 0:04:43.160 --> 0:04:46.240 be okay. Are you confident that that can happen, that 0:04:46.279 --> 0:04:51.200 the economy will grow faster. Uh. We're gonna get a 0:04:51.279 --> 0:04:55.840 strong boost to GDP growth in which I just talked about, 0:04:56.240 --> 0:05:00.719 and above trend growth excuse me, and most likely above 0:05:00.720 --> 0:05:05.240 trend in two. The issue over the horizon, UH is 0:05:05.640 --> 0:05:09.960 what are we doing to improve sustainable GDP growth? And 0:05:09.960 --> 0:05:12.320 what do I mean by that? Once we climb out 0:05:12.360 --> 0:05:15.600 of UH and recover from the whole we're in and 0:05:15.640 --> 0:05:18.360 recover from COVID. We're gonna get back to some real 0:05:18.480 --> 0:05:22.640 challenges we had pre COVID. Slowing workforce growth, aging of 0:05:22.720 --> 0:05:26.600 the population, and productivity growth has not been sufficient to 0:05:26.680 --> 0:05:29.560 off set that, and so what would help with that? 0:05:30.200 --> 0:05:33.920 Find ways to improve labor force growth Again, I talked 0:05:33.920 --> 0:05:39.400 about women reentering the workforce, but also early childhood literacy UH, 0:05:39.480 --> 0:05:43.880 improving secondary education, skills training, closing the skills gap, more 0:05:44.000 --> 0:05:48.320 widespread WiFi in the United States. I would love to 0:05:48.360 --> 0:05:54.440 see more investments in education and some infrastructure items, particularly WiFi, 0:05:54.720 --> 0:05:57.760 that will help create more sustainable growth. But that will 0:05:57.800 --> 0:06:00.040 be the challenge that we're gonna be talking about of 0:06:00.080 --> 0:06:04.000 the horizon, how to improve workforce growth and improve productivity 0:06:04.400 --> 0:06:09.200 and so will we grow faster than deck grows UH. 0:06:09.360 --> 0:06:11.920 We're gonna have to find ways to improve GDP growth 0:06:12.240 --> 0:06:14.799 or otherwise the answer to that. I don't know whether 0:06:14.839 --> 0:06:18.680 the answer to that will be yes or no otherwise. UM. 0:06:18.720 --> 0:06:21.560 I know that you and all of your colleagues basically 0:06:21.560 --> 0:06:23.800 have said it's too early to talk about when you 0:06:23.880 --> 0:06:27.240 might taper QUE, but I'm wondering how you assess the 0:06:27.400 --> 0:06:31.760 danger of inflating a bubble in financial markets, which is 0:06:31.960 --> 0:06:33.640 what a lot of people on Wall Street are talking 0:06:33.640 --> 0:06:36.560 about now. Uh. And the hundred and twenty billion you're 0:06:36.560 --> 0:06:39.960 buying a month to keep markets functioning when markets are 0:06:40.000 --> 0:06:43.440 functioning just fine. Uh. Is there a point at which 0:06:43.520 --> 0:06:47.240 you think the danger of the markets bubble is bigger 0:06:47.279 --> 0:06:49.960 than the danger of pulling back just a little bit? 0:06:51.000 --> 0:06:54.960 So the way I make that trade off. While we're 0:06:55.000 --> 0:06:58.520 in the teeth of this pandemic, uh, and until it's 0:06:58.560 --> 0:07:02.159 clear we've weathered the pandemic, I think it's appropriate to 0:07:02.160 --> 0:07:08.039 be aggressive with our tools. However, once it's clear that 0:07:08.080 --> 0:07:11.000 we've that we've weathered this pandemic, and we're not out 0:07:11.000 --> 0:07:13.240 of the woods yet by a long shot. But once 0:07:13.280 --> 0:07:15.280 it's clear we've weathered the pandemic, and we put this 0:07:15.360 --> 0:07:17.800 pandemic and the effects of it in the rear view mirror, 0:07:17.840 --> 0:07:21.640 and we're making substantial progress toward our toward full employment 0:07:21.640 --> 0:07:24.840 and price stability, I think we'd be far healthier to 0:07:24.960 --> 0:07:31.720 be weaning off these extraordinary measures. Uh. So that's the issue. UH. 0:07:31.760 --> 0:07:34.720 And I think as soon as it's clear we've gotten 0:07:34.760 --> 0:07:37.240 past COVID, which I don't know when that will be. 0:07:37.880 --> 0:07:40.600 I think would be far healthier to be weaning off 0:07:40.640 --> 0:07:45.239 these extraordinary measures. Well, Uh, speaking of questions about bubbles 0:07:45.240 --> 0:07:48.720 in the markets, your initial career was as an investment banker, 0:07:48.760 --> 0:07:51.520 and now we've got this spack I p O mania 0:07:51.640 --> 0:07:54.360 going on? What do you think of that? Does that 0:07:54.440 --> 0:07:57.400 tell you something about where we are in financial markets 0:07:57.480 --> 0:08:01.360 or or this economic cycle. So I won't comment on 0:08:01.400 --> 0:08:04.360 any individual situation because there's a lot of factors that 0:08:04.440 --> 0:08:07.000 go to into any any one of them. But I 0:08:07.000 --> 0:08:10.360 would say broadly, when you're when you're keeping rates at 0:08:10.440 --> 0:08:12.720 zero and you've committed to keep rates at zero for 0:08:12.760 --> 0:08:16.280 an extended period, you're buying eighty billion of treasuries and 0:08:16.400 --> 0:08:20.880 forty billion of mortgage backed securities, we should expect that 0:08:20.880 --> 0:08:25.600 that's going to have a material impact on liquidity financial assets. 0:08:25.720 --> 0:08:30.440 And UH, that's why I've said we'd be wise, as 0:08:30.560 --> 0:08:34.320 as soon as we're able to uh to wean off 0:08:34.360 --> 0:08:39.079 these extraordinary measures, because these measures certainly have an impact 0:08:39.520 --> 0:08:42.400 on financial assets, and we'd be wise at the FED 0:08:42.440 --> 0:08:46.280 to acknowledge it, and and uh and be very sensitive 0:08:46.320 --> 0:08:50.560 to it. And and I'm I'm very concerned UH and 0:08:50.559 --> 0:08:55.199 and watching UH, you know, excess risk taking and excessis 0:08:55.200 --> 0:08:58.560 and balances, particularly in the non bank financial sector. The 0:08:58.640 --> 0:09:02.120 issue is, while we're fighting this pandemic, and until it's 0:09:02.120 --> 0:09:04.040 clear we're out of the woods, I think we've got 0:09:04.080 --> 0:09:08.559 to be aggressive. So UH. The challenge will be after 0:09:08.640 --> 0:09:11.400 we it's clear we've weathered it, we've got to we've 0:09:11.440 --> 0:09:14.640 got to move away from these extraordinary measures, in my opinion, 0:09:14.720 --> 0:09:18.080 and I think will be far healthier for it. I 0:09:18.120 --> 0:09:21.079 know the FED doesn't regulate equity trading except for your 0:09:21.120 --> 0:09:24.720 control over the margin rate, but what do you think 0:09:24.720 --> 0:09:28.839 of the sort of meme UH enthusiasm that's been going around. 0:09:28.920 --> 0:09:32.960 Does that worry you in terms of potential effect on 0:09:32.960 --> 0:09:38.720 the economy. So I, again, I won't comment on any 0:09:38.720 --> 0:09:43.360 individual situation. UH. I don't at the moment see UH 0:09:43.600 --> 0:09:47.480 systemic risk UH in these markets. But I do think 0:09:47.920 --> 0:09:51.760 you're seeing, and I'll speak broadly, not about the situation asked, 0:09:51.760 --> 0:09:56.320 but broadly, you're seeing the effects as you'd expect of 0:09:56.320 --> 0:09:59.600 of again UH eighty billion of treasuries and forty billion 0:09:59.640 --> 0:10:03.480 and Morgan back securities. I think it's necessary while we're 0:10:03.520 --> 0:10:07.280 fighting the pandemic, but again, as after we get beyond it, 0:10:07.800 --> 0:10:09.480 I think we need to wean off some of these 0:10:09.480 --> 0:10:13.760 extraordinary measures. And I'm watching non bank financial markets very 0:10:13.800 --> 0:10:17.480 carefully and what I would call excess risk taking. What 0:10:17.520 --> 0:10:23.000 I mean by that positioning that when um, when vol 0:10:23.280 --> 0:10:27.000 volatility is relatively low and credit spreads are tight and 0:10:27.240 --> 0:10:31.720 liquidity is good, look benign. But in hindsight, when you 0:10:31.760 --> 0:10:34.840 get a vault spike and credit spreads wide and volatility 0:10:34.880 --> 0:10:38.000 tends to drive up drop, you find people realize they're 0:10:38.000 --> 0:10:40.720 over risk and they've got a d risk and they've 0:10:40.760 --> 0:10:43.000 got to do it quickly. We saw some of that 0:10:43.040 --> 0:10:46.760 in March, by the way. Uh, And and I'm concerned 0:10:46.800 --> 0:10:51.160 that we we should watch that carefully because there's uh, 0:10:51.200 --> 0:10:54.640 there's always uh, that's always something we are we need 0:10:54.679 --> 0:10:57.840 to be aware of it. And I am watching that carefully. 0:10:58.160 --> 0:10:59.760 Before we let you go, I gotta ask you quickly. 0:10:59.800 --> 0:11:03.240 You're our oil guy, Um, how's the pandemic left the 0:11:03.280 --> 0:11:06.400 oil patch? And UM, I know that President Biden's energy 0:11:06.400 --> 0:11:09.840 plans are somewhat controversial in your area. Have you modeled 0:11:09.840 --> 0:11:12.760 the effect of moving away from fossil fuels and the 0:11:12.800 --> 0:11:16.720 impact on your district? Yeah, we have and and most 0:11:16.720 --> 0:11:20.000 participant in the industry have also modeled it. And so 0:11:20.920 --> 0:11:25.679 you've got an industry that's far more consolidated UH and 0:11:26.080 --> 0:11:32.120 you've seen a number of failures, bankruptcies, consolidations, UH, de leveragings. 0:11:33.080 --> 0:11:36.000 And I think that you've also seen an industry that 0:11:36.120 --> 0:11:38.640 is going to spend a lot more money on sequestration, 0:11:38.720 --> 0:11:43.080 carbon capture and reducing their their greenhouse gas emissions footprint. 0:11:43.480 --> 0:11:46.440 And also an industry that is committed now when they 0:11:46.440 --> 0:11:48.599 have excess cash flow, to returning more of it to 0:11:48.679 --> 0:11:51.720 shareholders and less of it to drilling. So because of that, 0:11:51.800 --> 0:11:55.959 we think that UH supply UM and production in the 0:11:56.000 --> 0:12:01.000 United States will be flat with this coming year. UH 0:12:01.040 --> 0:12:05.760 and even though prices are are moving up, UH, people 0:12:05.800 --> 0:12:08.640 may be surprised that supply does not move up like 0:12:08.679 --> 0:12:10.679 the way they would have expected to in the past. 0:12:10.760 --> 0:12:13.480 So the challenge in the United States is to keep 0:12:13.520 --> 0:12:17.400 a healthy oil and gas business understanding that a smaller 0:12:17.440 --> 0:12:20.520 and smaller percentage of energy consumption is going to go 0:12:20.640 --> 0:12:25.000 to fossil fuels and much more aggressive energy consumption to 0:12:25.200 --> 0:12:28.880 win solar other alternatives. And the challenge is going to 0:12:28.960 --> 0:12:32.400 be to make that transition Robert Catlan, Dallas Fed President, 0:12:32.679 --> 0:12:35.719 oil patch leader, thank you very much for joining us 0:12:35.720 --> 0:12:49.199 this morning here on Bloomberg. Troy sky Bridge Morning, Troy's 0:12:49.280 --> 0:12:53.440 about the spread, still is about the come on. It's 0:12:53.600 --> 0:12:57.479 it's really about just an overwhelming amount of monetary stimulus 0:12:57.480 --> 0:13:00.880 in the system, right and to your point, negative yields, 0:13:01.400 --> 0:13:05.080 real yields and sovereigns that keep getting more negative as 0:13:05.120 --> 0:13:08.360 inflation comes back and rates can't haven't caught up yet, 0:13:08.840 --> 0:13:10.400 and there's just the dearth of income. I mean, the 0:13:10.440 --> 0:13:13.400 only markets in the world that have still meaningful cash 0:13:13.440 --> 0:13:16.080 flow or in structure credit because they got hammered so 0:13:16.120 --> 0:13:18.680 back in March and they haven't come back fully, and 0:13:18.720 --> 0:13:22.880 the fundamentals still look fairly attractive. Um, but from our perspective, 0:13:22.920 --> 0:13:25.480 and not to back up Lisa and Tod by the way, 0:13:25.559 --> 0:13:28.320 thanks for calling me a steamed um. But you know, 0:13:28.559 --> 0:13:30.319 if you're gonna make a choice right now where you 0:13:30.320 --> 0:13:32.640 want to be in the capital structure, at least in 0:13:32.679 --> 0:13:34.760 the equity part of the capital structure, you still have 0:13:34.880 --> 0:13:39.160 meaningful upside that this waterfall of waterfall, waterfall of cash 0:13:39.280 --> 0:13:42.480 and fiscal STEAMUS can drive higher. Yes, you can get 0:13:42.520 --> 0:13:45.520 spreads to tighten more. But high yield hasn't been high 0:13:45.559 --> 0:13:47.880 yield for the last six months at least right it 0:13:47.960 --> 0:13:50.880 wasn't even that highving yield coming into the prices. So 0:13:51.120 --> 0:13:54.000 you know, from our perspective, you have massive money supply, 0:13:54.160 --> 0:13:57.120 massive fiscal stimulus that's just driving all risk as that's 0:13:57.320 --> 0:14:00.160 highed Troy. But dying to ask you this question then 0:14:00.160 --> 0:14:02.880 the two model the last what three weeks, what have 0:14:02.960 --> 0:14:06.439 you learned as an observer of hedge funds about game 0:14:06.520 --> 0:14:09.679 stop and all that, Robin hood and all that and 0:14:09.760 --> 0:14:12.800 the long short structure of the hedge fund world. Is 0:14:12.840 --> 0:14:16.600 it forever changed? You know, forever is a strong term 0:14:16.640 --> 0:14:19.840 tom um. You know much of the you know, obviously 0:14:19.880 --> 0:14:22.960 game stop in m C and stocks like that. I mean, 0:14:23.040 --> 0:14:25.920 they've behaved very similar to what happened in the late nineties, 0:14:25.960 --> 0:14:28.640 but just on steroids, like everything else is on steroids 0:14:28.640 --> 0:14:32.280 in this post pandemic period. And so what long SHORECTY 0:14:32.320 --> 0:14:35.320 managers are doing across the board is they're moving up 0:14:35.360 --> 0:14:37.680 in market cap in terms of the shorts that they 0:14:37.680 --> 0:14:40.920 have on. They're getting even more diversified. Typically their short 0:14:40.960 --> 0:14:43.600 positions are a quarter to a third dat of their 0:14:43.640 --> 0:14:46.880 lungs just because of the asymmetry in your face. Also, 0:14:46.960 --> 0:14:50.680 when in doubt, if you're concerned about systematic risk or beta, 0:14:51.040 --> 0:14:53.560 there's nothing wrong with using STP futures or an et 0:14:53.720 --> 0:14:57.960 F to take that risk out. But most importantly avoid 0:14:58.040 --> 0:15:01.680 crowded shorts. That's kind of shorting one on one U. 0:15:01.840 --> 0:15:05.560 I understand the you know, profit motive, but you should 0:15:05.560 --> 0:15:09.360 never be in shorts with more than short interests outstanding. 0:15:09.520 --> 0:15:12.240 So that's some of the changes that are taking place 0:15:12.320 --> 0:15:14.400 right now. But try to build on what Tom was 0:15:14.440 --> 0:15:17.640 talking about. There's sort of a larger question here. Can 0:15:17.720 --> 0:15:21.600 hedge funds get really outsized value? Can they really find 0:15:21.720 --> 0:15:24.560 alpha in a world dominated still so much by central 0:15:24.560 --> 0:15:27.920 bank liquidity, a world that has proven inauspicious I should 0:15:27.920 --> 0:15:31.960 say for hedge fund performance over the past decade, well, 0:15:32.120 --> 0:15:34.520 inauspicious is a strong term. I mean, the hedge fund 0:15:34.600 --> 0:15:37.880 industry has a holded very well last year, particularly particularly 0:15:37.920 --> 0:15:41.440 protecting capital in March. It's always been challenging to make 0:15:41.480 --> 0:15:44.920 money on the short side um most investors expect to 0:15:44.960 --> 0:15:47.440 lose money through shorts over time, but one of the 0:15:47.480 --> 0:15:49.920 key to have in short positions is to stay in 0:15:49.960 --> 0:15:52.840 the game right to mitigate downside in months like March 0:15:53.360 --> 0:15:56.080 or Q four of two thousand eighteen, or during the 0:15:56.080 --> 0:15:59.360 Eurozone crisis, so you can protect the downside and then 0:15:59.400 --> 0:16:02.120 go on off ends. Um that being said, and we 0:16:02.200 --> 0:16:04.000 talked about this last time I was on, the industry 0:16:04.080 --> 0:16:06.320 is certainly more net long than they've been in quite 0:16:06.360 --> 0:16:09.440 some time, because again of that cocktail of you know, 0:16:09.600 --> 0:16:13.680 fairly good virus news, powerful money supply never ending, the 0:16:13.680 --> 0:16:16.720 fiscal stimulus that many would argue is too large the 0:16:16.760 --> 0:16:19.280 stage of the game. Um So yeah, alpha on the 0:16:19.320 --> 0:16:23.080 short side has always been hard, but fortunately there's been 0:16:23.200 --> 0:16:25.520 both the past year and so far this year there's 0:16:25.520 --> 0:16:27.880 been more alpha on the longside and obviously negative alph 0:16:27.880 --> 0:16:30.320 on the short side. Final question for LSA drum roll, 0:16:30.960 --> 0:16:34.720 if we got this is this is four LASA. This 0:16:34.800 --> 0:16:38.760 is dedicated that do we have an asset shortage? Do 0:16:38.800 --> 0:16:42.000 we need to wish you more Detroit. You know that's 0:16:42.000 --> 0:16:45.840 a great question, John, because you know, when people look 0:16:45.840 --> 0:16:49.120 at deficits, what they always look at is the liability 0:16:49.200 --> 0:16:51.600 side of the balance sheet, and they don't look at 0:16:51.640 --> 0:16:54.000 the assets side of the balance sheet. So you know, 0:16:54.120 --> 0:16:58.120 as the FED reflates right, and the FED also um 0:16:58.160 --> 0:17:01.480 prints more money um in the government issues more debt. 0:17:01.600 --> 0:17:04.760 What's happened particularly past year is the value of assets 0:17:04.800 --> 0:17:06.880 has gone up far more than the value of debt. 0:17:07.280 --> 0:17:09.600 So you could argue that one way to cure that 0:17:10.119 --> 0:17:14.160 is to print more debt. However, you know the best 0:17:14.280 --> 0:17:17.600 argument is to have targeted fiscal stimulus that goes after 0:17:17.680 --> 0:17:21.040 those that are in the most pain and doesn't continue 0:17:21.200 --> 0:17:24.159 to create mini bubble lefter mini bubble after mini bubble 0:17:24.520 --> 0:17:27.040 that will ultimately lead to, you know, quite a hangover 0:17:27.160 --> 0:17:28.840 when the feed is forced to tie you. Now, we 0:17:28.920 --> 0:17:31.360 don't expect that to anytime soon. It's toltly not this year, 0:17:31.800 --> 0:17:34.520 but at some point, you know, the think of a hangover, 0:17:34.560 --> 0:17:37.359 there's a hangover. After late nineties we had a housing bubble, 0:17:37.359 --> 0:17:40.640 you know, you know, oh five till six um, there 0:17:40.680 --> 0:17:42.840 was a mini oil bubble. In a way, these things 0:17:42.880 --> 0:17:46.040 always end in tears, and so for the time being, 0:17:46.160 --> 0:17:48.280 you want to monetize that. But you have to have 0:17:48.320 --> 0:17:51.560 an eye on money, supply growth and fed policy. Troy 0:17:51.760 --> 0:17:53.720 right to catch up, Seth. I want to see you guys. 0:17:53.720 --> 0:18:09.240 Look always applies. Thank you. Set The Bloomberg Intelligence Michael 0:18:09.280 --> 0:18:12.359 mcclog has done the best work on Bitcoin. He's looked 0:18:12.359 --> 0:18:14.359 at the dynamics of it, he's looked at the modern 0:18:14.400 --> 0:18:17.480 market features of it. He's clearly been way out front 0:18:17.480 --> 0:18:20.560 and the vector moving higher from the lower left to 0:18:20.640 --> 0:18:23.520 the upper right. As a skeptic Dennis Gartman would say. 0:18:23.560 --> 0:18:26.760 Michael mcgloane joins us this morning with Bloomberg Intelligence. Michael, 0:18:26.800 --> 0:18:28.679 I want to go back to first principles. In a 0:18:28.680 --> 0:18:32.520 Bloomberg article today on coal and western China. There are 0:18:32.640 --> 0:18:37.520 things called miners from Butch Cassidy. Who are those guys there? 0:18:37.600 --> 0:18:41.320 It's a global decenturized network following any place they can 0:18:41.359 --> 0:18:44.560 find cheap energy. From a strategy standpoint, the bottom line 0:18:44.640 --> 0:18:47.440 is there's nine coins that can be mined today. That's 0:18:47.480 --> 0:18:51.119 the max come. They'll drop to four fifty. So I 0:18:51.200 --> 0:18:54.520 analyze it as the miners don't matter and manners to them. 0:18:54.560 --> 0:18:57.600 But from a strategist predicting price, this is a set 0:18:57.760 --> 0:19:00.640 supply schedule. It's declining in terms of image, so only 0:19:00.640 --> 0:19:02.920 thing that matters is demand. The key thing is it's 0:19:02.920 --> 0:19:08.040 only day. Come to page one of every economics textbook, 0:19:08.080 --> 0:19:12.040 including the ones Janet Yelling studied, is about scarcity. It 0:19:12.320 --> 0:19:17.199 is a manufacturer the critics would say contrived scarcity. That 0:19:17.560 --> 0:19:22.600 always means nefarious elements come in to force the scarcity away. 0:19:22.680 --> 0:19:26.040 Who are those nefarious elements that could take the scarcity 0:19:26.119 --> 0:19:29.040 built into the price increase. Well, there's eight thousand want 0:19:29.040 --> 0:19:33.119 to be cryptocurrency bitcoins out there. There's eight thousand all coins. 0:19:33.119 --> 0:19:36.119 So they've tried. There's been many forks, everyone has worked, 0:19:36.119 --> 0:19:39.120 but they have gotten nowhere near the robustness and adoption 0:19:39.119 --> 0:19:42.520 that bitcoin has. So it's been through many deaths and 0:19:42.600 --> 0:19:44.879 yet it's keeps surviving. So that's the key thing about it. 0:19:44.880 --> 0:19:47.280 It's been killed many times, it keeps coming back. It's 0:19:47.320 --> 0:19:51.679 gained that global robust nous. It's the the go to 0:19:51.840 --> 0:19:55.159 reserve now digital asset. I will say, Tom, I just 0:19:55.200 --> 0:19:58.280 have this image of Butch Cassidy behind a computer, plugging 0:19:58.320 --> 0:20:02.200 in algorithms and used remember and it's it's it's really 0:20:02.280 --> 0:20:04.320 quite an image, I will say, Mike. There is also 0:20:04.600 --> 0:20:07.720 a question about just how much institutional adoption there is. 0:20:07.720 --> 0:20:10.520 This is raised of course by Tesla yesterday coming out 0:20:10.600 --> 0:20:13.240 and saying that they will soon accept a bitcoin as 0:20:13.280 --> 0:20:15.879 a form of payment. Can you give us a sense 0:20:15.960 --> 0:20:19.640 of truly how widespread this idea is in major corporations. 0:20:19.680 --> 0:20:22.800 Whether you actually expect to hear some announcements in the 0:20:22.840 --> 0:20:26.560 near future from other major companies about doing the same. Well, 0:20:26.600 --> 0:20:29.040 initially it was a wave, now a tsunami, and that's 0:20:29.080 --> 0:20:32.640 just getting started. Remember we're talking about a US corporations 0:20:32.720 --> 0:20:34.800 based in the reserve currency of the Dollar's think of 0:20:34.800 --> 0:20:37.640 the rest of the world that doesn't have that reserve currency, 0:20:37.720 --> 0:20:40.000 they have maybe much greater incentive to alligate some of 0:20:40.040 --> 0:20:41.840 their treasuries to bitcoined. So to me, this is just 0:20:41.920 --> 0:20:44.879 part of what's happening. It's being adopted on a global scale, 0:20:45.040 --> 0:20:46.560 and it's part of the reason I think, remember when 0:20:46.560 --> 0:20:48.640 you at the thirty thousand that health support, I think 0:20:48.640 --> 0:20:51.000 this reason forty is going to hold support. Now it's 0:20:51.000 --> 0:20:53.880 just going to continue. Something has to go wrong, which 0:20:53.880 --> 0:20:56.199 I knocked myself around every day for I don't know 0:20:56.240 --> 0:20:58.280 what it is right now, but it's on that it's 0:20:58.320 --> 0:21:00.880 in that unique phase where sometimes it technicals don't matter 0:21:00.960 --> 0:21:03.160 as much as what's the next support should it hold 0:21:03.320 --> 0:21:05.320 and just focus on your next resistance, which we all 0:21:05.400 --> 0:21:08.359 kind of know is around fifty number. The more institutional 0:21:08.359 --> 0:21:09.760 buying we get, do you think it makes it more 0:21:09.800 --> 0:21:11.959 complex more difficult for the government to step in and 0:21:11.960 --> 0:21:14.640 do something. Oh yes, they're going to continue regulate. Remember 0:21:14.680 --> 0:21:16.639 we just had a theory and futures launched yesterday. We 0:21:16.680 --> 0:21:19.560 have bitcoin futures. So bigcoin's under the purview of a government. 0:21:19.560 --> 0:21:22.320 When you felt your tax, that's not government, that's the 0:21:22.480 --> 0:21:28.119 establishment of a market. John's talking about government regulation of 0:21:28.200 --> 0:21:32.399 a non financial, non coin. When does that happen? What 0:21:32.520 --> 0:21:34.720 might happen to something like it has happened to gold. 0:21:34.760 --> 0:21:36.840 But the key thing about bitcoin is no one's else, 0:21:37.119 --> 0:21:40.239 no one's project, no one's liability. Like ripple x RP 0:21:40.440 --> 0:21:42.639 was someone's project and liability, and the government's cracked on 0:21:42.760 --> 0:21:44.960 in them. Here's the key thing about that. The government, 0:21:45.240 --> 0:21:47.720 the New York d a crackdown and tether. Tether's the 0:21:47.800 --> 0:21:50.959 number one stable coin that was an April two nineteen. 0:21:51.359 --> 0:21:53.639 Market cap then was about three billions, So they've been 0:21:53.760 --> 0:21:56.720 under that purview since two thousand nineteen. Now the market 0:21:56.720 --> 0:21:59.440 caps around twenty nine billion. So do you think they've 0:21:59.440 --> 0:22:02.879 done anything a legal sense? It's pure organic, organic demand. 0:22:02.880 --> 0:22:06.520 What I see is the world wants a digital digital 0:22:06.520 --> 0:22:09.000 currencies and digital dollar, and it's getting it. And the 0:22:09.040 --> 0:22:13.080 government's getting regulations getting in there. My final question, how 0:22:13.119 --> 0:22:15.720 close do you think we are to a very well 0:22:15.760 --> 0:22:18.320 known American company that is not run by Ela Musk 0:22:18.600 --> 0:22:21.800 doing exactly what Ela must announced yesterday. It's inevitable. I 0:22:21.800 --> 0:22:24.840 don't see what's gonna stop it. Wow, Mike McLean. Great 0:22:24.840 --> 0:22:27.920 to catch up, sir, Thank you. John Gets from Bloomberg Intelligence. 0:22:37.119 --> 0:22:39.879 This is an important interview. Julie Norman is at the 0:22:39.960 --> 0:22:44.160 University of College in London. She is a political science professor, 0:22:44.280 --> 0:22:47.879 but is truly one of the world's experts on political 0:22:48.160 --> 0:22:52.359 activism and social movement. A different take on what we 0:22:52.400 --> 0:22:55.640 will witness in Washington today, Julie Norman, if you look 0:22:55.680 --> 0:22:59.160 at the Republicans, the Grand Old Party, the path from 0:22:59.200 --> 0:23:02.119 Lincoln to where they are right now, there seemed to 0:23:02.160 --> 0:23:05.240 be partitions, and one of them is militia and some 0:23:05.359 --> 0:23:09.160 of the violence we saw January six as well, tell 0:23:09.240 --> 0:23:12.919 us about the social movement that defines a more assertive, 0:23:12.920 --> 0:23:18.239 a more aggressive Republican Party. Well time, I think there 0:23:18.240 --> 0:23:21.520 are different movements going on right now in the Republican 0:23:21.600 --> 0:23:24.600 Party and that's pretty clear and across the left as well. 0:23:24.960 --> 0:23:27.639 I mean, part of what we're seeing in the Republican 0:23:27.760 --> 0:23:33.080 Party is people who have very legitimate grievances who saw 0:23:33.160 --> 0:23:35.600