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Speaker 2: Daily Podcast with Carol Masser and Tim Stenebek on Bloomberg Radio.
Speaker 3: Carol Masser along with David Gera. Tim is out on assignment.
Speaker 3: We'll be back tomorrow. So, hey, we want to talk
Speaker 3: a little bit about the inflation report, because David, as
Speaker 3: you mentioned at the top, I mean, it really did
Speaker 3: feel like investors like what we got that there wasn't
Speaker 3: any kind of big surprise here.
Speaker 4: Yeah, just to give everyone an update on what we
Speaker 4: did learn. The core consumer price index, excluding that often
Speaker 4: volatile food and energy categories, increased byo point three percent
Speaker 4: from June from the month before. That's according to the
Speaker 4: Bureau of Labor Statistics data that was released this morning,
Speaker 4: largely in line with what economists were forecasting Carol, and
Speaker 4: on an annual basis, it picked up to three point
Speaker 4: one percent, so of those.
Speaker 3: Wereew okay, not worse than could have been. Let's get
Speaker 3: more on the release, the outlook for US inflation and
Speaker 3: really FED policy. With US is Bloomberg TV and Radio.
Speaker 3: International economics and policy correspondent, of course are Michael McKee.
Speaker 3: He's here in studio. And also with US is Poojam Stream.
Speaker 3: She's vice president of US Economics Research over at Barkley's.
Speaker 3: She's joining us from New York City. Welcome, Welcome to
Speaker 3: both of you. So, Mike, for those who maybe I
Speaker 3: don't know, slept in on this Tuesday, what do we
Speaker 3: need to not you, Mike, what do we need to
Speaker 3: know about the inflation print this morning?
Speaker 5: Well?
Speaker 6: I think what you want to say is don't count
Speaker 6: your chickens before they're priced, because there is some evidence
Speaker 6: of tariff passed through in these numbers. There's maybe some
Speaker 6: evidence that Chris Waller's right that it's a one time increase,
Speaker 6: because we saw things that went up in price last
Speaker 6: month because of tariff's come down. So it may be
Speaker 6: a one off, but it may be a continuing one
Speaker 6: off that pushes inflation higher because you saw things like
Speaker 6: used cars go up half a percent. New car prices
Speaker 6: which had been declining, are now flat, which the President
Speaker 6: claimed as a victory.
Speaker 7: But then you look at the.
Speaker 6: Profit margins for the automakers in the second quarter and
Speaker 6: they were all minuscule or negative because they're absorbing it
Speaker 6: and they're not going to continue to do that.
Speaker 7: So there is no.
Speaker 6: Proof that the tariff issue is over in these numbers.
Speaker 6: And the other aspect of it is services prices have
Speaker 6: gone up. They went up more than anticipated. So that's
Speaker 6: something that doesn't have to do with tariffs, but is
Speaker 6: a concern to economists, and it'll obviously be something that
Speaker 6: FED wants to watch.
Speaker 7: Could you pick up on that if you would.
Speaker 4: I was looking bad back in a recent note that
Speaker 4: you wrote before these numbers came out this morning, and
Speaker 4: you said that while firms tend to raise prices, they've
Speaker 4: been restorting to other mitigation measures. First, what did these
Speaker 4: data this morning tell you about the way the economy
Speaker 4: has been reacting? Is reacting to the presence trade policies?
Speaker 2: Yeah?
Speaker 8: Sure, a great question. You know, the release this morning
Speaker 8: was to us a pretty mixed bag. What was interesting
Speaker 8: is a lot of the acceleration that we saw in
Speaker 8: core CPI came from the core services component. Core goods
Speaker 8: prices were up. Inflation. Was you know, on the core
Speaker 8: good side, still a point two percent, very similar to
Speaker 8: what we saw in June. But really the increases in prices,
Speaker 8: they're not as broad based as one would have expected.
Speaker 2: Now.
Speaker 8: To be clear, we think it's too soon for us
Speaker 8: to conclude that the tariff passed through is not happening
Speaker 8: or is more muted. We do think there are a
Speaker 8: couple of things that could have happened in July which
Speaker 8: just made the core good side of the report look
Speaker 8: a little softer. One is, you know, if you remember,
Speaker 8: July was a big motion period. We did have an
Speaker 8: Amazon Prime Day event that lasted longer than usual, and
Speaker 8: we had similar promotions from retailers like Walmart and Target.
Speaker 8: So it's plausible that we just had you know, slightly
Speaker 8: lower looking prices this July, you know, than we did
Speaker 8: last July. And if you look at some of the
Speaker 8: details within categories, that seems to corroborate with this narrative.
Speaker 8: But I also will allude to what Mike McKee pointed
Speaker 8: out earlier. We are seeing signs of early tariff passed
Speaker 8: through already in the economy. Within the CPI release itself,
Speaker 8: We've been flagging for a while that household furnishing prices,
Speaker 8: for example, are up three percent just year to date.
Speaker 8: This is very different from how prices historically have behaved.
Speaker 8: Something very similar can be said about appliances in the US.
Speaker 8: So I just think tariff effects are in train, and
Speaker 8: while today's report may not suggest that we're seeing much
Speaker 8: pid of effects, I just think it's too soon for
Speaker 8: us to dismiss that effect altogether.
Speaker 4: Mike, let me ask you, if I could, about housing.
Speaker 4: We look to these data for some indication of those
Speaker 4: costs as well. We have for many months. Now, what
Speaker 4: is it telling you about the state of the housing
Speaker 4: market in the US today.
Speaker 6: Well, we're not saying price declines, but certainly the price
Speaker 6: increases have leveled off.
Speaker 7: This is the third.
Speaker 6: Month in a row that owner's equivalent rent was up
Speaker 6: three tenths of eight percent, and on a year over
Speaker 6: year basis, we see slight declines here in home prices.
Speaker 6: We're seeing in the more immediate data that the case
Speaker 6: shillers and things like that, that home prices are not
Speaker 6: rising as fast because at this point people have give
Speaker 6: it up on selling, it appears, and so they're not
Speaker 6: raising prices because it's a seller's market. But let's see
Speaker 6: what happens going forward. The interesting question is going to
Speaker 6: be how does the housing market recover. Is a FED
Speaker 6: rate cut or two going to be enough? How much
Speaker 6: does it have to go down before people get out
Speaker 6: there and start buying again.
Speaker 3: One thing I wanted to ask both of you, and Mike,
Speaker 3: let me start with you first, is that I think
Speaker 3: I heard it on surveillance this morning, the idea or
Speaker 3: the concept of it's not just the number and where
Speaker 3: it goes to, but the percentage of the increase or decrease.
Speaker 3: So when we think about that, I mean, I know
Speaker 3: the numbers came in line, but what we've seen in
Speaker 3: terms of trends in inflation, are we seeing it continue
Speaker 3: to kind of move down in a significant way like
Speaker 3: that percentage change.
Speaker 6: Use if you have a Bloomberg go ahead and put
Speaker 6: in cpiyoy index GP and graphic. And in the last
Speaker 6: two and a half three months, the inflation arrow has
Speaker 6: changed from going down into the right to going up
Speaker 6: and to the right. It's not been a huge change yet,
Speaker 6: and we don't know for sure that that's going to
Speaker 6: happen or if it's just going to come to you
Speaker 6: to steadily rise, but it definitely shows the inflation trajectory
Speaker 6: has changed.
Speaker 3: All right, So let's cut to the chase. What does
Speaker 3: this mean for the Fed? Pooja weigh in on this.
Speaker 3: I know Mike tends to say, and he's always right
Speaker 3: about this, that like there's a lot more data come
Speaker 3: in our way before the next FED meeting. So has
Speaker 3: this changed anything for J. Powell and company? Well, I
Speaker 3: think not.
Speaker 8: The Barclays baseline for a while now has been one
Speaker 8: rate cut and all the way at the end of
Speaker 8: the year in December. Now we're looking quite out of consensus, admittedly,
Speaker 8: but we think, you know, there is a lot of
Speaker 8: data to come. Nothing in this inflation print to us
Speaker 8: was you know, was suggestive of inflation being more muted
Speaker 8: or the tariff effects are not coming. So we do
Speaker 8: think that, you know, the next employment report is going
Speaker 8: to be the big one to watch out for. Also,
Speaker 8: we're going to hear from Chair Powell at Jackson Hall
Speaker 8: and so we think those would be good signals to
Speaker 8: watch for. But right now we maintain our call the
Speaker 8: Fed is in rush to cut ryds, and we have
Speaker 8: a call for December.
Speaker 3: Mike's getting is you mentioned?
Speaker 7: Mike lights up? You can't see it on the Getting Ready.
Speaker 4: But Mike, how are you sort of thinking about the
Speaker 4: way this influence is for FED decision making going forward,
Speaker 4: the report today, and of course sort of what this
Speaker 4: might tell us about the PCE report coming up little
Speaker 4: bit later.
Speaker 6: Well, I think it puts them in the category of
Speaker 6: if we get the same numbers that we've gotten, and
Speaker 6: by that I mean inflation numbers and the another round
Speaker 6: of bad jobs numbers, the FED might be more inclined
Speaker 6: to cut. But when you parse who the voters are
Speaker 6: and what they've said since the last FED meeting, you
Speaker 6: got about two people who think they should go down,
Speaker 6: two people who think they should not, and two people
Speaker 6: who are undecided. The rest have yet to weigh in.
Speaker 6: So we will hear more over the next couple of weeks,
Speaker 6: including from the chair, and we'll see where they are
Speaker 6: going into September. But again, there's another jobs report, and
Speaker 6: another CPI report, and a PCE inflation report, and so
Speaker 6: there's a lot of information to come that will help
Speaker 6: decide what's going to happen. The odds are now ninety
Speaker 6: six percent that they cut in September, but I wouldn't
Speaker 6: put money into that market right now.
Speaker 3: I feel like I've seen this movie before, expectations that
Speaker 3: change very quickly on a data point. Michael McKee, thank
Speaker 3: you so much. I always appreciate it, And of course Projirium,
Speaker 3: vice president of Yous Economics Research at Barkley's Hey. Coming
Speaker 3: up later next week, do join us for our live
Speaker 3: coverage from Jackson, Hull. We'll be on the ground in Wyoming, Well,
Speaker 3: we meaning Mike and team covering the Kansas City Fed's
Speaker 3: Annual Economic Policy Symposium and highly anticipated remarks from fedscher J. Powell.
Speaker 3: All happens and starts Wednesday, August twentieth, and finishes up
Speaker 3: with a special edition of Bloomberg Surveillance. Tom Keene, Lisa Bromoitz,
Speaker 3: and the one and only Mike McKee will all be
Speaker 3: part of that special Starting at nine am Eastern on Friday.
Speaker 2: You are listening to the Bloomberg Business Weekdaily Podcast. Catch
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Speaker 4: David Gura in for Tim Steneviek, who's on assignment with
Speaker 4: Carol Masser here on Bloomberg Business Week, and we got
Speaker 4: news yesterday from the White House that Presdon Trump has
Speaker 4: decided to extend that ninety day pause yet again on
Speaker 4: those heightened tariffs on China. China very much in focus
Speaker 4: here in the US, of course, as we wait to
Speaker 4: see sort of what happens with those trade talks, but
Speaker 4: also playing an incredibly important.
Speaker 7: Role around the world.
Speaker 4: We saw the Brazilian President Lula de Silva speaking with
Speaker 4: the Chinese leader, exchanging their views on international affairs. President
Speaker 4: she calling for coordinated efforts against unilateralism and protectionism. News
Speaker 4: today also that India and China set to resume direct
Speaker 4: flight connections as soon as next month. And we're seeing
Speaker 4: oil playing a critical role here as the contours of
Speaker 4: this trade war continue to come into Folks, it does
Speaker 4: feel like, in a way, many parts of the world
Speaker 4: are moving on and increasingly away from the US. Let's
Speaker 4: get to a roundtable now to understand China's goals here,
Speaker 4: what they're thinking in terms of the role they're playing
Speaker 4: in the world. US very clear of course about wanting
Speaker 4: a higher tariff world for those looking to sell into
Speaker 4: the US. Shouldadkazi joints as Chief Operating Officer Managment Director
Speaker 4: at the China BAIG book here with us in the
Speaker 4: studio and from our bureau in Buenos Aires, Aminasuniga with
Speaker 4: US geoeconomic analysts for Latin America at Bloomberg Economics and
Speaker 4: shouldsod Let me start with you and maybe just give
Speaker 4: us your sense of how China is thinking about all this.
Speaker 4: We've had a series of three meetings now Geneva, London, Stockholm.
Speaker 4: The pause continues here as we get perilously close. I
Speaker 4: think to the Christmas holiday when people are going to
Speaker 4: be buying a lot of gifts and are going to
Speaker 4: be very worried if a lot of these tariffs come
Speaker 4: to pass. How is China thinking about the kind of
Speaker 4: trajectory of these negotiations with the US.
Speaker 5: You know, when the year began, we would have thought
Speaker 5: that their primary objective was to bring the tariff levels
Speaker 5: down and negotiate just about trade. But what we've learned
Speaker 5: is that they are much more concerned about US exp
Speaker 5: controls because that is ultimately what hurts them far more
Speaker 5: than even tariffs do. Because they have ways to get
Speaker 5: around the tariffs, and so what they've done is they've
Speaker 5: used their chokehold on rare it's minerals and magnets, and
Speaker 5: forced compelled really the administration to relent and roll back
Speaker 5: US export controls while also bringing down the tariffs. So
Speaker 5: two wins for Shujinping in the last several months.
Speaker 3: But what kind of relationship do you think he wants
Speaker 3: with the United States going forward?
Speaker 5: Well, he'd love nothing more than to be able to
Speaker 5: sell as much as possible and be able to import
Speaker 5: the things they care about, the most advanced technology, not
Speaker 5: just ships, but across the board. Right, that's in an
Speaker 5: ideal world. Now, that's probably not what he's getting right away,
Speaker 5: but he's getting pretty close to it. I don't think
Speaker 5: he feels a pressure to do anything more. I don't
Speaker 5: think he feels a pressure today to say I'm going
Speaker 5: to pledge like Japan and Europe did you know five
Speaker 5: hundred billion dollars worth of investment, or I'm going to
Speaker 5: pledge to buy all this US agricultural output the way
Speaker 5: I did in the past. I think they've demonstrated she specifically,
Speaker 5: we've got a lot of leverage and we don't need
Speaker 5: to play ball. If you don't feel like I do.
Speaker 3: Think it's interesting that they want all the high tech,
Speaker 3: and yet Beijing is urging what local companies to avoid
Speaker 3: using in Vidia's H twenty processors, particularly for government related purposes.
Speaker 3: So yes, but there's always caveat Hamena com on in
Speaker 3: on this because in the meantime, Latin America is watching
Speaker 3: very closely, I'm sure, and remind us of the relationship
Speaker 3: that already exists with China across Latin America and maybe
Speaker 3: what they hope to even solidify even further.
Speaker 9: Thank you, Carol. Yes, you know, g and Lula just
Speaker 9: talked and they said the relationship is as strong as ever.
Speaker 9: But so far the support from China to Brazil seems
Speaker 9: to have been largely rhetorical.
Speaker 7: Right.
Speaker 9: They have said they have shared views on multilajournalism and
Speaker 9: unilateralism on behalf of the US, condemning that, and China
Speaker 9: has been very keen on jumping on this collective criticism
Speaker 9: of the US. But even though Trump's tarifsts may be
Speaker 9: giving bricks the blog that Brazil and China have, along
Speaker 9: with India, Russia and other smaller partners, even though Trump
Speaker 9: tariffs seemed to be giving it some mortar, it's still
Speaker 9: far from operating as a block and it's not really
Speaker 9: coordinating a response, a collective response to the Trump tariffs.
Speaker 4: Him man on that note, do you anticipate that's likely
Speaker 4: to happen? I remember that moment a few months ago
Speaker 4: when there was a meeting of the bricks countries. There
Speaker 4: was this tacit threat that they were going to work
Speaker 4: more closely together in opposition to what the United States
Speaker 4: was doing. President Trump, clearly irritated agitated by that threatned
Speaker 4: even more punitive sanctions, more tariffs on those bricks countries.
Speaker 4: As a result of that. What would the catalyst be
Speaker 4: that would get them to do more than, as you say,
Speaker 4: talk about presenting a more united front against the United States.
Speaker 9: I think there are two main issues that are blocking
Speaker 9: a more integrated response, more coordinating response. One is the
Speaker 9: very diverse membership of the group in general, and also
Speaker 9: with respect to the Trump tariffs, they're facing slightly different issues,
Speaker 9: although they are becoming increasingly closer in the sense that,
Speaker 9: for example, now Brazil and India are similarly targeted, but
Speaker 9: for example, Russia has so far not been targeted with tariffs,
Speaker 9: although they have other issues with the US, of course,
Speaker 9: but the key thing is that China doesn't really need
Speaker 9: the blogs as much as the other members of the
Speaker 9: blog need China or would benefit from a coordinating response
Speaker 9: with China. As Jas just said, China has a lot
Speaker 9: of leverage, has demonstrated has a lot of leverage to
Speaker 9: push back without offering any dramatic concessions as other countries
Speaker 9: have done. Uh and the US has back down. So
Speaker 9: China does not really need to have the collective weight
Speaker 9: and have took the bricks block to stand up to Trump.
Speaker 9: If it did, however, it could really expand its geopolitical cloud,
Speaker 9: and it would mean the bricks would function more as
Speaker 9: a block. But so far, I think China is very
Speaker 9: focused on its national interest and as long as as
Speaker 9: it can stand up to Trump on its own, and
Speaker 9: it has the leveraged to do it, it is unlikely
Speaker 9: to compromise its national interest to expand the bricks theft.
Speaker 3: We're talking with him in a Suniga geoeconomic analyst for
Speaker 3: Latin America out there in our Buenos Aires Bureau, and
Speaker 3: also with US Shazad Kazi, chief Operating Officer, Managing Director
Speaker 3: China Basebook and Studio. All right, so let's shift a
Speaker 3: little bit to China and India, which I think is
Speaker 3: kind of interesting and you know, just a little headline.
Speaker 3: As David mentioned, that looks like Indian China set to
Speaker 3: resume direct flight connections as soon as next month, according
Speaker 3: to those familiar, as they look to kind of reset
Speaker 3: their political ties as the US and India, after years
Speaker 3: and years of working on improving that relationship, seem to
Speaker 3: have taken some steps back. China and India. What's China's
Speaker 3: goal there?
Speaker 5: Well, I think, you know, they have an incredibly complex
Speaker 5: relationship because whereas they trade, it is absolutely not They
Speaker 5: have very serious national security concerns about each other, more
Speaker 5: specifically India with regards to China, and of course are
Speaker 5: constantly having these bottles battles rather than skirmishes at the border,
Speaker 5: long running problems there. So you know, I think I
Speaker 5: think the traders.
Speaker 3: Is any of this real or is it just for show?
Speaker 5: I think it's real to the extent that they want
Speaker 5: to do business with each other, but it's not it
Speaker 5: doesn't go towards, you know, anything beyond that. I mean India.
Speaker 5: So let's be clear, India does not want to be
Speaker 5: seen as a country that's going to counterbalance China and
Speaker 5: all the rest on behalf of the US. It wants
Speaker 5: to be seen as a power in its own merit,
Speaker 5: on its own right. But by that token though, still,
Speaker 5: they also don't want to blow up their business relationship
Speaker 5: with China. This is far more complex than I think
Speaker 5: traditional models of geopolitics would suggest.
Speaker 4: You know, we were talking about sort of the the
Speaker 4: gap that might be left if the training relationship has
Speaker 4: ruined between the United States and China. How confident is
Speaker 4: China that it could get, yes, the rare earths, the
Speaker 4: critical minerals exported to other countries if the US isn't
Speaker 4: able to buy them. I guess what I'm saying is
Speaker 4: how sure they are in their ability to pivot to
Speaker 4: other markets if the US is no longer what it
Speaker 4: has been.
Speaker 5: So they demonstrated, I think that everybody is desperate for
Speaker 5: Chinese rare arts. And if you remember what they did
Speaker 5: was briefly they said export controls on more or less everyone,
Speaker 5: so that they could prevent us from transshipping those rare
Speaker 5: ets right into the US the way. You know, obviously
Speaker 5: China takes advantage of transshipment. So I think I don't
Speaker 5: know if that's really the big concern, because there's such
Speaker 5: desperation given the chokehold that they have as a sole
Speaker 5: supplier really of most of these things, including some really
Speaker 5: critical things like samarium, which you need for weapons development,
Speaker 5: and how dependent we are on that and by the way,
Speaker 5: they are not letting that out human.
Speaker 3: I also wonder, you know, if some great deal happens
Speaker 3: between the US and China after, you know, if the
Speaker 3: delays are done, you know, we'll Latin America as a
Speaker 3: whole or specific countries be like, okay, missed opportunity. You know,
Speaker 3: we're out because we understand the importance of that US
Speaker 3: China relationship, and especially if they if China gets better
Speaker 3: terms in terms of tariffs. Finally, what do you mean
Speaker 3: we're out?
Speaker 1: Sorry, Well, meaning that they won't necessarily have such an
Speaker 1: open door perhaps or the conversation lines, you know, between
Speaker 1: China and Latin America might go away if ultimately the
Speaker 1: US trade deal and tariff deal that they come together
Speaker 1: with China is not as onerous as maybe has been
Speaker 1: put out before that ultimately US and China come to
Speaker 1: terms that are good for both sides.
Speaker 3: So does that China kind of back off again from
Speaker 3: Latin America.
Speaker 9: Yeah, in a way, I think that China is very
Speaker 9: present in Latin America if you think of it outside Mexico,
Speaker 9: who exports eighty percent of its schoods towards the US.
Speaker 9: China is the main markets or most of the are bigger,
Speaker 9: biggest economies, including Brazil, Argentina and tile Peru. And so
Speaker 9: I don't think that Latin America can choose between the
Speaker 9: US and China. For Latin America, the best would be
Speaker 9: not to have to choose, and for a while it
Speaker 9: cultivated positive pragmatic relationships with both with both markets that
Speaker 9: are important not only in terms of trade, but also
Speaker 9: in terms of financing and in terms of tourism. Both
Speaker 9: both markets are critical to region in different respects depending
Speaker 9: on the country. If having to choose, a lot of
Speaker 9: countries would not we try to push back a lot
Speaker 9: not to be not to have to choose. They would
Speaker 9: continue to trade with China, they would continue to have
Speaker 9: financial ties, and they would like try to push back
Speaker 9: on this on this on the US, because China is
Speaker 9: now almost as important or more important for many of
Speaker 9: these countries as the US is.
Speaker 5: Any last thoughts just real quickly, well, look, China's going
Speaker 5: to be a big player, which is why I think
Speaker 5: when Secretary Rubio took over. His big focus initially was
Speaker 5: supposed to be to push back on China right here
Speaker 5: in the Western Hemisphere. That feels like years ago at
Speaker 5: this point, but it's an important objective, I think.
Speaker 3: All right, So appreciate both of you. Shazad Kazi, chief
Speaker 3: Operating Officer Maaging Director of China bagbook right here in
Speaker 3: studio and then out there at our Buenos Aires bureau
Speaker 3: for Bloomberg News, him and a Suniga geoeconomic analyst for
Speaker 3: Latin America.
Speaker 2: This is the Bloomberg Business Week Daily Podcast. Listen live
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Speaker 3: Well, he holds one of the most important jobs in
Speaker 3: the Trump administration. Is off and out about talking about
Speaker 3: the president's policies. Another individual who hails from the world
Speaker 3: of financial markets before taking the job in Washington. We
Speaker 3: are talking about US Treasury Secretary Scott Besson, who is
Speaker 3: the subject of the latest issue of Bloomberg BusinessWeek. It's
Speaker 3: the cover story. It's on the Bloomberg Two, at Bloomberg
Speaker 3: dot com, Slash BusinessWeek, and on newsstands. He talked, we're
Speaker 3: talking about mister Bessett, the two key members of our
Speaker 3: Bloomberg team about Tariff's deficits and President Trump's economic plan
Speaker 3: with us as Bloomberg News US Treasury Reporter Dan Flatley
Speaker 3: out there in our DC bureau and Bloomberg New Economy
Speaker 3: reporter editorial director and Bloomberg business Week Getthered at Large,
Speaker 3: Eric Shaftsker, Eric here in our studio. Eric, I want
Speaker 3: to start with you deep dive, so much detailed, pretty incredible.
Speaker 3: Your first impression of actually sitting down and talking with
Speaker 3: the Treasury Secretary.
Speaker 10: Oh boy, well, I've had the good fortune of seeing
Speaker 10: him a couple of times since he became the Treasury Secretary.
Speaker 10: I would say, more than anything else, And I'm curious
Speaker 10: to know if Dan feels the same way that he was.
Speaker 7: Remarkably at ease.
Speaker 10: This is someone and that it truly is a point
Speaker 10: worth making because this is somebody who came from a
Speaker 10: totally different background, who had no experience in Washington, who
Speaker 10: knew nothing about how to navigate political waters and yet
Speaker 10: only seven months into the job, he's sitting there at
Speaker 10: the Treasury Department feeling like or at least exuding an
Speaker 10: aura of calm and control in a way that wasn't
Speaker 10: a foregone conclusion. If you had the background that he had,
Speaker 10: you ran a small, relatively small hedge fund, certainly not
Speaker 10: that many people at the most. Over the course of
Speaker 10: his career, he probably oversaw three hundred people at Soros
Speaker 10: Fund Management when he was the chief Investment Officer twenty
Speaker 10: eleven to twenty fifteen. Here he's got a department of
Speaker 10: one hundred thousand people, and as we explain in this story,
Speaker 10: it is the department of everything. He is responsible not
Speaker 10: just for the things that Treasury is typically responsible for,
Speaker 10: but so many other things as well, including trade negotiations,
Speaker 10: acting IRS commissioner, shepherding the one big beautiful bill through Congress.
Speaker 7: You name, it's on his plate.
Speaker 4: Dan, I'm curious if you want to respond to that
Speaker 4: sort of how you found the treasuresector, But also I'm
Speaker 4: interested in how he sees his role, yes within the department,
Speaker 4: but in the administration as well, that the president has
Speaker 4: a varied economic team, folks from different backgrounds. He's taking
Speaker 4: advice from from all of them. What's the role of
Speaker 4: Treasury sectory Scott Besson in, Yes, advising the president, but
Speaker 4: setting his economic agenda as well.
Speaker 11: Yeah, you know, it's it's a great question, and I
Speaker 11: agree with Eric. You know, he definitely seemed at ease
Speaker 11: when we were speaking with him. And one of the
Speaker 11: things that I noticed he goes on TV a lot,
Speaker 11: and he's very careful sometimes about what he says on TV.
Speaker 11: Occasionally he gets himself into some trouble with some of
Speaker 11: his public remarks, including on TV. But he was much
Speaker 11: more at ease, much more relaxed. One of the things
Speaker 11: that I said to him was, you know, you must
Speaker 11: you must feel very well prepared for your role in
Speaker 11: terms of macroeconomic policy and and and that aspect of it,
Speaker 11: given your background. But what about the political dimension? And
Speaker 11: he sort of gestured over to this table that he
Speaker 11: had set up in his office with a white tablecloth
Speaker 11: that he said he brought from home where he brings
Speaker 11: in members of Congress to have lunch or breakfast with him.
Speaker 11: And he said, that's one of the things that he's
Speaker 11: been trying to work on, is congressional relations. And that's
Speaker 11: something that came into play with Steve Mnusian when he
Speaker 11: was Treasury Secretary with the pandemic, where he really needed
Speaker 11: to rely on Democrats to get a lot of those
Speaker 11: sort of stimulus bills through. And Bessett hasn't had to
Speaker 11: do that yet because Republicans have control of both houses
Speaker 11: of Congress and there hasn't been a crisis of that
Speaker 11: level certainly during his time in office. But he may
Speaker 11: need to rely on on some Democrats at some point
Speaker 11: in the future. And so he mentioned that he has
Speaker 11: members of both parties there with him at times, So
Speaker 11: I think that was interesting. And then you know how
Speaker 11: he sees his role. I think, you know, he told
Speaker 11: us he gives a president options and outcomes, and he
Speaker 11: also helps manage the narrative, which is I think one
Speaker 11: of the things that's very interesting to observe. How he
Speaker 11: does go out a lot, a lot more than some
Speaker 11: other secretaries in the past and talks about what the
Speaker 11: president is.
Speaker 7: Trying to do.
Speaker 11: And I think markets seem to like that. Whether he
Speaker 11: can keep that up over the course of his tenure,
Speaker 11: we'll see, but that seems to be a big part
Speaker 11: of his role right now.
Speaker 3: Well, you know, it's something that you made reference to
Speaker 3: about how comfortable he was, because it's something that David
Speaker 3: and I both kind of seized on, like in reading
Speaker 3: your story about when he's on air, Eric, it is
Speaker 3: very halting his speech, and you've got none of that
Speaker 3: no when you guys sat with him. So it makes
Speaker 3: me wonder, is he just being so careful because he
Speaker 3: knows the president's watching?
Speaker 10: Well, he's being careful, I would say for a couple
Speaker 10: of reasons, yes, maybe three reasons. Yes, he knows the
Speaker 10: president's watching. Yes, he doesn't have a lot of time
Speaker 10: in which to make those remarks. We give him plenty
Speaker 10: of airtime, and others do as well, but it's not
Speaker 10: as much time as Dan and I had. It's not
Speaker 10: as free flowing a conversation. It tends to be a
Speaker 10: conversation that's much more responsive to or concerning news and
Speaker 10: something that may have happened ten minutes ago or where
Speaker 10: the markets are trading right now. Dan and I had
Speaker 10: a relatively unique opportunity to talk to the present, to
Speaker 10: talk to excuse me, to the Treasury secretary without any
Speaker 10: of those pressures on his mind, and so he was
Speaker 10: able to express himself much more in a sense in
Speaker 10: his own words, the way he would express himself if
Speaker 10: he were having a conversation I hesitate to say, with
Speaker 10: a friend, but not under the glare of the television
Speaker 10: lights and a rat tat tat interview that you typically
Speaker 10: get when you're certainly being questioned by multiple parties.
Speaker 4: You take us through his childhood in South Carolina, born
Speaker 4: of this family that's been there for a very long time,
Speaker 4: his centuries nicknamed by the Secret Services Swampbox after Francis Marion,
Speaker 4: the American General. I'm curious sort of if you could
Speaker 4: you tell us a bit more about his back in finance, because,
Speaker 4: as you both mentioned, Wall Street seems to have warmed him.
Speaker 4: They seem as kind of a bultwork against some of
Speaker 4: the president's worst impulses. Perhaps was how did he make
Speaker 4: a name for himself on Wall Street? What's his specialty?
Speaker 4: Was it in currencies? Was it in macro? Beacro? How
Speaker 4: is he known on Wall Street?
Speaker 11: For this?
Speaker 10: It's important first of all to say that it's in macro.
Speaker 10: He was a macro fund manager, which means he translates
Speaker 10: his view of global economics into bets on bonds, currencies, commodities, equities,
Speaker 10: whatever the case, may be a lot of it relative
Speaker 10: value bets among different currencies, that kind of thing.
Speaker 7: That's what he specialized in.
Speaker 10: That's what he learned at the knee of both George
Speaker 10: Soros and Stan Ruckenmiller. Stan Druckenmiller, for all of the
Speaker 10: fame George Soros has earned, Stan Druckenmiller his chief investment
Speaker 10: officer at Quantum May and at Soros Fund Management, maybe
Speaker 10: the greatest investor in modern history is a man who,
Speaker 10: you know, whether he was managing other people's money or
Speaker 10: managing his own money, has never had a down year. That,
Speaker 10: as much as anything, is what made Scott Besson famous.
Speaker 10: He was the understudy to the mentee of Stan Druckenmeller,
Speaker 10: and of course he ran two firms of his own,
Speaker 10: best in capital First he then went back to Soros
Speaker 10: Fund Management as the chief investment officer overseeing George Soros's
Speaker 10: twenty five billion dollar portfolio, and then in twenty late
Speaker 10: twenty fifteen early twenty sixteen he started Key Square Group,
Speaker 10: which is where he was until effectively he became the
Speaker 10: Treasury nominee. It's a peculiar place to have come from
Speaker 10: in finance. It does prepare him in a unique way
Speaker 10: for the demands of the Treasury Secretary's job, because he
Speaker 10: thought about global markets and the interrelationship between policy and
Speaker 10: market response in a way that say, along short equity
Speaker 10: of fund manager never has to and so that is
Speaker 10: an important thing to recognize about his background. It would
Speaker 10: have been Stephen Minuchin, for example, came from a very
Speaker 10: different tradition. He was a little bit more of an
Speaker 10: He was special in operations when he was at Golden Sachs,
Speaker 10: and then when he started his own investing operation, he
Speaker 10: was more of an opportunist, spent more of his time
Speaker 10: on credit, as you may remember, took over Indiemac, you
Speaker 10: know when that bank failed after the financial crisis, financed
Speaker 10: Hollywood films, a very different kind of a mindset. He
Speaker 10: had his own views, of course about how to be
Speaker 10: the Treasury Secretary, but he didn't have the background and
Speaker 10: the immersion in global markets and world affairs that best
Speaker 10: and has had his entire career.
Speaker 3: We're talking with Eric Shaftsker, editorial director for Bloomberg New Economy,
Speaker 3: also editor at large for Bloomberg BusinessWeek here and studio,
Speaker 3: and Dan Flatley out there in our Washington, DC bureau.
Speaker 3: Dan as US Treasury reporter for Bloomberg News. So it
Speaker 3: kind of begs, and you guys write this in the
Speaker 3: story that he was a private guy. So I'm curious, Dan,
Speaker 3: does he like the job, does he feel conflicted in
Speaker 3: terms of the president's policies or that's not his job.
Speaker 3: It's just to maybe layout scenarios for the president.
Speaker 7: Yeah.
Speaker 11: No, it's a great question. I mean on the privacy point.
Speaker 11: You know, it's very interesting because he sort of mentioned
Speaker 11: to us this sort of old line about, you know,
Speaker 11: a gentleman should never should only have his name in
Speaker 11: the paper three times when he's born, when he gets married,
Speaker 11: and when he dies, and.
Speaker 3: So he's such a southern old gentleman. But go ahead,
Speaker 3: go ahead.
Speaker 11: Yeah, I mean, it's you know, but it was very
Speaker 11: interesting because it was very apparent, I think to us,
Speaker 11: and I think Eric would agree with me that that's
Speaker 11: sort of how he lived his life up to the
Speaker 11: point where he decided, Hey, I'm going to make a
Speaker 11: play for being Donald Trump's Treasury secretary. And it didn't
Speaker 11: happen overnight. You know, he told us that he got
Speaker 11: interested in the Trump campaign in twenty sixteen. He thought
Speaker 11: about potentially raising his hand for a position in the
Speaker 11: first Trump administration, but was conflicted because he had just
Speaker 11: started his own hedge fund, Key Square Group, and he
Speaker 11: was very cautious about, you know, wanting to be seen
Speaker 11: as overly political, although he did give a million dollars
Speaker 11: to Trump's first inauguration, which he said he sort of
Speaker 11: smoothed over with the clients by saying it was the
Speaker 11: people's inauguration. But over time he got more and more
Speaker 11: interested in politics, and he sort of took us through
Speaker 11: his journey, so to speak, and some of the things
Speaker 11: that he saw that he was concerned about. Of course,
Speaker 11: he made mention of the Biden administration's policies, but he
Speaker 11: also talked about the idea that people don't trust either
Speaker 11: political party anymore and that he sees himself as playing
Speaker 11: a role, you know, smaller than the president's of course,
Speaker 11: but still a significant role in terms of trying to
Speaker 11: shore up the system, so to speak. And again, like
Speaker 11: I said before, it's an active experiment. Whether it works
Speaker 11: at the end of the day is an open question.
Speaker 5: All right.
Speaker 3: I wish we had another twenty minutes to go, but
Speaker 3: I highly recommend everybody check out the story. Eric Dan
Speaker 3: You guys rock Eric Schatzger and Dan Sally so appreciate.
Speaker 3: This is the cover of the new issue of Bloomberg
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