WEBVTT - PCE Inflation Picks Up Ahead of Tariffs 0:00:02.720 --> 0:00:10.560 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.560 --> 0:00:14.520 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:14.560 --> 0:00:18.479 Eastern on Applecarplay and Android Auto with the Bloomberg Business App. 0:00:18.600 --> 0:00:21.840 Listen on demand wherever you get your podcasts, or watch 0:00:21.920 --> 0:00:23.040 us live on YouTube. 0:00:24.000 --> 0:00:25.759 Latch of economic data today. 0:00:25.840 --> 0:00:28.200 We got the PCEE data, the inflation data, which is 0:00:28.280 --> 0:00:31.720 key for the Federal Reserve. I got the University of 0:00:31.760 --> 0:00:34.360 Michigan a sentiment data which is becoming more and more 0:00:34.400 --> 0:00:36.440 important to a lot of people's people try to sess 0:00:36.479 --> 0:00:40.559 out any potential impacts on this economy from changing terraff policies. 0:00:41.040 --> 0:00:44.000 So Michael McKee joins is here Bloomberg International Economics and 0:00:44.000 --> 0:00:46.720 Policy corspot It might be a lot of data points today. 0:00:46.720 --> 0:00:48.280 What kind of were you focusing on? 0:00:49.040 --> 0:00:52.400 Well, a couple of things, because the income and spending 0:00:52.479 --> 0:00:55.959 numbers were interesting. In their incomes were up, A lot 0:00:56.000 --> 0:00:59.760 of that was transfer payments, but wages still growing strongly 0:01:00.080 --> 0:01:03.680 about half a percent a month, and spending was rebounded 0:01:03.760 --> 0:01:07.360 some but most of that was durable goods and it 0:01:07.400 --> 0:01:11.440 probably was people buying ahead, trying to get ahead of 0:01:11.480 --> 0:01:15.760 tariffs which then are reflected in the University of Michigan numbers. 0:01:15.840 --> 0:01:18.720 The big drop in the headline number and the inflation 0:01:18.800 --> 0:01:21.080 numbers of one year inflation is now up to five 0:01:21.160 --> 0:01:24.520 percent and five to ten years up to four point 0:01:24.520 --> 0:01:29.160 one percent. That's going to get the FEDS attention. Inflation 0:01:30.040 --> 0:01:32.320 in the PCE numbers wasn't a big deal because it 0:01:32.360 --> 0:01:37.119 came in very close testaments. Although the core rose two 0:01:37.160 --> 0:01:40.280 point eight percent from two point seven percent, so that 0:01:40.800 --> 0:01:43.120 is a bit of bad news. And on a three 0:01:43.160 --> 0:01:46.000 month basis, the numbers are bad, but everybody kind of 0:01:46.080 --> 0:01:47.680 knew was coming with that. 0:01:49.000 --> 0:01:54.400 How much weight are you placing on this you miss report. 0:01:54.840 --> 0:01:57.680 It's a data point to look at and it gives 0:01:57.720 --> 0:02:02.120 you sort of context around what's going on. But consumer 0:02:02.400 --> 0:02:08.440 behavior doesn't necessarily follow consumer sentiment. People don't. It's not 0:02:08.480 --> 0:02:11.280 a good predictor for what's going to happen with consumer spending. 0:02:11.720 --> 0:02:15.160 It's more of a coincident predictor. And we've seen this 0:02:15.360 --> 0:02:20.240 decline for Michigan sentiment. When we get the retail numbers 0:02:20.280 --> 0:02:24.560 for March next month, we will probably see some softness 0:02:24.600 --> 0:02:28.320 because people were if they were feeling bad, they probably 0:02:28.320 --> 0:02:28.920 weren't spending. 0:02:29.080 --> 0:02:29.840 But it doesn't tell you what. 0:02:29.840 --> 0:02:30.840 They're going to do in the future. 0:02:31.480 --> 0:02:33.799 Consumers expect prices to rise at an annual rate of 0:02:33.840 --> 0:02:35.880 four point one percent over the next five to ten years, 0:02:35.960 --> 0:02:38.600 the highest since February of nineteen ninety three. 0:02:38.639 --> 0:02:39.880 So you were right to call that out. 0:02:39.919 --> 0:02:41.440 That's that's not nothing. 0:02:41.520 --> 0:02:42.960 So that you're right. That's going to get defense. 0:02:43.080 --> 0:02:45.000 Yeah, that's going to get defense attention. They don't like 0:02:45.440 --> 0:02:51.440 the idea that inflation expectations start to get unmoored. A 0:02:51.480 --> 0:02:54.720 lot's going to depend on what comes out of the 0:02:54.760 --> 0:02:59.360 White House next week. And because we're all just flying 0:02:59.600 --> 0:03:03.120 blind at this point, Tom Barkin from the Richmond FED 0:03:03.200 --> 0:03:06.280 said yesterday there's a fog of uncertainty. But this isn't 0:03:06.280 --> 0:03:09.560 your usual fog. This is a pull over to the 0:03:09.600 --> 0:03:12.040 side of the road and turn your brights on the 0:03:12.160 --> 0:03:14.400 kind of fog because you can't see a thing out there. 0:03:14.560 --> 0:03:17.359 And once we get some idea of what the tariffs 0:03:17.360 --> 0:03:20.520 are actually going to be, then people can start modeling 0:03:20.520 --> 0:03:23.280 them and we'll get a much better impression of what 0:03:23.320 --> 0:03:24.600 it might do to the economy. 0:03:25.040 --> 0:03:27.239 With all this uncertainty out there, how do you think 0:03:27.320 --> 0:03:30.320 that the FED is really mapping out their next steps. 0:03:30.280 --> 0:03:30.880 Well, they can't. 0:03:31.200 --> 0:03:34.400 I mean, they're doing some what if scenarios right now. 0:03:34.400 --> 0:03:38.720 But I think starting on Wednesday, everybody's gonna be working 0:03:38.720 --> 0:03:41.720 overtime at all the FED offices trying to come up 0:03:41.720 --> 0:03:45.480 with ideas for this. And then Friday we hear from j. Powell, 0:03:45.520 --> 0:03:49.920 so we'll get straight from the horse. We'll get what 0:03:49.960 --> 0:03:52.040 the FED thinks of all this. They may not have 0:03:52.080 --> 0:03:56.880 a great idea yet, and as some Albert Alberto Musselam 0:03:56.920 --> 0:03:58.840 from Saint Louis said earlier this week, it's the second 0:03:58.920 --> 0:04:02.480 round effects that worry you. It's you know, obviously prices 0:04:02.520 --> 0:04:04.800 are going to go up for certain goods that come 0:04:04.840 --> 0:04:07.520 across the border, but then how does that affect other 0:04:07.680 --> 0:04:10.360 goods that are either manufactured here or brought in, and 0:04:11.160 --> 0:04:14.080 how does it affect consumers expectations. 0:04:14.120 --> 0:04:15.040 It's probably gonna take some. 0:04:15.000 --> 0:04:16.960 Months before we have a real view. 0:04:17.520 --> 0:04:19.640 Well, last night up in Greenwich, Connecticut, I had an 0:04:20.520 --> 0:04:24.600 interviewed former FED Vice Chairman Richard Clarida, and I think 0:04:24.600 --> 0:04:27.880 the biggest takeaway was he doesn't think DOSEE is going 0:04:27.960 --> 0:04:31.679 to come to the Federal Reserve Bank, but you can't 0:04:31.680 --> 0:04:33.400 say for sure. But that was one of the questions 0:04:33.400 --> 0:04:34.400 from the crowd, you know. 0:04:34.839 --> 0:04:39.080 So, yeah, it's an interesting situation because the FED is 0:04:39.120 --> 0:04:44.280 theoretically an independent agency under law, and the Trump administration 0:04:44.760 --> 0:04:46.960 seems to not care about that being the law. 0:04:47.360 --> 0:04:50.120 The twelve regional banks. 0:04:49.920 --> 0:04:55.120 Are essentially private, they're not, They're only quasi governmental, and 0:04:55.200 --> 0:05:00.280 so the theory is doose can't affect them, right, but 0:05:00.360 --> 0:05:01.600 who Yeah, what. 0:05:01.640 --> 0:05:03.360 Good is theory these days? Exactly? 0:05:03.600 --> 0:05:05.720 All right, Michael McKay, thank you so much for joining us. 0:05:05.720 --> 0:05:09.279 As always, Michael McKey, international economics and policy correspondent for 0:05:09.440 --> 0:05:11.839 Bloomberg News, joining us live here in our Bloomberg Inactive 0:05:11.880 --> 0:05:12.679 Brokers studio. 0:05:14.480 --> 0:05:18.200 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:05:18.279 --> 0:05:21.640 weekdays at ten am Eastern on Applecarclay and Android Auto 0:05:21.760 --> 0:05:24.839 with the Bloomberg Business Appum. Listen on demand wherever you 0:05:24.880 --> 0:05:27.880 get your podcasts, or watch us live on YouTube. 0:05:28.440 --> 0:05:31.560 Let's check in with Nathan Dean. Nathan Dean is our 0:05:31.560 --> 0:05:34.919 senior policy Alice or Bloomberg Intelligence. He's down in Washington, 0:05:35.000 --> 0:05:38.360 d C. That's his lot in life, and he follows 0:05:38.480 --> 0:05:41.520 all the policy stuff coming out of Washington. You know, 0:05:42.040 --> 0:05:43.880 there's so much stuff coming out there that all I 0:05:43.920 --> 0:05:45.599 do is just read his stuff because I know he's 0:05:45.600 --> 0:05:48.039 focusing on the important stuff, and if he's looking at it, 0:05:48.080 --> 0:05:50.320 I'm going to look at it. Nathan Dean, thanks so 0:05:50.400 --> 0:05:54.000 much for joining us. Nathan, talk to us about terroris. 0:05:54.080 --> 0:05:56.960 I think we've got Liberation Day next Wednesday. What's the 0:05:56.960 --> 0:06:01.400 feeling inside the beltwagh about how this administration's pursuing trade policy. 0:06:02.160 --> 0:06:04.560 Yeah, so you know, April second, Liberation Day, it's going 0:06:04.640 --> 0:06:06.039 to be a really fast day. 0:06:06.120 --> 0:06:08.039 Lots of red lines on the terminal that day. 0:06:08.560 --> 0:06:10.200 But I think that what's going to happen is you're 0:06:10.440 --> 0:06:12.600 going to see a combination of tariffs that actually come 0:06:12.600 --> 0:06:14.800 in immediately, you know, President Trump. You know, we've been 0:06:14.800 --> 0:06:17.880 talking about automobiles all week, for example. You're also going 0:06:17.960 --> 0:06:21.480 to see some additional tariffs that are maybe just announcements 0:06:21.520 --> 0:06:23.120 saying and I think this is going to be more 0:06:23.120 --> 0:06:25.640 in the reciprocal camp, saying, like a tariff on a 0:06:25.680 --> 0:06:28.640 certain country. We're looking at the European Union and we're 0:06:28.680 --> 0:06:30.520 interested to see what the White House does in terms 0:06:30.560 --> 0:06:33.120 of value added tacks, because the White House has taking 0:06:33.120 --> 0:06:35.720 the approach that that is considered a tariff, and then 0:06:35.720 --> 0:06:37.720 subsequently you are going to see the creation of this 0:06:37.800 --> 0:06:41.039 external revenue service. I think this is just a rebranding 0:06:41.080 --> 0:06:44.000 of an already existing agency or an already existing group. 0:06:44.160 --> 0:06:45.839 And I think this is more of a pr. 0:06:45.600 --> 0:06:48.919 Exercise to showcase how many tariffs come in so ultimately 0:06:49.000 --> 0:06:51.640 the Republicans can pass a tax package later this year. 0:06:51.920 --> 0:06:54.320 But again, lots of things happening, and we just continue 0:06:54.320 --> 0:06:56.080 to go back to our clients and say there's a 0:06:56.080 --> 0:06:58.880 lot of bluster out there, but incrementally these tariffs are 0:06:58.880 --> 0:07:00.760 coming on board. And for those in the auto space, 0:07:00.800 --> 0:07:02.159 you know exactly how the impact is. 0:07:03.040 --> 0:07:06.000 I mean, everyone really is bracing for April. Second, what 0:07:06.080 --> 0:07:08.839 are people feeling on the ground as you talk to sources, 0:07:08.920 --> 0:07:12.120 especially since we did get that tariff news for autos 0:07:12.160 --> 0:07:14.720 that was a bigger magnitude than expected. 0:07:16.080 --> 0:07:17.720 So you know, this is where it's kind of hard 0:07:17.720 --> 0:07:21.120 because there is a boy crying wolf mentality going around 0:07:21.160 --> 0:07:23.680 some people, and especially I think in some of the 0:07:23.720 --> 0:07:25.960 investors I talked to you from New York because they 0:07:26.040 --> 0:07:28.480 say that President Trump says we're going to do reciprocal tariffs, 0:07:28.520 --> 0:07:30.440 We're going to do on everything, and then Bloomberg News 0:07:30.440 --> 0:07:32.960 has great reportings saying no it's going to be sectoral instead. 0:07:33.240 --> 0:07:35.400 But I do think that there is this anticipation that 0:07:35.520 --> 0:07:38.320 something is going to happen on Tuesday. Look, President Trump 0:07:38.440 --> 0:07:42.000 is hyped it up. So if it's automobiles, it's pharmaceutical, 0:07:42.080 --> 0:07:45.040 potentially it could be recicrable tariffs on countries like that, 0:07:45.160 --> 0:07:48.200 that something is coming on April. Second, I would look 0:07:48.240 --> 0:07:50.240 for the reporting over this weekend to see if we 0:07:50.280 --> 0:07:53.720 get any indication of that, because usually it will start 0:07:53.800 --> 0:07:55.960 to leak out. I would say about twelve twenty four 0:07:55.960 --> 0:07:59.040 hours in advance of Tuesday. But you know, come Tuesday, 0:07:59.120 --> 0:08:00.400 there's going to be a lot of red lines on 0:08:00.400 --> 0:08:00.880 the terminal. 0:08:01.000 --> 0:08:03.920 It's interesting, Nathan. We were talking to major Garrett CBS 0:08:03.960 --> 0:08:07.520 Television and he's going to be hosting Face Nation this Sunday. 0:08:07.800 --> 0:08:09.520 He says their program has been out to the White 0:08:09.520 --> 0:08:12.640 House asking for a voice on TARIS and they've gotten 0:08:12.680 --> 0:08:15.720 no response. And he was suggesting that perhaps that means 0:08:16.280 --> 0:08:19.559 the White House is not ready to really talk about 0:08:19.600 --> 0:08:22.000 their policies because they don't haven't decided on it yet. 0:08:22.000 --> 0:08:23.800 Would that surprise you No. 0:08:23.960 --> 0:08:27.400 Actually, I think that's in line with our expectation as well. 0:08:27.400 --> 0:08:30.520 I mean, look, ultimately it's just one person, this is 0:08:30.560 --> 0:08:32.760 President Trump. So yes, you could talk to the Department 0:08:32.800 --> 0:08:35.199 of Commerce, you could talk to the US Trade Representative, 0:08:35.240 --> 0:08:37.000 you could talk to State and you're going to get 0:08:37.040 --> 0:08:39.080 three separate different answers on what. 0:08:38.960 --> 0:08:40.080 This tariff policy is. 0:08:40.360 --> 0:08:43.400 Now, why do we think President Trump's doing tariffs fairness? 0:08:43.640 --> 0:08:45.760 But ultimately I think a lot of it is trying 0:08:45.800 --> 0:08:49.160 to drive manufacturing back to the United States. But if 0:08:49.200 --> 0:08:51.520 you are another country and you give President Trump a 0:08:51.520 --> 0:08:53.680 great deal, he could say, I want to have a 0:08:53.679 --> 0:08:56.400 great deal. So again, it's very hard to predict. But 0:08:56.520 --> 0:08:59.920 incrementally these tariffs are coming on board. And we just continued, 0:09:00.040 --> 0:09:01.959 why is our clients that you have to prepare for them? 0:09:02.160 --> 0:09:03.760 Because you don't want to be the boy who's cried 0:09:03.760 --> 0:09:04.640 wolf too many times. 0:09:05.200 --> 0:09:07.600 Nathan's the leadest with this department. That's been in all 0:09:07.600 --> 0:09:09.640 the headlines. What's going on with Doze right now? 0:09:10.520 --> 0:09:12.640 So you know, bloomerg News is reporting the DOGE has 0:09:12.720 --> 0:09:15.920 just meant gone over to the SEC this morning. This 0:09:16.000 --> 0:09:17.840 is the first time that you know, it's been reported 0:09:17.840 --> 0:09:20.520 that they're over there. But Elon Musk also just gave 0:09:20.559 --> 0:09:22.680 a little bit of a tidbit yesterday saying that he 0:09:22.720 --> 0:09:25.440 anticipates a lot of DOGE work we up by the 0:09:25.559 --> 0:09:28.400 end of May, and that could be good for Tesla investors, 0:09:28.480 --> 0:09:31.560 especially those that want Elon Musk to return back to 0:09:31.600 --> 0:09:34.080 the car companies. So I would say that, you know, 0:09:34.160 --> 0:09:36.439 the DOGE Committee is still going through all the different 0:09:36.480 --> 0:09:39.280 agencies and they're still looking for areas to cut, but 0:09:39.800 --> 0:09:42.720 in terms of cutting the deficit, they really need Congress 0:09:42.760 --> 0:09:45.600 to do that because mandatory spending, there's not so much 0:09:45.640 --> 0:09:48.400 DOACHE can do there unilaterally. So I would just say 0:09:48.440 --> 0:09:50.200 that I think what's going to happen is the DOGE 0:09:50.240 --> 0:09:52.360 is going to continue to work in these agencies for 0:09:52.440 --> 0:09:54.880 the next few months. But as we get closer to 0:09:54.920 --> 0:09:58.120 this tax extension debate, in this mandatory spending and debates 0:09:58.120 --> 0:10:00.719 on Medicaid for example, that's and I think a lot 0:10:00.800 --> 0:10:02.640 of the big ticket items are going to be debated 0:10:02.679 --> 0:10:04.560 because DOJ I don't think is going to be able 0:10:04.559 --> 0:10:06.080 to touch the mandatory spending right now. 0:10:06.600 --> 0:10:08.880 All right, So we got the DOGE, we got the tarriffs. 0:10:10.320 --> 0:10:14.120 Big one for Wall Street is taxes. Talk to us 0:10:14.160 --> 0:10:18.839 about just the broad tax package and the tax discussion 0:10:19.200 --> 0:10:20.920 as it kind of fits in with budgets and all 0:10:20.920 --> 0:10:21.480 that kind of stuff. 0:10:21.480 --> 0:10:22.280 That's the big stuff. 0:10:23.040 --> 0:10:25.560 Yeah, this is the big, beautiful bill that President Trump 0:10:25.600 --> 0:10:28.160 likes to talk about. Essentially, they want to extend the 0:10:28.200 --> 0:10:31.080 twenty seventeen tax cuts. Now, in order to do that, 0:10:31.240 --> 0:10:34.760 using this process they called reconciliation, Congress has to figure 0:10:34.760 --> 0:10:36.920 out how to pay for around four point six trillion 0:10:36.960 --> 0:10:38.400 dollars and they have lots of time. 0:10:38.440 --> 0:10:39.880 They have to do it by the end of this year. 0:10:40.160 --> 0:10:42.560 But next week we are seeing momentum on the Senate 0:10:42.600 --> 0:10:45.679 adopting a budget resolution. Now, if you see this headline 0:10:45.720 --> 0:10:49.560 comes out says Senate adopts tax package, they're adopting a blueprint. 0:10:49.600 --> 0:10:50.920 There's no specifics in here. 0:10:51.240 --> 0:10:53.679 All they're doing is adopting a blueprint that allows them 0:10:53.720 --> 0:10:57.199 to continue to negotiate. Now, Speaker Johnson wants everything wrapped 0:10:57.240 --> 0:10:59.319 up by Memorial Day. I don't think he can get there. 0:10:59.559 --> 0:11:01.640 I would be more I would think it's going to 0:11:01.720 --> 0:11:04.520 more likely be after the August recess. But the biggest 0:11:04.600 --> 0:11:06.800 question what comes to the taxes is that, yes, I 0:11:06.840 --> 0:11:09.040 do think the taxes are going to be extended, but 0:11:09.120 --> 0:11:12.200 what's the impact on the deficit. Because if they Republicans 0:11:12.240 --> 0:11:14.320 can't figure out a way to make this budget neutral, 0:11:14.720 --> 0:11:17.280 then potentially you could get in a situation where the 0:11:17.280 --> 0:11:20.400 deficit increases even more than what the Doge Committee's trying 0:11:20.440 --> 0:11:23.000 to do. I think they'll eventually try and figure something out, 0:11:23.000 --> 0:11:25.000 but it's one of the biggest questions for investors at 0:11:25.000 --> 0:11:25.439 this point. 0:11:26.200 --> 0:11:27.720 And how are Democrats viewing this? 0:11:29.360 --> 0:11:31.400 The Democrats are out of the picture on this because 0:11:31.440 --> 0:11:34.160 what the Republicans are doing is that they're using this 0:11:34.200 --> 0:11:36.960 process called reconciliation. This is the same way President Biden 0:11:37.160 --> 0:11:39.559 put the Inflation Reduction Act, the same process that President 0:11:39.600 --> 0:11:42.440 Obama put Obamacare through, but allows you to avoid the 0:11:42.440 --> 0:11:45.560 Democrats and avoid the filibuster. And you need a majority 0:11:45.679 --> 0:11:47.560 vote in the House, the majority vote in the Senate. 0:11:47.720 --> 0:11:49.640 And this is why at least the Phonic. 0:11:49.480 --> 0:11:52.760 Was pulled back from the un ambassadorship, because the Republicans 0:11:52.800 --> 0:11:55.599 need every single vote in that House in order to 0:11:55.679 --> 0:11:56.960 move this tax package forward. 0:11:57.880 --> 0:12:00.480 So what's the timing here of some of this? Like 0:12:00.679 --> 0:12:02.720 again I got back to I'm going to pay attention 0:12:02.760 --> 0:12:04.880 when there's money involved, when Congress has going to be 0:12:04.880 --> 0:12:07.679 allocating money here. So for some of these tax packages, 0:12:08.080 --> 0:12:09.560 is it really a year end do we have that 0:12:09.640 --> 0:12:12.720 much time or do we have some interim mileposts that 0:12:12.760 --> 0:12:13.320 need to be hit. 0:12:14.160 --> 0:12:16.080 Well, you know, the biggest interim on I would say 0:12:16.120 --> 0:12:18.320 there's really three things the markets should be paying attention 0:12:18.360 --> 0:12:20.960 to for twenty twenty five. The first is tariffs. We 0:12:21.040 --> 0:12:23.679 talked about that. The second is the debt ceiling. Now 0:12:23.760 --> 0:12:26.240 there's a lot of debt ceiling discussion and when this 0:12:26.320 --> 0:12:28.760 is going to happen. Most people think that X date, 0:12:28.800 --> 0:12:30.920 the date in which treasury runs out, is going to 0:12:30.920 --> 0:12:31.360 be in late. 0:12:31.320 --> 0:12:33.240 July and August. Congress is going to have to figure 0:12:33.240 --> 0:12:33.800 out something. 0:12:34.000 --> 0:12:36.760 Now President Trump wants to include this in that one big, 0:12:36.800 --> 0:12:39.680 beautiful bill, but we're telling our clients it doesn't matter 0:12:39.679 --> 0:12:42.520 whether it's included or not. We do think Congress is 0:12:42.559 --> 0:12:45.080 going to raise the debt ceiling, and I don't think 0:12:45.200 --> 0:12:47.400 you know, you could see some headlines and some scary 0:12:47.400 --> 0:12:49.959 headlines associated with fixed ink of markets, but I think 0:12:49.960 --> 0:12:51.840 Congress is going to be able to figure that out 0:12:52.000 --> 0:12:54.040 and then this tax debate extending it by the end 0:12:54.040 --> 0:12:56.000 of the year. And I would just say that you know, 0:12:56.280 --> 0:12:59.800 Congress in Washington, whether it's Republican controlled, they're Democrat controlled, 0:13:00.080 --> 0:13:01.760 they don't like doing things until. 0:13:01.520 --> 0:13:03.280 They absolutely have to do it. 0:13:03.640 --> 0:13:06.160 So you see this debate, you see these political headlines, 0:13:06.200 --> 0:13:08.320 and you see these red lines in the terminal. But 0:13:08.520 --> 0:13:11.360 I don't think until they're actually faced with this idea 0:13:11.440 --> 0:13:14.000 that unless they do something, then bad things happen. 0:13:14.080 --> 0:13:15.240 That's when you get a deal. 0:13:15.840 --> 0:13:19.480 Headline crossing the Bloomberg terminal. Trump Carney agreed to meet 0:13:19.520 --> 0:13:22.719 after Canada's election, So again, maybe they can dial the 0:13:22.800 --> 0:13:25.520 rhetoric down a little bit. They're speaking of raising the 0:13:25.559 --> 0:13:27.800 debt sling my number four offspring call for me yesterday. 0:13:27.800 --> 0:13:30.960 He wanted to raise effectively the debt ceiling. I said no, 0:13:31.120 --> 0:13:33.079 And this is what Congress has to say. I told him, 0:13:33.400 --> 0:13:35.760 do one of two things, or both cut your spending 0:13:35.960 --> 0:13:38.719 or generate more revenue for yourself. And that's basically I 0:13:38.720 --> 0:13:40.360 don't know why Congress can't say that. 0:13:41.240 --> 0:13:44.880 If only a transferred. I'm curious here we're talking about. 0:13:45.280 --> 0:13:48.800 We're looking at Paul Atkins, right. This is Trump's nominee 0:13:48.880 --> 0:13:51.600 to the chair of the SEC. He's saying that his 0:13:51.679 --> 0:13:53.839 top priority in that role would be establishing a new 0:13:53.840 --> 0:13:56.640 framework for crypto regulation. What are you hearing on this? 0:13:57.440 --> 0:14:01.000 Yeah, so yesterday, Senator sorry, a Commissioner ACT. Former Commissioner 0:14:01.000 --> 0:14:03.560 Akins had his Senate confirmation hearing, and it was very 0:14:03.640 --> 0:14:06.920 positive for the crypto industry. In his opening statement, he said, look, 0:14:07.240 --> 0:14:10.360 and I'm paraphrasing here, I want to bring regulatory clarity 0:14:10.400 --> 0:14:13.280 to an industry that doesn't have it, and that's just 0:14:13.360 --> 0:14:16.599 the noise to you know, that's what essentially Robinhood and 0:14:16.640 --> 0:14:19.120 coinbase and a lot of these other crypto players want 0:14:19.120 --> 0:14:21.480 to hear. Now, you know, we do think he's going 0:14:21.520 --> 0:14:23.600 to be confirmed. We don't think that there's really going 0:14:23.680 --> 0:14:25.520 to be any hiccups with that. And I think he's 0:14:25.520 --> 0:14:27.800 going to have three major priorities in twenty twenty five, 0:14:28.080 --> 0:14:32.160 crypto essentially making the enforcement risk decrease to the point 0:14:32.160 --> 0:14:34.040 where it's not so much of a risk anymore. I 0:14:34.040 --> 0:14:36.480 would also note that crypto and the ICEC only has 0:14:36.520 --> 0:14:40.560 authority over securities, so for things like bitcoin or considered commodities, 0:14:40.800 --> 0:14:43.200 Congress still needs to act on this. The second thing 0:14:43.360 --> 0:14:45.800 is just bringing capital formation back. This is you know, 0:14:45.920 --> 0:14:48.280 a lot of things in terms of private credit, making 0:14:48.280 --> 0:14:51.800 it easier for investors to invest into private funds. There's 0:14:51.800 --> 0:14:54.160 some rule makings that he potentially could do there and 0:14:54.200 --> 0:14:57.200 then finally market structure. Now this is important for like 0:14:57.200 --> 0:15:00.320 the New York Stock Exchange NASDAK Commissioner Atkins, it didn't 0:15:00.320 --> 0:15:03.680 really exactly like the way that market structure developed back 0:15:03.680 --> 0:15:04.880 in the early two thousands. 0:15:05.040 --> 0:15:06.920 So I think he could do some tweaking. 0:15:06.560 --> 0:15:08.120 There, but that's going to be more of a long 0:15:08.200 --> 0:15:09.640 term strategy than a short term. 0:15:09.800 --> 0:15:11.640 You're a fount of knowledge, dude, I don't know how 0:15:11.640 --> 0:15:14.720 you keep it all straight. Nathan Dean, senior policy analyst 0:15:14.760 --> 0:15:18.000 at Bloomberg Intelligence down there in DC, he's in the swamps. 0:15:18.560 --> 0:15:20.520 We throw him down there. Somehow he figures it all 0:15:20.560 --> 0:15:22.520 out and he puts it down. He's got great research. 0:15:22.560 --> 0:15:24.920 Go to b I, go look at the policy stuff. 0:15:24.920 --> 0:15:26.960 He tells you what's going on in Washington, what it 0:15:27.000 --> 0:15:31.240 means for markets, what it means for individual industries, individual companies. 0:15:31.680 --> 0:15:33.480 That's kind of research Nathan and his team are doing 0:15:33.480 --> 0:15:35.720 down there in Washington. And as we can tell just 0:15:35.760 --> 0:15:37.600 in the market performance this year, you got to know 0:15:37.640 --> 0:15:40.720 what's going on in DC because it moves markets in 0:15:40.800 --> 0:15:41.760 a big way. 0:15:43.640 --> 0:15:47.320 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:15:47.400 --> 0:15:50.800 weekdays at ten am Eastern on Applecarclay and Android Auto 0:15:50.920 --> 0:15:53.960 with the Bloomberg Business app. Listen on demand wherever you 0:15:54.000 --> 0:15:57.400 get your podcasts, or watch us live on YouTube. 0:15:57.960 --> 0:16:00.680 Let's not geopolitics here, because that remained front and center, 0:16:01.240 --> 0:16:04.040 not just on a geopolitical front, but also for investors 0:16:04.120 --> 0:16:07.840 and financial markets. Kristin Sorry, Kirsten Fontain Rose joins us. 0:16:07.840 --> 0:16:10.960 She's a president of Red six Solutions. She's also a 0:16:11.000 --> 0:16:13.480 senior Fellow at the Atlanta Council. I was a senior 0:16:13.560 --> 0:16:16.040 director for the Middle East in the last US administration. 0:16:16.760 --> 0:16:19.200 Kirsten talk to us about how this world order is 0:16:19.240 --> 0:16:23.720 being reshaped here, the US pulling back on a lot 0:16:23.760 --> 0:16:27.280 of its prior commitments, whether you know it's some Europe 0:16:27.320 --> 0:16:29.600 or other parts of the world, and we saw some 0:16:29.720 --> 0:16:32.280 European countries, most notably Germany, say we're going to have 0:16:32.320 --> 0:16:34.680 to step up here. How do you think this process 0:16:35.000 --> 0:16:37.800 is going to play out over the next six months, year, 0:16:37.880 --> 0:16:38.800 two years, three years. 0:16:39.400 --> 0:16:42.480 In the US perspective, this europe stepping up is really 0:16:42.520 --> 0:16:45.160 good news. It's an ask that has been taking place 0:16:45.200 --> 0:16:47.720 for several years now and wasn't really taken seriously by 0:16:47.720 --> 0:16:50.720 Europe until the US came in and said the post 0:16:50.800 --> 0:16:54.880 World War two global order that gave a US security 0:16:54.960 --> 0:16:58.400 umbrella and provided sort of unlimited assistance in terms of 0:16:58.560 --> 0:17:04.560 both humanitarian assistants and development assistance is crazy expensive and frankly, 0:17:04.600 --> 0:17:07.760 it's been bankrupting the US, and for this kind of 0:17:07.760 --> 0:17:11.280 world order to continue, the rest of the world is 0:17:11.320 --> 0:17:12.840 going to have to put some skin in the game. 0:17:13.200 --> 0:17:15.679 So the US has a national debt right now that 0:17:15.800 --> 0:17:18.960 costs it two billion dollars per day to simply pay 0:17:18.960 --> 0:17:21.960 the interest on That is the cost of maintaining this 0:17:22.080 --> 0:17:25.359 kind of security umbrella, this kind of assistance umbrella, and 0:17:25.520 --> 0:17:28.080 without other countries carrying a little bit more of the burden, 0:17:28.520 --> 0:17:31.240 the US simply can't continue that kind of world order. 0:17:31.960 --> 0:17:34.800 So this is more balancing in the US view. It's 0:17:34.880 --> 0:17:37.359 more asking others to just put a little more of 0:17:37.400 --> 0:17:41.639 their own money, resources, manpower time into the places around 0:17:41.680 --> 0:17:43.320 the world that they are closer to that are more 0:17:43.320 --> 0:17:46.040 relevant to their own national security interests than. 0:17:45.880 --> 0:17:46.639 To the US. 0:17:47.920 --> 0:17:50.679 Let's talk a little bit more about defense spending in Europe. 0:17:50.680 --> 0:17:53.280 I cover US defense contractors and people have been a 0:17:53.320 --> 0:17:56.240 bit curious about what the implications will be of a 0:17:56.280 --> 0:17:59.040 potential Titan military spending budget, but when you put that 0:17:59.200 --> 0:18:02.359 against a lot of European arms makers, they're actually doing 0:18:02.560 --> 0:18:05.320 quite well, especially as they're amping up their defense spend. 0:18:05.359 --> 0:18:07.359 Can you just talk a bit about what's going on there. 0:18:08.440 --> 0:18:11.040 Sure this might be really good for the European defense 0:18:11.080 --> 0:18:13.960 sector that often loses out to larger companies in the 0:18:14.040 --> 0:18:16.000 US that have a lot more money to put into 0:18:16.080 --> 0:18:18.000 R and D and the like, and recently even to 0:18:18.040 --> 0:18:21.439 Israeli companies as they've expanded their offerings. But for the 0:18:21.560 --> 0:18:23.879 US right now, this means we will see some of 0:18:23.920 --> 0:18:26.760 our own companies around the world losing contracts. We've seen 0:18:26.760 --> 0:18:29.160 that already, even in places like the UAE where other 0:18:29.280 --> 0:18:32.560 offerings have been preferred in recent years. So this might 0:18:32.600 --> 0:18:35.200 give Europe a chance to boost its own domestic economies 0:18:35.200 --> 0:18:37.920 with a little more of the defense sector becoming more 0:18:38.000 --> 0:18:40.720 robust as they're buying more of their own products and 0:18:40.760 --> 0:18:45.680 selling to each other. The US readiness requirements will sustain 0:18:45.720 --> 0:18:48.240