Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: We're a few days out from election day, but chances
Speaker 2: are we're not a few days out from knowing who
Speaker 2: wins the White House. There's fear of a repeat of
Speaker 2: twenty twenty, when it took four days for Joe Biden
Speaker 2: to be declared the winner, even before the final votes
Speaker 2: were counted. Then President Donald Trump stoked false claims of
Speaker 2: widespread fraud, ballot harvesting, and hacked voting machines. All of
Speaker 2: that ended with the insurrection at the US Capitol on
Speaker 2: January sixth.
Speaker 1: This is so abnormal in American history. It was very,
Speaker 1: very disturbing. That is a very major black guy in
Speaker 1: the reputation of the US as the world's oldest and
Speaker 1: traditionally seen as most stable democratic society.
Speaker 2: Former Senator to Me was in the Capitol when riders
Speaker 2: stormed it that day. He's a Republican from Pennsylvania, and
Speaker 2: he says that if violent interference in the election process
Speaker 2: becomes a new normal, it could damage not just American democracy,
Speaker 2: but something else, the global financial system that America dominates.
Speaker 1: Elections are an essential part of a democratic society, but
Speaker 1: they're not the whole of it. I think on both
Speaker 1: sides of the aisle, we've really witnessed undermining of some
Speaker 1: of these institutions and these separate powers. Collectively, it will
Speaker 1: damage the reputation of the US, and over time, it
Speaker 1: could damage our ability to remain the dominant reserve currency
Speaker 1: of the world.
Speaker 2: For the past eighty years, the global economy has run
Speaker 2: on dollars, and over the past few weeks, I've been
Speaker 2: speaking with big bank CEOs, money managers, and policymakers like
Speaker 2: toome about the threat the financial system faces if the
Speaker 2: US can't count on peaceful transfers of power. Today on
Speaker 2: the show, what I've learned from all those conversations. What's
Speaker 2: at stake for a world that runs on American dollars
Speaker 2: if a peaceful transfer of power is no longer given
Speaker 2: in the world's oldest democracy. From Bloomberg's Washington Bureau, This
Speaker 2: is the Big Take DC podcast. I'm Saleamosen. On January sixth,
Speaker 2: twenty twenty one, then Senator Pat Toomey was in the
Speaker 2: US Capitol building. Vice President Mike Pence was overseeing what's
Speaker 2: typically a routine certification of election results. When he stepped away,
Speaker 2: What did you think when Vice President Pence left the
Speaker 2: Senate chamber that day.
Speaker 1: My initial reaction was not one of great surprise, because
Speaker 1: the Vice president's role is it's almost ceremonial, you know,
Speaker 1: as ministerial, and so the idea that he would step
Speaker 1: off the dais and be replaced by the presiding officer
Speaker 1: of the Senate it didn't strike me as particularly surprising.
Speaker 1: I thought, this is just the fact that he doesn't
Speaker 1: intend to sit there for the full proceedings. He'll do
Speaker 1: various ceremonial aspects of it, but perhaps not the whole thing.
Speaker 2: But in the minutes that followed, a fuller picture of
Speaker 2: what was happening came into focus. Pence had been whisked
Speaker 2: out of the chamber by the Secret Service or his
Speaker 2: safety Rioters were storming the Capitol, calling on the Vice
Speaker 2: president to reject the results. Can you tell me what
Speaker 2: you remember most vividly about that day?
Speaker 1: Most vividly was the violence that I was becoming aware of,
Speaker 1: as we were, in fact frightened by that violence, and
Speaker 1: we were rushed into what was believed to be a
Speaker 1: secure room turned out to be secure, and we could
Speaker 1: watch the violence unfolding on TV, and we knew that
Speaker 1: to some degree. We were the targets. We members of
Speaker 1: Congress were the targets of that violence because there was
Speaker 1: an attempt to prevent us from the root teen process
Speaker 1: of administering the election results. This was extraordinarily shocking to me.
Speaker 2: Toomey spent much of his congressional career working on economic policy,
Speaker 2: mostly from the Senates Finance and Banking committees, And if
Speaker 2: you ask him or Federal Reserve Chair Jerome Powell, Treasury
Speaker 2: Secretary Janet Yellen, or any of their predecessors, you'll hear
Speaker 2: that the rule of law is a major reason the
Speaker 2: US economy, its stock market, currency bonds are all seen
Speaker 2: as such a sound investment.
Speaker 3: Around the world, businesspeople, capital markets, they all like the
Speaker 3: rule of law.
Speaker 2: Bloomberg's editor in chief, John Micklethwaite brought this up in
Speaker 2: an interview with former President Trump at the Economic Club
Speaker 2: of Chicago earlier this month.
Speaker 3: If you look at the events of January sixth, twenty
Speaker 3: twenty one, and it showed to many people America's democracy
Speaker 3: was unruly and violent only three weeks to go to
Speaker 3: the election. Will you commit now to respecting and encouraging
Speaker 3: a peaceful transfer of power. Well, you had a peaceful transfer.
Speaker 3: You had a peaceful test of power, that you had.
Speaker 2: A peaceful Trump went on to defend the January sixth
Speaker 2: riders and deny the results of the election yet again.
Speaker 2: His continued defense of the capital attack is concerning to
Speaker 2: people in the business community. I was on a zoom
Speaker 2: call yesterday with Robert Rubin. He served as treasure Secretary
Speaker 2: during the Clinton administration and has spent five decades in finance.
Speaker 2: When it comes to the prospect of instability as the
Speaker 2: presidency changes hands, he said this, the strength of the
Speaker 2: dollar does depend on respect for our economy, for rule
Speaker 2: of law. If there's a real question about the effective,
Speaker 2: peaceful transfer of power, it could be very unsettling. Rubin
Speaker 2: says a smooth transition is a bedrock for US democracy
Speaker 2: and is one reason why the economy is so resilient.
Speaker 2: It's the reason the country is able to rack up
Speaker 2: some twenty eight trillion dollars in debt without investors really
Speaker 2: batting an eye. People around the world want to invest
Speaker 2: in the US because the government, backed by free and
Speaker 2: fair elections that prevent dictatorships, won't run away with anyone's money.
Speaker 2: I asked to me how that strength is held up.
Speaker 1: It's a combination of factors. The biggest economy in the
Speaker 1: world is one that people can't ignore. The biggest consumer
Speaker 1: market in the world is very attractive to people. But
Speaker 1: I would suggest that equally important, if not more important,
Speaker 1: is the tradition, the history, the clear evidence that the
Speaker 1: United States respects the rule of law. We also had
Speaker 1: limits on the power of our governments, both state and federal,
Speaker 1: and local for that matter. And that's very important too,
Speaker 1: because a potential investor can invest in the US with
Speaker 1: a very high level of confidence that the government isn't
Speaker 1: going to come in and undermine or confiscate or otherwise
Speaker 1: jeopardize a person's investment. That's not true around much of
Speaker 1: the world.
Speaker 2: If you're looking for a safe investment, any American asset
Speaker 2: is a good bet, the S and P five hundred
Speaker 2: US treasuries or the dollar itself, which is the world's
Speaker 2: reserve asset. That's great for Americans. It means interest rates
Speaker 2: for them on everything from credit card debt to student
Speaker 2: loans and home mortgages are lower, all because any investment
Speaker 2: in the US economy is backed by a government with credibility.
Speaker 2: The dollar's regime actually started about eighty years ago at
Speaker 2: the end of World War Two. During a debate in
Speaker 2: nineteen forty four, dozens of countries came together to find
Speaker 2: a way to knit the world around one influential economic force.
Speaker 2: US Treasury officials convinced everyone that the dollar was the
Speaker 2: asset to back. America was the world's biggest economy, and
Speaker 2: its fiscal outlook was the best since its infrastructure hadn't
Speaker 2: been decimated by two world wars. But in twenty twenty four,
Speaker 2: the dollar's dominance isn't a given. It's the world foreign investors,
Speaker 2: central banks, individuals that have decided to put their trust
Speaker 2: in the dollar as their anchor currency. So if the
Speaker 2: American political and economic system isn't viewed as stable, could
Speaker 2: that permanently rattle investors and change their minds about the
Speaker 2: nation's credibility. That's coming up. I asked former Senator pat
Speaker 2: Tuwey to reflect on his memories of January sixth, not
Speaker 2: just the fear of being in the Capitol as an
Speaker 2: angry mob swarmed, but the potential that moment raised for
Speaker 2: weakening US democracy in the eyes of the rest of
Speaker 2: the world.
Speaker 1: It is a very fundamental aspect of a democratic society
Speaker 1: that the election actually matters and the results are respected.
Speaker 1: This great, great strength is this great reputation, this great economy,
Speaker 1: this great society. But it can be eroded, and the
Speaker 1: cumulative effect of various efforts to basically ignore the rule
Speaker 1: of law they will contribute to that erosion.
Speaker 2: It's hard to predict the way markets will react this year.
Speaker 2: It all depends on which previous elections playbook we follow.
Speaker 2: In two thousand, when the Bush versus Gore rays dragged
Speaker 2: on for more than a month, the S and P
Speaker 2: five hundred dropped around five percent. But in twenty twenty,
Speaker 2: markets were relatively stable since Biden's transition work had begun,
Speaker 2: so it was clear that a new president would take power.
Speaker 2: We don't know yet how this could pan out this year,
Speaker 2: but money managers are bracing for a market event around
Speaker 2: political instability, and many analysts fear that if questions around
Speaker 2: the transfer of power become more of a norm than
Speaker 2: an exception, it could make investors skittish. To me is
Speaker 2: among those with concerns.
Speaker 1: I think that the world looks at the US and says, well,
Speaker 1: even if there is not a smooth and immediate and
Speaker 1: peaceful transfer or power, as there ought to be. American
Speaker 1: institutions will prevail, the separations of powers will prevail. The
Speaker 1: divisions of electoral responsibility among the states and in the
Speaker 1: various counties within those states is a very, very important
Speaker 1: safeguard that we have. So I think that there will
Speaker 1: continue to be confidence, but it's not a good idea
Speaker 1: to challenge that confidence.
Speaker 2: There's likely a reason Biden dropped out of the race
Speaker 2: on a Sunday, and why other major political moves often
Speaker 2: happen when markets are closed. People want stability, and markets
Speaker 2: can be erratic in response to politics. But however the
Speaker 2: election goes. Concerns about the relationship between US politics and
Speaker 2: the economy won't end on January six, twenty twenty five,
Speaker 2: when the results are certified. There's still the question of
Speaker 2: what a second Trump term could mean for markets, and
Speaker 2: criticisms over the use of executive orders as economic policy
Speaker 2: making tools.
Speaker 1: More broadly, I would argue the Biden administration has taken
Speaker 1: a number of steps that it knows is in violation
Speaker 1: of the law. One example is the ongoing effort to
Speaker 1: forgive student loans. The Supreme Court has confirmed that they
Speaker 1: have no legal authority, and they go ahead and try
Speaker 1: to do it anyway that does not ensure confidence in legality.
Speaker 2: And there are plenty of other countries who would love
Speaker 2: to take America's place as the global economic power if
Speaker 2: it seeds its position. But Toomey told me, even if
Speaker 2: the US dollar isn't the only game in town, it's
Speaker 2: the best.
Speaker 1: Game, that's for sure, and we ought to strive to
Speaker 1: keep it that way.
Speaker 2: So you think, despite all this hand ringing that we
Speaker 2: have right now, American exceptionalism is here to stay.
Speaker 1: Well, I certainly hope. So if we remain true to
Speaker 1: our founding principles, to the rule of law. The founders
Speaker 1: devised a brilliant, brilliant arrangement, and if we respect that,
Speaker 1: then we'll continue to be the dominant power on the planet.
Speaker 2: Thanks for listening to The Big Take DC podcast from
Speaker 2: Bloomberg News. I'm Salaia Mosen. This episode was produced by
Speaker 2: Julia Press. It was edited by Aaron Edwards. It was
Speaker 2: mixed by Alex Zugier and fact checked by Adriana Tapia.
Speaker 2: A special thanks to Matt Shirley and Carter Johnson. Naomi Shaven,
Speaker 2: who also edited this episode, is our senior producer. Wendy
Speaker 2: Benjaminson and Elizabeth Ponso provide editorial direction. Nicole Beemsterbor is
Speaker 2: our executive producer. Sage Bauman is Bloomberg's head of podcasts.
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