1 00:00:10,840 --> 00:00:14,320 Speaker 1: Hello, and welcome to another episode of the All Thoughts podcast. 2 00:00:14,480 --> 00:00:18,279 Speaker 1: I'm Tracy Allaway and I'm Joe Joe. I was going 3 00:00:18,360 --> 00:00:21,400 Speaker 1: to start with a really long intro for this one, 4 00:00:21,720 --> 00:00:24,080 Speaker 1: but I think we can actually make it really short. 5 00:00:24,480 --> 00:00:26,799 Speaker 1: What is it? I'm all for that, I'm all for 6 00:00:27,280 --> 00:00:29,560 Speaker 1: We don't need We were past the era of throat 7 00:00:29,600 --> 00:00:34,400 Speaker 1: clearing an intros. There's no time for that anymore. Yeah, exactly. Okay, So, 8 00:00:34,520 --> 00:00:37,040 Speaker 1: anyone who's been listening to All Thoughts knows there's been 9 00:00:37,120 --> 00:00:40,400 Speaker 1: volatility in the market. There's been a lot of drama 10 00:00:40,520 --> 00:00:44,080 Speaker 1: in the repo market, specifically, a lot of things going 11 00:00:44,120 --> 00:00:46,720 Speaker 1: on with money market funds as well. Who do we 12 00:00:46,800 --> 00:00:52,239 Speaker 1: turn to in times of repo market madness? I can 13 00:00:52,280 --> 00:00:55,680 Speaker 1: only think of one person when the when, the when, 14 00:00:55,720 --> 00:00:59,280 Speaker 1: the phrase repo market madness comes to mind. Yeah. Um, 15 00:00:59,320 --> 00:01:03,000 Speaker 1: and you would be absolutely right if you said Sultan Posar, 16 00:01:03,600 --> 00:01:06,680 Speaker 1: the strategist over at Credit Sweets. He is with us 17 00:01:06,840 --> 00:01:11,280 Speaker 1: once again. But to make this episode even better, we 18 00:01:11,360 --> 00:01:15,119 Speaker 1: also have Perry Merling, who we've had on All Thoughts 19 00:01:15,160 --> 00:01:18,920 Speaker 1: before as well. He's a professor of international political economy 20 00:01:19,000 --> 00:01:22,920 Speaker 1: at the Party School of Global Studies at Boston University, 21 00:01:22,959 --> 00:01:26,440 Speaker 1: and he's worked with Sultan. They've co authored some papers 22 00:01:26,480 --> 00:01:29,840 Speaker 1: a long time ago, and in fact, Sultan referenced one 23 00:01:29,880 --> 00:01:34,360 Speaker 1: of Perry's famous quotes in one of our original episodes 24 00:01:34,400 --> 00:01:38,360 Speaker 1: with him. So basically, we have two heavy hitters who 25 00:01:38,360 --> 00:01:41,240 Speaker 1: are going to walk us through what just happened in 26 00:01:41,319 --> 00:01:45,200 Speaker 1: money markets. Well, I think furthermore, I mean, obviously you 27 00:01:45,240 --> 00:01:48,840 Speaker 1: mentioned Ripo and Sultan's work on this, but I think 28 00:01:48,960 --> 00:01:52,800 Speaker 1: part of what is so extraordinary about this moment is 29 00:01:52,840 --> 00:01:56,480 Speaker 1: just the degree to which the entire monetary system is 30 00:01:56,480 --> 00:01:59,800 Speaker 1: coming under strain and of course passed. We had Perry 31 00:02:00,120 --> 00:02:02,920 Speaker 1: not long ago talking about this idea of the money 32 00:02:03,000 --> 00:02:06,880 Speaker 1: view and how everything, all of our interactions are this 33 00:02:06,800 --> 00:02:11,119 Speaker 1: this sequence and series of meeting financial obligations that we've 34 00:02:11,160 --> 00:02:15,520 Speaker 1: put a uh that we've set forth, credits, debits, deficits, 35 00:02:15,520 --> 00:02:18,639 Speaker 1: and so forth, everyone every aspect of it feeling the 36 00:02:18,760 --> 00:02:21,080 Speaker 1: strain right now. So I think this is the perfect 37 00:02:21,080 --> 00:02:24,160 Speaker 1: set of guests to help us understand this storm that 38 00:02:24,160 --> 00:02:27,400 Speaker 1: we're right in the middle of. Yeah, a lack of 39 00:02:27,480 --> 00:02:31,000 Speaker 1: liquidity kills you quick, as Perry would say, and we're 40 00:02:31,000 --> 00:02:33,520 Speaker 1: seeing a lot of that now. So without further ado, 41 00:02:33,600 --> 00:02:37,240 Speaker 1: we're going to jump right into it. Sulton and Perry, 42 00:02:37,400 --> 00:02:39,920 Speaker 1: welcome to the show again. Thank you so much for 43 00:02:40,000 --> 00:02:42,519 Speaker 1: coming on. Nice to be here, Nice to be here, 44 00:02:42,960 --> 00:02:45,920 Speaker 1: all right, Maybe just to begin, Sultan, one of the 45 00:02:45,960 --> 00:02:49,920 Speaker 1: things that you always do in your research is, I 46 00:02:50,000 --> 00:02:53,200 Speaker 1: know you call up a lot of the market participants 47 00:02:53,240 --> 00:02:55,519 Speaker 1: and try to get lots of color on what's been 48 00:02:55,560 --> 00:02:58,600 Speaker 1: going on. Can you walk us through what you've actually 49 00:02:58,680 --> 00:03:02,560 Speaker 1: heard over the past couple of weeks. Well, you know, 50 00:03:02,600 --> 00:03:07,760 Speaker 1: the past couple of weeks has been um, say the lea. 51 00:03:08,480 --> 00:03:13,040 Speaker 1: But you know when when all this uh fallout from 52 00:03:13,080 --> 00:03:17,399 Speaker 1: the outbreak started to happen. You know, when you talk 53 00:03:17,480 --> 00:03:21,200 Speaker 1: to bank treasurers in various parts of the world, and 54 00:03:21,320 --> 00:03:26,040 Speaker 1: initially you would call up you know, the Japanese treasurers 55 00:03:26,040 --> 00:03:28,560 Speaker 1: had treasures in Hong Kong, and you know, ask them 56 00:03:28,560 --> 00:03:32,880 Speaker 1: what they would see. You would get conflicting color from them, 57 00:03:32,960 --> 00:03:35,760 Speaker 1: right because depending on your business model, you were either 58 00:03:36,360 --> 00:03:39,520 Speaker 1: swimming in dollars or you were losing dollars. So if 59 00:03:39,560 --> 00:03:43,240 Speaker 1: you talk to Japanese banks, who are very big in 60 00:03:43,440 --> 00:03:49,840 Speaker 1: trade finance, shipping finance, UM and commodities finance, you know 61 00:03:49,880 --> 00:03:52,240 Speaker 1: they would say, well, we actually see a big drop 62 00:03:52,280 --> 00:03:56,800 Speaker 1: off in demand. When you talk to banks in in 63 00:03:56,960 --> 00:04:01,720 Speaker 1: Hong Kong or or mainland China, that's a clear dollar 64 00:04:01,800 --> 00:04:06,000 Speaker 1: payments for corporations, they would say that, well, we see 65 00:04:06,040 --> 00:04:09,040 Speaker 1: a lot of corporate customers bleed a lot of cash, 66 00:04:09,520 --> 00:04:11,520 Speaker 1: and so the money is slipping away from them, and 67 00:04:11,560 --> 00:04:14,280 Speaker 1: because it's slipping away from them, it's slipping away from us. 68 00:04:14,320 --> 00:04:16,440 Speaker 1: So you know, dollars are a bit type and so 69 00:04:17,040 --> 00:04:20,480 Speaker 1: it was very hard to to kind of come up 70 00:04:20,520 --> 00:04:24,239 Speaker 1: with a with a with a unified team about whether 71 00:04:24,279 --> 00:04:26,040 Speaker 1: this is going to be in that positive or a 72 00:04:26,320 --> 00:04:29,440 Speaker 1: negative for funding. So it was a bit a bit confusing. 73 00:04:30,279 --> 00:04:35,080 Speaker 1: And then I think it was the second week of January. Um, 74 00:04:35,080 --> 00:04:38,320 Speaker 1: you know James Spinney, the chief economists that credit steals 75 00:04:38,360 --> 00:04:44,400 Speaker 1: are third Musketeer Musketeer meeting, you know, Perry Result and James, 76 00:04:44,880 --> 00:04:48,839 Speaker 1: you know, he tumbles into my office and it just says, well, 77 00:04:48,880 --> 00:04:51,359 Speaker 1: you know this, I p shock that we are going 78 00:04:51,400 --> 00:04:54,960 Speaker 1: through um and your stuff. I mean, this is where 79 00:04:54,960 --> 00:04:58,760 Speaker 1: the two things meet because and I think this this 80 00:04:59,080 --> 00:05:01,279 Speaker 1: meme from him is going to go down and you 81 00:05:01,320 --> 00:05:04,800 Speaker 1: know as one of those heavy hitting means that and 82 00:05:04,839 --> 00:05:08,080 Speaker 1: he said, the supply chain is a payment chain in reverse. 83 00:05:09,320 --> 00:05:11,880 Speaker 1: So that's set off a certain set of sparks in 84 00:05:11,960 --> 00:05:15,279 Speaker 1: my head, thinking, okay, so that's that's useful to kind 85 00:05:15,279 --> 00:05:19,520 Speaker 1: of frame everything that I hear from from all these 86 00:05:19,560 --> 00:05:23,280 Speaker 1: bank treasurers and these conflicting colors, because certainly, I mean, 87 00:05:23,320 --> 00:05:25,560 Speaker 1: you know, if you're not producing, you don't need to 88 00:05:25,560 --> 00:05:29,040 Speaker 1: finance the flow of goods commerce. So that's why some 89 00:05:29,120 --> 00:05:34,520 Speaker 1: people have dollar surpluses. But then um, if you're not producing, 90 00:05:34,800 --> 00:05:37,599 Speaker 1: you know, some people are not getting payments, and so 91 00:05:37,800 --> 00:05:43,320 Speaker 1: that's the that's the the payment deficit of other players. 92 00:05:43,360 --> 00:05:45,000 Speaker 1: And then if you think about it, you know, that 93 00:05:45,080 --> 00:05:47,160 Speaker 1: kind of makes sense because in a shock like this, 94 00:05:48,560 --> 00:05:52,200 Speaker 1: you know, and this became obvious at a call, you know, 95 00:05:52,200 --> 00:05:55,520 Speaker 1: early February with Hong Kong clients who were you know, 96 00:05:55,640 --> 00:05:58,000 Speaker 1: joking that, well, we just got our credit card statements 97 00:05:58,000 --> 00:06:00,680 Speaker 1: and it's a big fat zero because nothing to spend 98 00:06:00,720 --> 00:06:03,960 Speaker 1: money on. So you know, it's natural that when something 99 00:06:04,000 --> 00:06:08,880 Speaker 1: like this happens, you have a bunch of deficit agents 100 00:06:08,920 --> 00:06:11,039 Speaker 1: as Perry would call them. You know, these are the 101 00:06:11,080 --> 00:06:13,440 Speaker 1: guys that you know lose dollars, and then you have 102 00:06:13,440 --> 00:06:16,680 Speaker 1: a bunch of surplus agents, you know, entities and households 103 00:06:16,680 --> 00:06:19,360 Speaker 1: that can spend because there's nothing to spend on. You 104 00:06:19,360 --> 00:06:22,320 Speaker 1: can't try to do much in your apartment. And you know, 105 00:06:22,360 --> 00:06:26,440 Speaker 1: the banking system's role is to basically clear these imbalances 106 00:06:26,480 --> 00:06:30,560 Speaker 1: between surplus and deficit agents. The problem now is that 107 00:06:30,680 --> 00:06:35,040 Speaker 1: these deficits are becoming so deep and their duration is 108 00:06:35,120 --> 00:06:39,239 Speaker 1: becoming so uncertain that no bank in its right mind 109 00:06:39,400 --> 00:06:41,520 Speaker 1: is going to be willing to kind of land into 110 00:06:41,560 --> 00:06:44,760 Speaker 1: this you know, growing black hole so to speak. Um, 111 00:06:44,800 --> 00:06:46,480 Speaker 1: you know, and then the stresses came from that in 112 00:06:46,560 --> 00:06:48,760 Speaker 1: inter bank markets, and then the sets that then but 113 00:06:49,160 --> 00:06:51,320 Speaker 1: we can we can get to that later on in 114 00:06:51,360 --> 00:06:55,120 Speaker 1: the conversation. But basically that's that's how I would frame it, 115 00:06:55,160 --> 00:06:58,000 Speaker 1: and that's how that's how these colors are are fitting 116 00:06:58,040 --> 00:07:01,600 Speaker 1: together that you get from back Treasurers Harry, Harry, how 117 00:07:01,640 --> 00:07:04,320 Speaker 1: would you sort of in your big big picture framework 118 00:07:04,360 --> 00:07:07,599 Speaker 1: describe what you see is going on? Um? Well, Zolton 119 00:07:07,800 --> 00:07:11,960 Speaker 1: has given a good lead in about the last several months. 120 00:07:12,200 --> 00:07:17,080 Speaker 1: Um uh. And we had some conversations about this before. UM. 121 00:07:17,120 --> 00:07:20,400 Speaker 1: What I particularly would draw attention to is what's happened 122 00:07:20,400 --> 00:07:24,480 Speaker 1: in the last two weeks, okay, which is clearly um, 123 00:07:24,600 --> 00:07:28,440 Speaker 1: some market breakdown and and specifically this dash for cash 124 00:07:28,720 --> 00:07:32,960 Speaker 1: that has been going on that there's an attempt to 125 00:07:33,160 --> 00:07:38,400 Speaker 1: liquidate the treasury bonds UM and turn them into spendable 126 00:07:38,440 --> 00:07:41,520 Speaker 1: cash UM and the dealers weren't taking the other side 127 00:07:41,520 --> 00:07:45,920 Speaker 1: of that, and so there was some some dislocation UM there. 128 00:07:46,280 --> 00:07:48,760 Speaker 1: And also corporations that have credit lines are drawing them 129 00:07:48,760 --> 00:07:51,560 Speaker 1: down in order to have that cash on hand. UM. 130 00:07:51,640 --> 00:07:55,960 Speaker 1: So this dash for cash, it's a dash for dollar cash. 131 00:07:56,040 --> 00:07:58,200 Speaker 1: That's another thing to say that this is a global 132 00:07:58,320 --> 00:08:01,160 Speaker 1: dash for cash. And so you see that in terms 133 00:08:01,200 --> 00:08:06,960 Speaker 1: of the Ford exchange movements UM as well and the 134 00:08:07,040 --> 00:08:11,120 Speaker 1: intervention of the Fed week though Sunday okay was a 135 00:08:11,160 --> 00:08:14,600 Speaker 1: response to all of that, UM, the kind of breakdown 136 00:08:14,840 --> 00:08:18,560 Speaker 1: of the private dealer system meant the FED stepped in 137 00:08:18,680 --> 00:08:23,040 Speaker 1: basically as dealer of last resort UM and UH and 138 00:08:23,120 --> 00:08:26,800 Speaker 1: put a floor on the core of the of the 139 00:08:26,840 --> 00:08:31,080 Speaker 1: dollar funding system. Yeah. And and what I would add 140 00:08:31,080 --> 00:08:34,120 Speaker 1: to that is, you know, the dollar is always the 141 00:08:34,240 --> 00:08:38,080 Speaker 1: orphan child of these funding market crisis, right because you 142 00:08:38,120 --> 00:08:41,720 Speaker 1: know the the countries where these stresses flare up, and 143 00:08:41,760 --> 00:08:43,719 Speaker 1: there have been a bunch of countries where where you 144 00:08:43,760 --> 00:08:46,280 Speaker 1: have dollar funding stresses over the past couple of weeks. 145 00:08:46,679 --> 00:08:49,400 Speaker 1: You know, they don't have any control over it, and 146 00:08:49,440 --> 00:08:54,760 Speaker 1: the fed UM historically has been very slow and very 147 00:08:54,800 --> 00:08:58,319 Speaker 1: reluctant kind of stepped in to to do the right thing. 148 00:08:59,120 --> 00:09:02,560 Speaker 1: I think what makes this episode very special is that, 149 00:09:03,760 --> 00:09:07,439 Speaker 1: you know, the set has been extremely impressive in how 150 00:09:07,520 --> 00:09:12,600 Speaker 1: much they have done in how little time. Um. And 151 00:09:12,640 --> 00:09:14,600 Speaker 1: you know, I'm not not just talking about you know, 152 00:09:14,679 --> 00:09:19,080 Speaker 1: activating the swap lines that already existed and pulling out 153 00:09:19,120 --> 00:09:21,880 Speaker 1: a lot of the you know, oh eight crisis measures, 154 00:09:21,920 --> 00:09:25,480 Speaker 1: but also you know, expanding the swap lines to ten 155 00:09:25,559 --> 00:09:30,040 Speaker 1: new countries that was a very big step, and um, 156 00:09:30,400 --> 00:09:33,120 Speaker 1: you know, launching some new new facilities that were not 157 00:09:33,520 --> 00:09:35,640 Speaker 1: launched back in two thousand and eight. So you know, 158 00:09:35,679 --> 00:09:40,520 Speaker 1: the set is has done a heroic job in in 159 00:09:40,600 --> 00:09:43,920 Speaker 1: back stepping this entire system. Yeah, it's kind of crazy 160 00:09:43,960 --> 00:09:47,040 Speaker 1: to think that all those measures have been unveiled in 161 00:09:47,120 --> 00:09:49,600 Speaker 1: just the past couple of weeks. And if we compare 162 00:09:49,640 --> 00:09:52,120 Speaker 1: it back to the two thousand eight financial crisis that was, 163 00:09:52,559 --> 00:09:56,360 Speaker 1: I mean, it seems achingly slow compared to what we 164 00:09:56,520 --> 00:09:59,920 Speaker 1: just witnessed. Actually, just to back up for a second, 165 00:10:00,520 --> 00:10:03,360 Speaker 1: both of you have mentioned the dash for cash and 166 00:10:03,480 --> 00:10:06,560 Speaker 1: specifically the dash for dollars. Can you talk to us 167 00:10:06,559 --> 00:10:10,400 Speaker 1: why dollar funding is so important here? Why don't we 168 00:10:10,480 --> 00:10:15,040 Speaker 1: worry about local currency funding? Well, maybe I'll start there. 169 00:10:15,120 --> 00:10:19,440 Speaker 1: So local currency funding we don't worry about because again, 170 00:10:19,559 --> 00:10:22,600 Speaker 1: every country has a central bank, and every central bank 171 00:10:22,760 --> 00:10:26,920 Speaker 1: can print local currency no problem. You know, local currency 172 00:10:27,000 --> 00:10:31,079 Speaker 1: is used locally. What makes the dollar special is that 173 00:10:31,200 --> 00:10:35,880 Speaker 1: everybody uses it, but the one central bank that can 174 00:10:36,000 --> 00:10:40,280 Speaker 1: print it is only the set right. So you know, 175 00:10:40,320 --> 00:10:43,760 Speaker 1: it's true that a bunch of countries have FX reserves, 176 00:10:43,800 --> 00:10:47,120 Speaker 1: but you know, when we think about FFX reserves, people 177 00:10:47,160 --> 00:10:50,240 Speaker 1: often overlook the fact that FEX reserves are basically investment 178 00:10:50,280 --> 00:10:55,480 Speaker 1: portfolios that are not sitting in cash um And you know, 179 00:10:55,559 --> 00:10:57,840 Speaker 1: when you need to tap into those f FEX reserves, 180 00:10:57,920 --> 00:11:00,720 Speaker 1: you either are taking your money back from the fax 181 00:11:00,760 --> 00:11:03,439 Speaker 1: spot market. So instead of lending dollars there, you kind 182 00:11:03,440 --> 00:11:04,800 Speaker 1: of pull it back and you give it to your 183 00:11:04,840 --> 00:11:08,320 Speaker 1: local banks, or if it's treasuries and mortgages, you just 184 00:11:08,400 --> 00:11:12,160 Speaker 1: liquidate them. And then you liquidated them, you basically leaning 185 00:11:12,200 --> 00:11:14,920 Speaker 1: on the dealer community here in in New York who 186 00:11:14,960 --> 00:11:17,200 Speaker 1: then put it in the report market. And that's where 187 00:11:17,720 --> 00:11:21,200 Speaker 1: that's where the stresses would would show up. But the 188 00:11:21,280 --> 00:11:23,839 Speaker 1: FED and the spot lines are helpful in that regarding that. 189 00:11:24,080 --> 00:11:27,360 Speaker 1: You know, they can put dollars into the system without 190 00:11:28,280 --> 00:11:31,280 Speaker 1: without there being any kind of step where you would 191 00:11:31,280 --> 00:11:34,760 Speaker 1: liquidate assets. And you know the fact of someone raising 192 00:11:34,800 --> 00:11:38,200 Speaker 1: liquidity is stressing out money market rates just kind of 193 00:11:38,200 --> 00:11:41,839 Speaker 1: not be a part of that picture. But um, that's 194 00:11:41,960 --> 00:11:44,920 Speaker 1: that's why the dollar is is is so special in 195 00:11:45,000 --> 00:11:50,200 Speaker 1: metricald yes. So maybe a little potantic point there. Basically, 196 00:11:50,200 --> 00:11:52,440 Speaker 1: what is happening is the FED is expanding it's balance 197 00:11:52,440 --> 00:11:56,520 Speaker 1: sheet on both sides, so the the desire that people 198 00:11:56,600 --> 00:12:00,840 Speaker 1: have for cash okay can be met by creating more 199 00:12:00,920 --> 00:12:05,200 Speaker 1: cash okay. That's what's happening um on the balance sheet 200 00:12:05,320 --> 00:12:09,679 Speaker 1: of the FED. Basically because the banks themselves, the farther 201 00:12:09,720 --> 00:12:14,200 Speaker 1: down the hierarchy UM have been tapped out by these 202 00:12:14,200 --> 00:12:17,120 Speaker 1: clients who are tapping their their credit lines and so forth, 203 00:12:17,520 --> 00:12:20,440 Speaker 1: and they're the risk of making markets in these in 204 00:12:20,480 --> 00:12:24,080 Speaker 1: these instruments has made the private dealer community not so 205 00:12:24,200 --> 00:12:28,280 Speaker 1: keen on absorbing the treasuries and and and and and 206 00:12:28,640 --> 00:12:32,160 Speaker 1: works back securities that are being that are being liquidated um. 207 00:12:32,200 --> 00:12:34,040 Speaker 1: And so the FED is doing it, and so the 208 00:12:34,080 --> 00:12:38,120 Speaker 1: feed is doing it instead. So the that combination of 209 00:12:38,160 --> 00:12:41,400 Speaker 1: a kind of perfect storm where there's a dash for 210 00:12:41,480 --> 00:12:44,560 Speaker 1: cash and there's and and the dealer community is feeling 211 00:12:44,559 --> 00:12:48,720 Speaker 1: itself constrained. UM in meeting those demands has meant that 212 00:12:48,760 --> 00:12:50,880 Speaker 1: it has it has fallen upon the FED, and I 213 00:12:50,920 --> 00:12:56,520 Speaker 1: would absolutely agree it has moved incredibly quickly. UM. And Tracy, 214 00:12:56,600 --> 00:12:58,400 Speaker 1: you said the last couple of weeks, let us just 215 00:12:58,480 --> 00:13:01,160 Speaker 1: remember it was a week ago Sunday. Okay, it was 216 00:13:01,200 --> 00:13:05,480 Speaker 1: a week of Sunday. It feels so much longer. I'm sorry. 217 00:13:05,640 --> 00:13:07,880 Speaker 1: I was just gonna say. One thing we forgot to 218 00:13:07,920 --> 00:13:11,760 Speaker 1: do that we've been doing lately is reminding listeners the 219 00:13:11,920 --> 00:13:15,520 Speaker 1: date and time that we are recording all of these episodes, 220 00:13:15,559 --> 00:13:18,719 Speaker 1: because it's important to have their context because things are 221 00:13:18,720 --> 00:13:20,719 Speaker 1: moving so fast. So just a reminder, we're recording this 222 00:13:21,160 --> 00:13:26,440 Speaker 1: March and we started at eight am Eastern time. We're 223 00:13:26,480 --> 00:13:29,079 Speaker 1: at the point where we're specifying the hour because again 224 00:13:29,120 --> 00:13:32,160 Speaker 1: of how fast things changed. So Perry, continue with what 225 00:13:32,240 --> 00:13:37,120 Speaker 1: you're continue with your thoughtless UM. So we've just really 226 00:13:37,160 --> 00:13:41,520 Speaker 1: talked about this UM liquidity problem, and and we've talked 227 00:13:41,559 --> 00:13:46,280 Speaker 1: about the way the FED has stepped in to basically 228 00:13:47,040 --> 00:13:50,440 Speaker 1: enable people to switch out of their their their you 229 00:13:50,440 --> 00:13:54,880 Speaker 1: know there their best assets, um, treasuries and so forth. Okay, 230 00:13:55,000 --> 00:13:59,440 Speaker 1: into cash okay, Um, But it's a much larger market 231 00:13:59,559 --> 00:14:02,440 Speaker 1: than that at And the deeper problem okay, that the 232 00:14:02,440 --> 00:14:06,119 Speaker 1: dealer community is facing, or I would say, I'm imagining 233 00:14:06,280 --> 00:14:10,000 Speaker 1: I'm going to ask Zoltan about this, is that basically, 234 00:14:10,040 --> 00:14:14,560 Speaker 1: this whole shock to the global supply chain is causing 235 00:14:14,559 --> 00:14:18,000 Speaker 1: a repricing of assets all over the world. And that 236 00:14:18,120 --> 00:14:21,880 Speaker 1: repricing is itself a big challenge. Um. Nobody knows what 237 00:14:22,040 --> 00:14:25,720 Speaker 1: value is. And the disruption of the dealer community means 238 00:14:25,800 --> 00:14:30,160 Speaker 1: that that price discovery, okay, is is impaired. Um. That 239 00:14:30,280 --> 00:14:34,200 Speaker 1: prices are moving because of liquidity problems. Um, that people 240 00:14:34,240 --> 00:14:38,560 Speaker 1: are mistaking for value for valuation problems. Um. And it's 241 00:14:38,600 --> 00:14:43,400 Speaker 1: hard to sort those things, sort those things out. Yes, yes, 242 00:14:43,480 --> 00:14:45,480 Speaker 1: it's it's hard to sort them out. I mean certainly 243 00:14:45,520 --> 00:14:48,440 Speaker 1: you have you know, you have you have an industrial 244 00:14:48,440 --> 00:14:52,280 Speaker 1: production shock, you have a service sector shock. You know 245 00:14:52,880 --> 00:14:56,240 Speaker 1: what makes this episode of special is that usually services 246 00:14:56,360 --> 00:14:59,920 Speaker 1: is very a cyclical lengths table. You know, there's a 247 00:15:00,000 --> 00:15:02,280 Speaker 1: bunch of IP cycles all the time. But you know, 248 00:15:02,320 --> 00:15:06,400 Speaker 1: the two never coincide, and uh, you know, we've never 249 00:15:06,400 --> 00:15:09,640 Speaker 1: had anything as deep as what we are going through now. 250 00:15:10,320 --> 00:15:15,080 Speaker 1: You know certainly that is hitting the valuation of credit 251 00:15:15,920 --> 00:15:19,680 Speaker 1: because you know, in this time around, it's not mortgages 252 00:15:19,720 --> 00:15:22,120 Speaker 1: that are the problem, it's not treasuries that are the problem, 253 00:15:22,160 --> 00:15:24,760 Speaker 1: but it's credit because it's the corporate sector that is 254 00:15:24,760 --> 00:15:29,400 Speaker 1: basically bearing the brunt of this fallout, and so you know, 255 00:15:29,640 --> 00:15:33,840 Speaker 1: that makes it very difficult to value things. Um then 256 00:15:33,840 --> 00:15:36,680 Speaker 1: when you when you come to the actual market making 257 00:15:36,720 --> 00:15:40,720 Speaker 1: and price setting mechanism that the dealers usually provide, you 258 00:15:40,760 --> 00:15:44,600 Speaker 1: know they contribute that function either because you know, it's 259 00:15:44,600 --> 00:15:47,240 Speaker 1: not only the case that everybody is trying to kind 260 00:15:47,240 --> 00:15:50,480 Speaker 1: of protect itself and making sure that you're there for 261 00:15:50,640 --> 00:15:54,160 Speaker 1: your corporate customer. You have promised the corporate credit linen, 262 00:15:54,200 --> 00:15:56,720 Speaker 1: so you have contractual obligations to kind of need that. 263 00:15:57,400 --> 00:15:59,600 Speaker 1: But also, you know, keep in mind things have been 264 00:15:59,600 --> 00:16:02,880 Speaker 1: moving very fast. You know, the government is now asking 265 00:16:02,960 --> 00:16:07,680 Speaker 1: the banks to show forbearance to small businesses, households, everybody 266 00:16:07,720 --> 00:16:10,480 Speaker 1: in your in your in your home country, and you 267 00:16:10,520 --> 00:16:13,640 Speaker 1: know in English that means basically that you know, the 268 00:16:13,680 --> 00:16:16,000 Speaker 1: banks are not going to be getting interest payments. They 269 00:16:16,000 --> 00:16:18,840 Speaker 1: are not going to be getting principal payments. Because you 270 00:16:18,880 --> 00:16:22,920 Speaker 1: are extending the time at which you will get those inflows, 271 00:16:23,360 --> 00:16:27,440 Speaker 1: you're basically increasing your loan books. So all these forbearance 272 00:16:27,520 --> 00:16:30,000 Speaker 1: and all all the corporate credit lends getting drawn down 273 00:16:30,120 --> 00:16:34,760 Speaker 1: is basically inflating banks and dealers balance sheets. It's adding 274 00:16:34,760 --> 00:16:37,680 Speaker 1: a ton of risk graded assets. And you know, balance 275 00:16:37,680 --> 00:16:39,720 Speaker 1: sheet is like an a four sheet of paper that 276 00:16:39,800 --> 00:16:41,440 Speaker 1: you know, you start to scribble on when you go 277 00:16:41,480 --> 00:16:43,200 Speaker 1: to the green market. I'm gonna buy this, and I'm 278 00:16:43,200 --> 00:16:45,080 Speaker 1: going to buy that, and then you run out of space. 279 00:16:45,800 --> 00:16:48,520 Speaker 1: You know, you can't write anymore. So balance sheet is finite. 280 00:16:48,800 --> 00:16:51,400 Speaker 1: And because the balance sheet is finite and you're being 281 00:16:51,480 --> 00:16:55,160 Speaker 1: asked to do the right thing locally, for people in 282 00:16:55,200 --> 00:16:58,560 Speaker 1: businesses on the ground, there's a lot less balance sheets 283 00:16:58,600 --> 00:17:03,320 Speaker 1: for you know, less balance sheet for making markets in repo, 284 00:17:03,520 --> 00:17:06,280 Speaker 1: less markets, less balance she didn't making markets in the 285 00:17:06,400 --> 00:17:09,720 Speaker 1: FX spot market less balance sheet to take on you know, 286 00:17:09,840 --> 00:17:13,040 Speaker 1: credit assets as on your inventory to kind of smooth 287 00:17:13,080 --> 00:17:17,280 Speaker 1: the pricing mechanism. So in all this market making stuff 288 00:17:18,320 --> 00:17:22,240 Speaker 1: is becoming luxury. Uh as I said in a recent note, 289 00:17:22,320 --> 00:17:25,760 Speaker 1: and uh you know. That's why it was so important 290 00:17:25,840 --> 00:17:29,719 Speaker 1: and so good that the FED stepped in, as I mean, 291 00:17:29,760 --> 00:17:31,600 Speaker 1: I would even say they are like dealer, a first 292 00:17:31,640 --> 00:17:33,760 Speaker 1: resort because you know, no one is going to have 293 00:17:33,840 --> 00:17:37,280 Speaker 1: the the the ability to kind of make markets on scale, 294 00:17:37,720 --> 00:17:39,880 Speaker 1: so they stepped in and they are taking on some 295 00:17:39,960 --> 00:17:43,199 Speaker 1: of this market making and price setting process. And you 296 00:17:43,240 --> 00:17:44,960 Speaker 1: know what, what Perry would say is that the FED 297 00:17:45,119 --> 00:17:48,240 Speaker 1: is not making the outside spread. But that's basically what 298 00:17:48,320 --> 00:17:52,280 Speaker 1: this is about. That that private market making mechanism is 299 00:17:52,640 --> 00:17:55,920 Speaker 1: I wouldn't say broken, it's just probably taking a little 300 00:17:55,920 --> 00:17:58,240 Speaker 1: bit of a back seat because you have to provide 301 00:17:58,240 --> 00:18:01,160 Speaker 1: so much on the ground. Yes, I would I would 302 00:18:01,200 --> 00:18:04,400 Speaker 1: say that it is making the outside spread. That's right, okay, 303 00:18:04,440 --> 00:18:07,480 Speaker 1: but it but it's important to note that it's making 304 00:18:07,800 --> 00:18:10,760 Speaker 1: it's making this spread. It's making these markets in very 305 00:18:10,840 --> 00:18:15,199 Speaker 1: specific core area of the market, okay, not the not 306 00:18:15,400 --> 00:18:19,760 Speaker 1: the whole thing. Um. And that that will keep the 307 00:18:20,040 --> 00:18:23,280 Speaker 1: wheels from falling off the entire wagon, right, But there 308 00:18:23,480 --> 00:18:25,919 Speaker 1: is still going to be a lot of disruption. And 309 00:18:26,000 --> 00:18:31,880 Speaker 1: that's because valuate value discovery. It's not so hard in treasuries, okay, 310 00:18:31,920 --> 00:18:35,280 Speaker 1: because um, we know that the US government is going 311 00:18:35,320 --> 00:18:38,800 Speaker 1: to survive this crisis, um, even if it has to 312 00:18:38,840 --> 00:18:42,080 Speaker 1: borrow another two trillion dollars or whatever. Um. This is 313 00:18:42,080 --> 00:18:45,840 Speaker 1: war finance. It's war. The US will still be around. 314 00:18:46,240 --> 00:18:50,640 Speaker 1: Whatever industries recover will pay taxes to the federal government. 315 00:18:50,720 --> 00:18:54,719 Speaker 1: And that is that means that treasuries are are are 316 00:18:54,800 --> 00:18:58,520 Speaker 1: good assets. Were not, however, sure that all these industry 317 00:18:58,560 --> 00:19:01,240 Speaker 1: industries are going to survive um, or that they will 318 00:19:01,320 --> 00:19:04,520 Speaker 1: emerge from this crisis in in the same form as 319 00:19:04,560 --> 00:19:08,840 Speaker 1: they went into it, Okay. The the natural feeling is 320 00:19:08,880 --> 00:19:11,679 Speaker 1: to imagine that somehow we'll just restart the economy like 321 00:19:11,720 --> 00:19:15,119 Speaker 1: it was before. That seems to me improbable, okay. And 322 00:19:15,200 --> 00:19:19,359 Speaker 1: so the the price discovery mechanism is also about the 323 00:19:19,359 --> 00:19:24,560 Speaker 1: reallocation of capital um. This is a very big real 324 00:19:24,680 --> 00:19:28,440 Speaker 1: side shift, um. And it's important to use the apparatus 325 00:19:28,520 --> 00:19:31,520 Speaker 1: of government to facilitate that real side shift. That's not 326 00:19:31,600 --> 00:19:34,280 Speaker 1: about the FED. Okay. That that's the FED is just 327 00:19:34,359 --> 00:19:38,159 Speaker 1: providing liquidity in core markets. Okay. Uh, that's that's a 328 00:19:38,200 --> 00:19:41,000 Speaker 1: bigger problem. And and the fiscal side of this is 329 00:19:41,600 --> 00:20:00,400 Speaker 1: where that's going to be dealt with. I would imagine, Perry, 330 00:20:00,440 --> 00:20:03,440 Speaker 1: I wanna just act both of you start with Perry 331 00:20:03,480 --> 00:20:05,520 Speaker 1: on this point a little bit further, because I think 332 00:20:05,680 --> 00:20:09,840 Speaker 1: it's key. We've seen, as you mentioned, Okay, the FED 333 00:20:09,840 --> 00:20:12,440 Speaker 1: can easily make a market in treasuries. We've seen an 334 00:20:12,440 --> 00:20:16,240 Speaker 1: expansion of the FEDS role in other sort of private 335 00:20:16,280 --> 00:20:22,440 Speaker 1: credits money markets, uh, high quality investment grade company credit. 336 00:20:22,480 --> 00:20:25,440 Speaker 1: And so far, how far can the FED go in 337 00:20:25,480 --> 00:20:30,280 Speaker 1: this realm before it becomes clearly outside of anything that 338 00:20:30,320 --> 00:20:33,040 Speaker 1: the FED is equipped to do in terms of back 339 00:20:33,160 --> 00:20:36,679 Speaker 1: stopping and keeping the flow of credit going to industries that, 340 00:20:36,760 --> 00:20:40,160 Speaker 1: as you point out, um, you know, may not exist 341 00:20:40,560 --> 00:20:46,360 Speaker 1: post crisis. Well, it's important to the details of these 342 00:20:46,520 --> 00:20:49,960 Speaker 1: facilities are still coming clear. But but so far as 343 00:20:50,000 --> 00:20:52,679 Speaker 1: I can see, they're following the playbook of two thousand 344 00:20:52,680 --> 00:20:55,760 Speaker 1: and eight, which is it's very important to appreciate that 345 00:20:55,840 --> 00:20:59,520 Speaker 1: the FED is basically not taking credit risk, Okay, Um, 346 00:20:59,760 --> 00:21:02,159 Speaker 1: the it is that it is the Treasury or some 347 00:21:02,240 --> 00:21:06,600 Speaker 1: other body okay, that is going to be taking credit risk. Um. 348 00:21:06,960 --> 00:21:10,680 Speaker 1: The FAT can expand its balance sheet. There is essentially 349 00:21:10,720 --> 00:21:13,880 Speaker 1: no limit. I mean, you could put the entire financial 350 00:21:13,920 --> 00:21:16,080 Speaker 1: system on the FATS balance sheet, and that's sort of 351 00:21:16,119 --> 00:21:18,960 Speaker 1: what we do in wartime. Um. But I don't think 352 00:21:19,000 --> 00:21:22,040 Speaker 1: we're we want to do that because getting it back 353 00:21:22,080 --> 00:21:24,840 Speaker 1: off the balance sheet is not so easy. Um uh. 354 00:21:24,880 --> 00:21:27,680 Speaker 1: And so that's what we're trying to do, is to 355 00:21:28,640 --> 00:21:32,840 Speaker 1: be selective um and uh and and and and think 356 00:21:32,880 --> 00:21:37,440 Speaker 1: about what comes after. Yeah, I mean, maybe I can 357 00:21:37,520 --> 00:21:40,120 Speaker 1: I can share a little anecdote that it's just it's 358 00:21:40,160 --> 00:21:44,280 Speaker 1: just remarkable how you know, the reflexes of the market 359 00:21:44,320 --> 00:21:47,640 Speaker 1: don't really change because a lot of a lot of investors, 360 00:21:47,640 --> 00:21:49,879 Speaker 1: you know that they are buying you know, that are 361 00:21:49,920 --> 00:21:53,720 Speaker 1: buying credit um from the world over in a hedge basis. 362 00:21:54,400 --> 00:21:56,560 Speaker 1: You know, credit is cheap now because the fat cut 363 00:21:56,600 --> 00:22:00,119 Speaker 1: rates zero hedging costs are wayeep er. So this is 364 00:22:00,119 --> 00:22:03,640 Speaker 1: a great opportunity to to kind of load up. And 365 00:22:04,320 --> 00:22:07,679 Speaker 1: you know, old habits die hard. But I but I 366 00:22:07,680 --> 00:22:14,360 Speaker 1: would agree that there will be some long term implications 367 00:22:14,440 --> 00:22:19,479 Speaker 1: from you know, what death is viable and and and 368 00:22:19,520 --> 00:22:20,959 Speaker 1: what is not. And you know, when you look at 369 00:22:21,040 --> 00:22:25,159 Speaker 1: corporate credit de thoughts over over time, you know what 370 00:22:25,280 --> 00:22:28,480 Speaker 1: you notice is that you always have sectors that were 371 00:22:28,560 --> 00:22:32,040 Speaker 1: hit by something unexpected. Uh and that was their undoing. 372 00:22:32,119 --> 00:22:37,200 Speaker 1: So like Kodak in Rochester, New York, and the cigarette 373 00:22:37,240 --> 00:22:39,720 Speaker 1: companies and and and all this stuff, right, so you 374 00:22:39,760 --> 00:22:43,119 Speaker 1: always have these things. And I think COVID nineteen is 375 00:22:43,119 --> 00:22:45,240 Speaker 1: is another one of those where if you have some 376 00:22:46,000 --> 00:22:49,919 Speaker 1: long lasting changes to the ways people live, I mean, 377 00:22:49,960 --> 00:22:52,480 Speaker 1: maybe no one's gonna go to you know, not to 378 00:22:52,480 --> 00:22:54,439 Speaker 1: take concertain sectors, but you know, you can you can 379 00:22:54,520 --> 00:22:58,480 Speaker 1: let your your imagination run free. So you know, and 380 00:22:58,640 --> 00:23:01,080 Speaker 1: you know, there's going to be a lot of sectors 381 00:23:01,160 --> 00:23:04,600 Speaker 1: within the i G universe, the investment grade universe that 382 00:23:05,000 --> 00:23:08,600 Speaker 1: are are going to be subject to these changes, and 383 00:23:08,680 --> 00:23:10,800 Speaker 1: maybe some of that that is not going to be viable. 384 00:23:11,480 --> 00:23:14,640 Speaker 1: The set is following this dictum of you know, land 385 00:23:14,720 --> 00:23:18,480 Speaker 1: freely against what normally is good collateral and so in 386 00:23:18,520 --> 00:23:22,959 Speaker 1: the current circumstances, now that that includes credit. But again, 387 00:23:23,359 --> 00:23:26,000 Speaker 1: what we have so far is a one page term sheet. 388 00:23:26,160 --> 00:23:28,840 Speaker 1: You know, it's unclear who can issue into it. It's 389 00:23:28,920 --> 00:23:32,000 Speaker 1: unclear at what price they will take, you know, the 390 00:23:32,640 --> 00:23:35,960 Speaker 1: primary issuance, it's unclear what price they will buy the 391 00:23:36,040 --> 00:23:40,040 Speaker 1: secondary paper. It's helping the liquidity and to kind of 392 00:23:40,080 --> 00:23:43,200 Speaker 1: make sure that people are not having cash flow problems, 393 00:23:43,359 --> 00:23:45,280 Speaker 1: assuming in a way that you know, this stuff is 394 00:23:45,280 --> 00:23:47,600 Speaker 1: going to go away in six months and if it doesn't. 395 00:23:47,720 --> 00:23:51,000 Speaker 1: I think that's a completely different conversation and I'm much 396 00:23:51,040 --> 00:23:55,359 Speaker 1: more complicated. So since we're talking about credit risk and 397 00:23:55,720 --> 00:24:00,720 Speaker 1: timelines here, I wanted to ask about thinking relations in 398 00:24:00,760 --> 00:24:04,640 Speaker 1: the current scenario, because even though we've seen this massive volatility, 399 00:24:04,680 --> 00:24:08,639 Speaker 1: we haven't really seen the banks necessarily strained, or at 400 00:24:08,720 --> 00:24:11,480 Speaker 1: least not strained in the way they were back in 401 00:24:11,520 --> 00:24:13,880 Speaker 1: two thousand eight. Lots of people are talking about how 402 00:24:13,920 --> 00:24:18,040 Speaker 1: this is vindication for the regulators. For instance, you know, 403 00:24:18,119 --> 00:24:21,560 Speaker 1: all the banks have to hold high quality liquid acid 404 00:24:21,600 --> 00:24:25,000 Speaker 1: portfolios now that cover I think it's a month's worth 405 00:24:25,080 --> 00:24:28,760 Speaker 1: of outflows or something like that. So how have those 406 00:24:28,760 --> 00:24:32,199 Speaker 1: measures helped in the current crisis, and also how have 407 00:24:32,359 --> 00:24:35,400 Speaker 1: they sort of played a role in what we've seen 408 00:24:35,440 --> 00:24:38,440 Speaker 1: over the past few weeks as well. Oh, they have helped. 409 00:24:38,600 --> 00:24:40,520 Speaker 1: They have held a lot. So you know, I get 410 00:24:40,520 --> 00:24:43,200 Speaker 1: that question. A lot, you know should direct the ease, 411 00:24:44,160 --> 00:24:49,000 Speaker 1: and I would say absolutely not. You know, that would 412 00:24:49,000 --> 00:24:52,760 Speaker 1: be a mistake, just for context. In two thousand and eight. 413 00:24:54,080 --> 00:24:58,359 Speaker 1: You know, the way the the you know, the game 414 00:24:58,600 --> 00:25:00,399 Speaker 1: used to work is you know someone it's called the 415 00:25:00,440 --> 00:25:02,320 Speaker 1: ft on Friday saying well, we don't have money, we 416 00:25:02,320 --> 00:25:04,399 Speaker 1: can't open up on Monday, and then everybody had to 417 00:25:04,440 --> 00:25:06,679 Speaker 1: go in, you know, on the weekend to kind of 418 00:25:06,720 --> 00:25:10,840 Speaker 1: figure stuff out for the Monday open and so, you know, 419 00:25:10,920 --> 00:25:14,439 Speaker 1: in my mind, you know, the whole purpose of basil 420 00:25:14,520 --> 00:25:17,520 Speaker 1: tree is to kind of elongate that responds time to 421 00:25:17,560 --> 00:25:22,320 Speaker 1: thirty days, you know. So the reason why we managed 422 00:25:22,440 --> 00:25:27,159 Speaker 1: to get this far without the banking crisis is because 423 00:25:27,200 --> 00:25:30,879 Speaker 1: the banking system has been fortified by the curity buffers, 424 00:25:31,080 --> 00:25:36,400 Speaker 1: by capital buffers, by limits on balance sheets, limits on 425 00:25:36,680 --> 00:25:39,600 Speaker 1: you know what banks can carry on their on their books, 426 00:25:39,880 --> 00:25:42,679 Speaker 1: all these all these things, and so that is a 427 00:25:42,840 --> 00:25:45,920 Speaker 1: very important part of the picture. And that's why we 428 00:25:46,000 --> 00:25:49,639 Speaker 1: don't have a viral outbreak with a banking crisis. You know, 429 00:25:49,680 --> 00:25:52,720 Speaker 1: if we had this outbreak in oh wait, we would 430 00:25:52,760 --> 00:25:56,000 Speaker 1: have had a banking crisis because of this, because of 431 00:25:56,040 --> 00:25:59,080 Speaker 1: this outbreak. So you know, that's a that's a good thing. 432 00:25:59,520 --> 00:26:02,439 Speaker 1: You know, when you go into the finer detail, you know, 433 00:26:02,560 --> 00:26:06,919 Speaker 1: you will you will realize that some jurisdictions already required 434 00:26:07,560 --> 00:26:11,200 Speaker 1: their banks to match outflows in one currency with liquid 435 00:26:11,280 --> 00:26:14,439 Speaker 1: assets in the same currency, and some jurisdictions have not. 436 00:26:15,119 --> 00:26:17,680 Speaker 1: So that's why, you know, when these dollars started to 437 00:26:17,720 --> 00:26:21,119 Speaker 1: sleep away in certain parts of the world. Um, you know, 438 00:26:21,160 --> 00:26:23,800 Speaker 1: the liquidity problems showed up very quickly because you know, 439 00:26:23,840 --> 00:26:26,920 Speaker 1: you had your hq A, your liquid asset in local currency, 440 00:26:27,000 --> 00:26:29,320 Speaker 1: but your outlaws were happening in dollars, so you have 441 00:26:29,440 --> 00:26:31,880 Speaker 1: to go into the x pop markets kind of which 442 00:26:31,920 --> 00:26:36,040 Speaker 1: the difference. But but so you know, the regulations were 443 00:26:36,920 --> 00:26:40,480 Speaker 1: a good thing in in the current context in terms 444 00:26:40,560 --> 00:26:43,520 Speaker 1: of this luxury thing that you talk about, right, the 445 00:26:43,560 --> 00:26:46,320 Speaker 1: banks have finite amount of balance sheets, you know, because 446 00:26:46,320 --> 00:26:48,560 Speaker 1: you're being asked to provide more for the real economy, 447 00:26:48,560 --> 00:26:52,320 Speaker 1: you don't have as much package. Market making should be 448 00:26:52,359 --> 00:26:55,959 Speaker 1: easy the rex for that, No, because again you know, 449 00:26:56,000 --> 00:26:59,040 Speaker 1: the first and foremost goal of the regulator and the 450 00:26:59,119 --> 00:27:01,720 Speaker 1: set in this count in this and and other central 451 00:27:01,720 --> 00:27:04,400 Speaker 1: banks too in this environment is to make sure that 452 00:27:05,000 --> 00:27:07,439 Speaker 1: you know, people don't take money out of the bank, okay, 453 00:27:07,480 --> 00:27:09,720 Speaker 1: So so that's very important to keep all these things 454 00:27:09,720 --> 00:27:13,879 Speaker 1: in place. And again, you know, the technology exists for 455 00:27:14,080 --> 00:27:19,000 Speaker 1: central banks to become market makers in the report market, um, 456 00:27:19,040 --> 00:27:21,320 Speaker 1: and in the fx spock market, I mean the report market, 457 00:27:21,600 --> 00:27:24,159 Speaker 1: and everybody can kind of landing on the margin and 458 00:27:24,160 --> 00:27:25,920 Speaker 1: the set is doing it. It's now on the MINT 459 00:27:26,040 --> 00:27:28,960 Speaker 1: repos and now we have the spop lines with fifteen 460 00:27:29,040 --> 00:27:32,320 Speaker 1: central banks, and you know those central banks are basically 461 00:27:32,320 --> 00:27:35,800 Speaker 1: swapping currencies between each other just like banks and dealers. 462 00:27:35,800 --> 00:27:38,920 Speaker 1: Would you know, whatever currency or banks in the local 463 00:27:39,000 --> 00:27:42,200 Speaker 1: jurisdiction need, you can just give it to them through 464 00:27:42,200 --> 00:27:45,040 Speaker 1: repo operations, you know, so so that the infrastructure is 465 00:27:45,080 --> 00:27:48,120 Speaker 1: there to kind of back sed up this market making 466 00:27:48,160 --> 00:27:51,440 Speaker 1: mechanism that private banks normally do. And so I think 467 00:27:51,440 --> 00:27:53,520 Speaker 1: that would be the preferred path that you see some 468 00:27:53,600 --> 00:27:56,520 Speaker 1: extension in central bank balance sheets, central banks becoming more 469 00:27:56,560 --> 00:27:59,440 Speaker 1: active as market makers, and then you kind of preserve 470 00:27:59,520 --> 00:28:03,119 Speaker 1: the banking system and the existing book of business that 471 00:28:03,200 --> 00:28:07,040 Speaker 1: they have in this you know, protective casing of basil 472 00:28:07,119 --> 00:28:09,920 Speaker 1: tree and then over and above that, you know, when 473 00:28:09,960 --> 00:28:12,240 Speaker 1: you think about how how the banks should be kind 474 00:28:12,240 --> 00:28:15,680 Speaker 1: of enlisted to kind of uh finance the war efforts, 475 00:28:15,800 --> 00:28:18,800 Speaker 1: as very uh I mentioned before, I don't know. I 476 00:28:18,800 --> 00:28:22,199 Speaker 1: mean it's going to be a combination of probably you know, 477 00:28:22,280 --> 00:28:25,760 Speaker 1: government guarantees on loans that you make in this environment, 478 00:28:26,520 --> 00:28:29,440 Speaker 1: and you know, central bank funding of those loan books 479 00:28:29,440 --> 00:28:32,119 Speaker 1: and whatnot. But I think you should you should conceptually 480 00:28:32,200 --> 00:28:35,159 Speaker 1: think about that as a separate book of business, you know, 481 00:28:35,240 --> 00:28:37,879 Speaker 1: your COVID nineteen book of business that you will be 482 00:28:38,040 --> 00:28:42,520 Speaker 1: building over and above, you know, whatever your pre existing 483 00:28:42,520 --> 00:28:45,280 Speaker 1: book of business was. But again, you know, don't touch 484 00:28:45,320 --> 00:28:50,440 Speaker 1: the rags because because that's would be more harm and good. 485 00:28:51,880 --> 00:28:54,000 Speaker 1: You know. One of the things that you hear people 486 00:28:54,160 --> 00:28:57,160 Speaker 1: say in terms of getting through this crisis, and it 487 00:28:57,240 --> 00:28:59,920 Speaker 1: goes to what you were just talking about with forbearing 488 00:29:00,000 --> 00:29:02,600 Speaker 1: ald Town. But I think it's important is they say, like, 489 00:29:02,680 --> 00:29:05,480 Speaker 1: why can't we just put applause on everything? All payments stop? 490 00:29:05,880 --> 00:29:08,360 Speaker 1: Nobody pays it has to pay their mortgage for the 491 00:29:08,400 --> 00:29:11,120 Speaker 1: next three months, nobody has to pay their rent, etcetera. 492 00:29:11,320 --> 00:29:14,320 Speaker 1: That keep cash in people's pockets while they're not working, 493 00:29:14,360 --> 00:29:18,160 Speaker 1: and so forth. Talk to us, um about either of you, 494 00:29:18,240 --> 00:29:20,400 Speaker 1: but result and maybe you can start and Perry please 495 00:29:20,440 --> 00:29:23,160 Speaker 1: then add in your thought, Yeah, well I'll take that one. 496 00:29:23,200 --> 00:29:24,840 Speaker 1: I'll take that And this is a this is a 497 00:29:24,920 --> 00:29:27,600 Speaker 1: high level point. Yes, So here's the here's the thing 498 00:29:27,720 --> 00:29:31,360 Speaker 1: from the money view, okay, that one person's cash outflows 499 00:29:31,440 --> 00:29:35,640 Speaker 1: or another person's cash inflows. So that um, when you 500 00:29:36,000 --> 00:29:41,000 Speaker 1: when you say, well, um, one way for me, okay 501 00:29:41,160 --> 00:29:44,160 Speaker 1: to build up my cash balances to to make to 502 00:29:44,360 --> 00:29:50,280 Speaker 1: match my my uh diminished inflows to my uh is 503 00:29:50,320 --> 00:29:52,880 Speaker 1: in fact just to stop stop paying, you know. But 504 00:29:52,960 --> 00:29:56,880 Speaker 1: that of course spreads the virus, right because then somebody 505 00:29:56,880 --> 00:30:00,000 Speaker 1: else is going to have a diminished cash inflow. So uh, 506 00:30:00,120 --> 00:30:04,200 Speaker 1: that's that's that's a concern, okay. And it's sort of 507 00:30:04,280 --> 00:30:07,400 Speaker 1: that's what Alton was hinting about about this forbearance, right 508 00:30:07,480 --> 00:30:10,959 Speaker 1: that so you want to make sure that you you 509 00:30:11,120 --> 00:30:14,640 Speaker 1: don't have a multiplier effect that comes from that. And 510 00:30:14,720 --> 00:30:17,800 Speaker 1: you can do that if you're using the government's balance 511 00:30:17,840 --> 00:30:20,560 Speaker 1: sheet more generally, not not the Fed here, you know that. 512 00:30:20,800 --> 00:30:24,080 Speaker 1: So it's that, yes, I'm not paying my mortgage, but 513 00:30:24,120 --> 00:30:27,120 Speaker 1: the government's paying the mortgage, you know, so then you 514 00:30:27,280 --> 00:30:30,320 Speaker 1: then you stop that spread. Um. And that seems to 515 00:30:30,360 --> 00:30:34,200 Speaker 1: be sort of what the idea is behind this fiscal 516 00:30:34,240 --> 00:30:40,320 Speaker 1: package um. And in multiple areas of the of the economy, 517 00:30:40,400 --> 00:30:45,080 Speaker 1: the Fed is trying to keep the short term money 518 00:30:45,080 --> 00:30:48,360 Speaker 1: markets operating. Okay, Notice you know it is it is 519 00:30:48,400 --> 00:30:51,720 Speaker 1: important what's Alton said to distinguish between that kind of 520 00:30:51,760 --> 00:30:55,520 Speaker 1: thing and this fiscal operation the longer term war finance 521 00:30:55,560 --> 00:30:59,640 Speaker 1: though that's a different story. Okay. But but putting you know, 522 00:30:59,680 --> 00:31:02,719 Speaker 1: putting out these liquidity swaps at at twenty five basis 523 00:31:02,720 --> 00:31:07,200 Speaker 1: points that that's a very tight spread. Okay, so that's 524 00:31:07,240 --> 00:31:09,160 Speaker 1: tighter than it ever was in two thousand and eight, 525 00:31:09,200 --> 00:31:11,760 Speaker 1: I think, you know, So this is the central bank 526 00:31:11,880 --> 00:31:15,200 Speaker 1: saying forget this cross currency basis swap thing, okay that 527 00:31:15,280 --> 00:31:18,800 Speaker 1: you've been desperately trying to do, you know, to facilitate 528 00:31:18,840 --> 00:31:23,320 Speaker 1: global dollar funding. Will do it. The central banks are 529 00:31:23,360 --> 00:31:27,400 Speaker 1: are stepping up big time. That's that's a very strong message. 530 00:31:27,520 --> 00:31:30,600 Speaker 1: And so I just want to underline underline that, and 531 00:31:30,600 --> 00:31:33,320 Speaker 1: and the commercial paper facility UM as well. You know 532 00:31:33,440 --> 00:31:36,040 Speaker 1: what we haven't talked about what's been happening in the 533 00:31:36,320 --> 00:31:39,440 Speaker 1: in the money market mutual funds, okay, and the way 534 00:31:39,560 --> 00:31:42,320 Speaker 1: the way that this is really backstop for the money 535 00:31:42,320 --> 00:31:45,400 Speaker 1: market mutual funds, where there's this shift out of prime funds. 536 00:31:45,480 --> 00:31:49,240 Speaker 1: Why because there's concern that the that the bank credit 537 00:31:49,320 --> 00:31:51,520 Speaker 1: and the and the and the corporate credit that are 538 00:31:51,560 --> 00:31:54,960 Speaker 1: the assets of these funds UM may not be what 539 00:31:55,000 --> 00:31:57,680 Speaker 1: we thought they were. And and and these prime funds 540 00:31:57,720 --> 00:32:01,160 Speaker 1: are marked to market, so you have shifting around. You 541 00:32:01,160 --> 00:32:04,280 Speaker 1: are a bit of a run on these prime money 542 00:32:04,320 --> 00:32:07,080 Speaker 1: market mutual that's not happening in banks. It's not happening banks, 543 00:32:07,120 --> 00:32:09,520 Speaker 1: That's what Alten was saying. And I'm just observing that 544 00:32:09,560 --> 00:32:12,840 Speaker 1: it is happening to some extent in prime money market 545 00:32:12,920 --> 00:32:16,880 Speaker 1: mutual funds, and it's being back stopped by banks. So 546 00:32:17,240 --> 00:32:19,960 Speaker 1: just on that note, another thing that's sort of come 547 00:32:20,040 --> 00:32:22,320 Speaker 1: up once or twice is the notion of whether or 548 00:32:22,360 --> 00:32:27,200 Speaker 1: not the FED has the right tools to solve something 549 00:32:27,240 --> 00:32:31,560 Speaker 1: that's sort of happening on the I hesitate to use 550 00:32:31,600 --> 00:32:34,560 Speaker 1: the word shadow banking side of things, but you know, 551 00:32:34,600 --> 00:32:37,080 Speaker 1: we are talking about money market mutual funds. We're talking 552 00:32:37,080 --> 00:32:40,120 Speaker 1: about some of the big buy side players who are 553 00:32:40,160 --> 00:32:42,160 Speaker 1: suffering in all of this. We're talking about the repo 554 00:32:42,280 --> 00:32:45,000 Speaker 1: market as well. Um, does the FED have the right 555 00:32:45,040 --> 00:32:48,840 Speaker 1: tools or is the FED sort of hamstrung by having 556 00:32:48,880 --> 00:32:52,920 Speaker 1: to deal with banks as intermediaries. Well, you know they have, 557 00:32:53,520 --> 00:32:56,960 Speaker 1: they had the right tools, I would say, but this 558 00:32:57,080 --> 00:32:59,960 Speaker 1: is like you know, a sword, it's just a matter 559 00:33:00,040 --> 00:33:02,080 Speaker 1: or of high wielding. You know, everybody can pick up 560 00:33:03,000 --> 00:33:06,240 Speaker 1: and again, you know, the scaffolding is in place. Um, 561 00:33:07,240 --> 00:33:10,160 Speaker 1: and I think what needs to be done now is 562 00:33:10,200 --> 00:33:14,320 Speaker 1: basically just you know, calibration and making sure that the 563 00:33:14,440 --> 00:33:18,080 Speaker 1: things fit a little bit better together. You know, this 564 00:33:18,160 --> 00:33:23,600 Speaker 1: shuttle banking point that you mentioned, carry trading is basically 565 00:33:23,800 --> 00:33:26,560 Speaker 1: what got us into trouble in two thousand and eight. 566 00:33:26,640 --> 00:33:30,280 Speaker 1: You know, Perry's description of carry trading and shadow banking 567 00:33:30,400 --> 00:33:33,840 Speaker 1: is money market funding of capital market landing. And you 568 00:33:33,840 --> 00:33:35,800 Speaker 1: know we've talked about some of this stuff on on 569 00:33:35,880 --> 00:33:38,680 Speaker 1: earlier episodes. But you know when we talked about the 570 00:33:38,680 --> 00:33:42,160 Speaker 1: curve inversion and the foreign has buyers, hedging costs and 571 00:33:42,200 --> 00:33:44,920 Speaker 1: all that stuff, I mean, that's carry trading and that's 572 00:33:44,920 --> 00:33:48,680 Speaker 1: money market funding of capital market landing. Because whoever comes 573 00:33:48,760 --> 00:33:52,240 Speaker 1: to the US to buy dallar assets that are relatively 574 00:33:52,280 --> 00:33:55,760 Speaker 1: better yielding than zero interest rates in a bunch of 575 00:33:55,840 --> 00:33:59,480 Speaker 1: jurisdictions and then you hedge it back that dallar the 576 00:33:59,560 --> 00:34:02,640 Speaker 1: hedge that at a set back to local currency. That's 577 00:34:02,680 --> 00:34:06,480 Speaker 1: basically borrowing dollars and rolling those dollars you borrow every 578 00:34:06,480 --> 00:34:09,719 Speaker 1: three months in the affe spot market. So you know, 579 00:34:10,320 --> 00:34:12,960 Speaker 1: when you when you're looking for the rain coronation of 580 00:34:12,960 --> 00:34:15,920 Speaker 1: the shadow banking system, that's what it is. You know, 581 00:34:16,120 --> 00:34:19,160 Speaker 1: it's uh, it's not sieves, and it's not found to its, 582 00:34:19,200 --> 00:34:22,600 Speaker 1: and it's not credit hedge funds that invest in mortgages. 583 00:34:23,280 --> 00:34:27,640 Speaker 1: But rather it's basically the post fee theme, which is 584 00:34:27,680 --> 00:34:32,760 Speaker 1: that in a bunch of jurisdictions, you know, Europe, Japan, Scandinavia, 585 00:34:33,440 --> 00:34:36,480 Speaker 1: you had the negative interest rates and pension funds with 586 00:34:36,880 --> 00:34:40,719 Speaker 1: positive liabilities in those jurisdictions. Came to the US, which 587 00:34:40,800 --> 00:34:44,399 Speaker 1: was the highest shielding G seven economy where you could 588 00:34:44,440 --> 00:34:47,680 Speaker 1: buy stuff, and you know, you bought treasuries, uh, you 589 00:34:47,800 --> 00:34:51,680 Speaker 1: bought mortgages, you bought investment great stuff. You know a 590 00:34:51,680 --> 00:34:54,200 Speaker 1: lot of that stuff has basically companies issuing that to 591 00:34:54,280 --> 00:34:57,840 Speaker 1: buy back. There's doctor paid dividends, you had financed a 592 00:34:57,920 --> 00:35:02,200 Speaker 1: large private equity, boom clos, all these things, and he 593 00:35:02,280 --> 00:35:05,000 Speaker 1: has it back to local currency. So you know, the 594 00:35:05,080 --> 00:35:08,560 Speaker 1: FED is essentially back stopping the shadow banking system. Again. 595 00:35:09,640 --> 00:35:12,799 Speaker 1: The only thing that's missing in this whole edifice is 596 00:35:13,000 --> 00:35:14,799 Speaker 1: probably has less to do with the set I think 597 00:35:14,840 --> 00:35:16,560 Speaker 1: for the FEED. The big step was to extend the 598 00:35:16,600 --> 00:35:19,919 Speaker 1: spot lines to jurisdictions other than the original five, which 599 00:35:19,960 --> 00:35:26,360 Speaker 1: were Canada, the UK, Europe, Switzerland and Japan. The responsibility 600 00:35:26,400 --> 00:35:29,040 Speaker 1: now is with the local central banks that were given 601 00:35:29,200 --> 00:35:31,279 Speaker 1: the new local central banks that were given access to 602 00:35:31,320 --> 00:35:34,359 Speaker 1: these spop lines, the new and the old central banks 603 00:35:34,400 --> 00:35:36,000 Speaker 1: that that have access to the spot lands, which is 604 00:35:36,040 --> 00:35:39,360 Speaker 1: to kind of take the big step and go around 605 00:35:39,520 --> 00:35:43,879 Speaker 1: banks and lend those dollars to end users directly, right 606 00:35:43,920 --> 00:35:46,959 Speaker 1: because what I mentioned about banks being has to show 607 00:35:47,000 --> 00:35:50,840 Speaker 1: forbearance to local businesses and households. You know, that's a 608 00:35:50,920 --> 00:35:56,000 Speaker 1: team in every country where where where we have an outbreak, 609 00:35:56,680 --> 00:35:58,680 Speaker 1: and so the banks are not really going to have 610 00:35:58,760 --> 00:36:03,320 Speaker 1: the balance sheets to take the dollars from the central 611 00:36:03,320 --> 00:36:07,160 Speaker 1: bank at oislaswenty five, which is Verry mentioned is very cheap, 612 00:36:07,360 --> 00:36:10,480 Speaker 1: very tight um even compared to to to de all 613 00:36:10,560 --> 00:36:13,880 Speaker 1: its prices and pass it on at the same price 614 00:36:14,880 --> 00:36:16,520 Speaker 1: to the end users, because the banks don't have the 615 00:36:16,560 --> 00:36:18,320 Speaker 1: balance sheet to do that. Right, So when you commit 616 00:36:18,360 --> 00:36:21,440 Speaker 1: balance sheet to be an intermediary, the prices which you 617 00:36:21,480 --> 00:36:23,680 Speaker 1: will end those dollars on is going to be way higher. 618 00:36:23,719 --> 00:36:26,000 Speaker 1: And those precidesly what you see in the FX spot market, 619 00:36:26,080 --> 00:36:30,600 Speaker 1: where you know implied yields are way bigger than oys 620 00:36:30,680 --> 00:36:33,040 Speaker 1: plenty five. When we were talking about stuff like OI 621 00:36:33,160 --> 00:36:35,840 Speaker 1: plas a hundred or as pass a hundred and fifteen 622 00:36:35,880 --> 00:36:40,480 Speaker 1: some jurisdictions, and that big spread is going to exist 623 00:36:40,680 --> 00:36:43,759 Speaker 1: for as long as the central banks that get the 624 00:36:43,840 --> 00:36:46,960 Speaker 1: dollars from the set make the big step and and 625 00:36:47,120 --> 00:36:52,000 Speaker 1: start lending those dollars onto end users direct being that 626 00:36:52,280 --> 00:36:55,839 Speaker 1: could be local tension funds, local life insurance companies, you know, 627 00:36:56,120 --> 00:37:00,000 Speaker 1: asset managers that run separate accounts for these life insurance companies, 628 00:37:00,040 --> 00:37:03,359 Speaker 1: and intention funds. So you know, a theme that we've 629 00:37:03,440 --> 00:37:07,560 Speaker 1: been emphasizing all these years in in some joints work 630 00:37:07,640 --> 00:37:10,200 Speaker 1: with Perry and James Sweeney is that, you know, the 631 00:37:10,239 --> 00:37:15,400 Speaker 1: central bank should be back stopping markets, not institutions. And 632 00:37:15,440 --> 00:37:18,320 Speaker 1: so for now we are still a very institution specific 633 00:37:18,360 --> 00:37:20,600 Speaker 1: in that everything we're trying to do we're trying to 634 00:37:20,719 --> 00:37:24,520 Speaker 1: do through the balance sheet of a bank. But again, 635 00:37:24,560 --> 00:37:27,480 Speaker 1: I think this is the time to to probably consider 636 00:37:27,560 --> 00:37:31,560 Speaker 1: broadening the entities that to do operations. I want to 637 00:37:31,600 --> 00:37:34,760 Speaker 1: ask a question, Perry, to you about what the post 638 00:37:34,800 --> 00:37:37,640 Speaker 1: crisis landscape looks like, because I remember, I think I 639 00:37:37,680 --> 00:37:40,520 Speaker 1: was watching one of your lectures on YouTube and you 640 00:37:40,680 --> 00:37:46,040 Speaker 1: described in one of them how the economy essentially consisted 641 00:37:46,120 --> 00:37:49,840 Speaker 1: of all of us making these big taking these big risks, 642 00:37:49,960 --> 00:37:53,960 Speaker 1: these uh promising future obligations. I think you're compared it 643 00:37:54,000 --> 00:37:55,680 Speaker 1: to sort of building a bridge if we don't really 644 00:37:55,680 --> 00:37:57,480 Speaker 1: know where the bridge is going. And anyone who has 645 00:37:57,520 --> 00:38:00,600 Speaker 1: a mortgage has committed to making a month police payment 646 00:38:00,640 --> 00:38:03,000 Speaker 1: for the next thirty years of their live despite the 647 00:38:03,000 --> 00:38:04,600 Speaker 1: fact that they really have no idea what's going to 648 00:38:04,719 --> 00:38:07,000 Speaker 1: happen over the next thirty years of their lives between 649 00:38:07,000 --> 00:38:10,720 Speaker 1: their employment and the stock market and everything else. After 650 00:38:10,840 --> 00:38:15,640 Speaker 1: we have this incredibly sharp, severe shock to everyone's cash 651 00:38:15,640 --> 00:38:18,560 Speaker 1: flows all at the same time. It's truly like traumatic 652 00:38:18,960 --> 00:38:22,720 Speaker 1: global episode. You have a lot of economists are like, Okay, 653 00:38:22,719 --> 00:38:25,200 Speaker 1: we're gonna have some sort of V shaped recovery after 654 00:38:25,200 --> 00:38:27,480 Speaker 1: we get the virus beat in Q two, then we're 655 00:38:27,480 --> 00:38:31,200 Speaker 1: gonna get this Q three rebound as everyone goes back 656 00:38:31,239 --> 00:38:33,719 Speaker 1: to work and spending. But what does this look like 657 00:38:33,760 --> 00:38:37,520 Speaker 1: to you when in terms of the future of people 658 00:38:37,640 --> 00:38:42,440 Speaker 1: being willing to commit themselves to making long term financial 659 00:38:42,480 --> 00:38:48,600 Speaker 1: obligations after coming through an experience like this, Well, that's 660 00:38:48,640 --> 00:38:50,919 Speaker 1: the big one, isn't it. Okay, And this gets back 661 00:38:50,920 --> 00:38:53,240 Speaker 1: to this gets back to what we were talking about 662 00:38:53,880 --> 00:38:57,120 Speaker 1: twenty minutes ago. Okay, about that this is a shock 663 00:38:57,200 --> 00:39:00,879 Speaker 1: that is that is changing the landscape. Okay, And so 664 00:39:01,400 --> 00:39:04,520 Speaker 1: as you're that that in terms of building this bridge, 665 00:39:04,640 --> 00:39:06,920 Speaker 1: you know, we were building this bridge toward the future, 666 00:39:07,360 --> 00:39:11,920 Speaker 1: and the last mile of that bridge is just all collapsed, okay. 667 00:39:11,920 --> 00:39:14,040 Speaker 1: And the shore that we thought we were building towards 668 00:39:14,440 --> 00:39:16,880 Speaker 1: is not It turns out it's not there, and so 669 00:39:16,960 --> 00:39:19,960 Speaker 1: we need to build in another direction, okay. And what 670 00:39:20,120 --> 00:39:25,400 Speaker 1: that direction is will emerge from millions of decentralized decisions 671 00:39:25,480 --> 00:39:29,200 Speaker 1: or guesses or or or views about that. There will 672 00:39:29,239 --> 00:39:32,879 Speaker 1: be some you know, government guidance. But just go back 673 00:39:32,920 --> 00:39:36,600 Speaker 1: to two thousand and eight, okay, and observe that what 674 00:39:36,600 --> 00:39:39,960 Speaker 1: what happened in terms of the expansion of credit since 675 00:39:40,000 --> 00:39:43,800 Speaker 1: two thousand and eight, it's really mostly a story about 676 00:39:43,840 --> 00:39:49,240 Speaker 1: the periphery, about the emerging market economies, okay, expanding dollar borrowing. Okay. 677 00:39:49,320 --> 00:39:52,640 Speaker 1: Sultan said, how you know these pension funds in Europe 678 00:39:52,680 --> 00:39:55,560 Speaker 1: are coming and buying assets in the United States, They're 679 00:39:55,560 --> 00:39:59,680 Speaker 1: buying dollar assets in Brazil. Okay, They're buying dollar assets, um, 680 00:39:59,760 --> 00:40:02,359 Speaker 1: all over all over the world. Um. It's a it's 681 00:40:02,440 --> 00:40:07,279 Speaker 1: it's the offshore ding system. Uh. It really expanded and 682 00:40:07,400 --> 00:40:11,600 Speaker 1: was the locomotive of the world economy. Um after two eight. 683 00:40:11,680 --> 00:40:15,480 Speaker 1: I don't know that anyone expected that. Okay, that was 684 00:40:15,560 --> 00:40:19,839 Speaker 1: driven by the negative interest rates in the in in 685 00:40:19,880 --> 00:40:23,640 Speaker 1: Europe um and the very positive interest rates you know 686 00:40:23,719 --> 00:40:26,399 Speaker 1: in the periphery. This is a dollar crisis, yes it 687 00:40:26,480 --> 00:40:29,680 Speaker 1: is okay. But what will emerge out of this? I 688 00:40:29,719 --> 00:40:34,919 Speaker 1: think we don't know, and uh it will. It will 689 00:40:35,000 --> 00:40:39,160 Speaker 1: be helpful to have some idea um at some point 690 00:40:39,200 --> 00:40:44,120 Speaker 1: because once you see distantly the shore, then you can 691 00:40:44,120 --> 00:40:47,919 Speaker 1: start making promises right that you you know where you're 692 00:40:47,920 --> 00:40:50,640 Speaker 1: building toward, you know what you're building toward. Right now, 693 00:40:51,200 --> 00:40:53,960 Speaker 1: I think we don't know what we're building toward. We're 694 00:40:54,000 --> 00:40:58,799 Speaker 1: imagining that particular industries. Industries are definitely on hold. You know, 695 00:40:58,840 --> 00:41:01,120 Speaker 1: all the restaurants are shut, all the theaters are shut, 696 00:41:01,200 --> 00:41:04,560 Speaker 1: you know, talking about New York City. But presumably that's 697 00:41:04,600 --> 00:41:07,880 Speaker 1: not forever um, it's that's just a virus thing. But 698 00:41:07,920 --> 00:41:11,080 Speaker 1: there are the supply chains, the rebuilding of the supply chains, 699 00:41:11,200 --> 00:41:14,200 Speaker 1: or the dismantling of them. You know this story about 700 00:41:14,520 --> 00:41:17,239 Speaker 1: on showing are all of our all of our pharmaceutical 701 00:41:17,280 --> 00:41:20,960 Speaker 1: production or things like that. These these take time. It's 702 00:41:21,120 --> 00:41:24,200 Speaker 1: dismantling part of the bridge that had been built, and 703 00:41:24,280 --> 00:41:26,600 Speaker 1: building the bridge in a different in a different direction. 704 00:41:27,160 --> 00:41:29,960 Speaker 1: M Re Sulton, I'd love to hear your thoughts on 705 00:41:30,160 --> 00:41:34,120 Speaker 1: the long term implications for the way the financial system works, 706 00:41:34,120 --> 00:41:38,960 Speaker 1: specifically since um you've been writing about basically the lingering 707 00:41:39,120 --> 00:41:41,600 Speaker 1: impact of what happened in two thousand and eight on 708 00:41:41,719 --> 00:41:44,399 Speaker 1: how the rebolt market works and and what it means 709 00:41:44,400 --> 00:41:46,960 Speaker 1: when it clashes with the winding down of the Federal 710 00:41:47,000 --> 00:41:49,799 Speaker 1: reserves balance sheet. How do you see this playing out 711 00:41:50,080 --> 00:41:54,759 Speaker 1: over the longer term. Well, it's it's probably too um 712 00:41:55,960 --> 00:41:59,440 Speaker 1: too early to say. I mean, obviously, you know some 713 00:41:59,480 --> 00:42:02,600 Speaker 1: of the base questions is you know, how long is 714 00:42:02,640 --> 00:42:07,520 Speaker 1: this going to persist? This is going to be recurring? Um, 715 00:42:07,640 --> 00:42:11,160 Speaker 1: are we kind of going to have to reorganize our 716 00:42:11,200 --> 00:42:14,640 Speaker 1: economies and and way of lives and ways of finance 717 00:42:14,920 --> 00:42:19,520 Speaker 1: around this? But I think I think the regulations are 718 00:42:19,640 --> 00:42:24,040 Speaker 1: going to be still in place. Probably the regulations are 719 00:42:24,040 --> 00:42:27,759 Speaker 1: going to be a bit tougher because you know, this 720 00:42:27,840 --> 00:42:31,200 Speaker 1: is now This is no different from global warming and 721 00:42:31,200 --> 00:42:34,200 Speaker 1: what it means of finance and standard assets. And you 722 00:42:34,239 --> 00:42:38,200 Speaker 1: know all the good work that the Bank of England 723 00:42:38,280 --> 00:42:41,680 Speaker 1: under under Governor Carny has has highlighted in the past. 724 00:42:42,080 --> 00:42:44,480 Speaker 1: You know, this is just this is just a variation 725 00:42:44,520 --> 00:42:47,520 Speaker 1: on that team, where like we have this viral outdate 726 00:42:47,600 --> 00:42:53,520 Speaker 1: that's causing havoc across the financial system. Global warming could 727 00:42:53,600 --> 00:42:55,880 Speaker 1: be that issue in a couple of years. So I 728 00:42:55,880 --> 00:42:58,120 Speaker 1: guess one thing that can come out of this is, 729 00:42:58,880 --> 00:43:01,480 Speaker 1: you know all these tale risks that we talk about, 730 00:43:02,160 --> 00:43:05,280 Speaker 1: it don't happen. They are very real. They can happen. 731 00:43:05,400 --> 00:43:09,719 Speaker 1: So should we do anything over and above basil three 732 00:43:10,200 --> 00:43:13,400 Speaker 1: to kind of fortify things? That's number one. Number two, 733 00:43:14,280 --> 00:43:17,799 Speaker 1: I think longer term supply chains are going to be 734 00:43:18,480 --> 00:43:21,680 Speaker 1: rethought because whether this is a one in a hundred 735 00:43:21,760 --> 00:43:24,200 Speaker 1: year or one in twenty year, or one every two 736 00:43:24,239 --> 00:43:26,920 Speaker 1: years or twice every year event. I think it was 737 00:43:26,960 --> 00:43:30,840 Speaker 1: becoming very apparent is that the way we have organized 738 00:43:30,840 --> 00:43:34,560 Speaker 1: the world around us doesn't really work. I mean, you 739 00:43:34,600 --> 00:43:37,920 Speaker 1: can't have just one country produce everything and everybody being 740 00:43:39,160 --> 00:43:43,440 Speaker 1: exposed to to that link in the chain. You know, 741 00:43:43,520 --> 00:43:49,000 Speaker 1: what we issue debt for is going to be thought about. Um. 742 00:43:49,080 --> 00:43:52,640 Speaker 1: I think even the government can think about ways to 743 00:43:52,719 --> 00:43:55,319 Speaker 1: kind of put caps on I don't know, stock buy 744 00:43:55,360 --> 00:43:58,560 Speaker 1: back stuff like that, because you know, corporations should be 745 00:43:59,080 --> 00:44:02,000 Speaker 1: taking a share of of of making sure that when 746 00:44:02,000 --> 00:44:04,600 Speaker 1: things like this happen. You know, they can they can 747 00:44:04,719 --> 00:44:07,440 Speaker 1: they can read two more efficiently. You have spare factory 748 00:44:07,440 --> 00:44:10,600 Speaker 1: capacity and all these things. And then third, I think, 749 00:44:10,600 --> 00:44:12,839 Speaker 1: you know, when it comes to so we talked about 750 00:44:12,840 --> 00:44:16,120 Speaker 1: the banks to talk about you know what what company, 751 00:44:16,200 --> 00:44:18,600 Speaker 1: how companies are gonna be running their supply chains. But 752 00:44:18,680 --> 00:44:21,239 Speaker 1: they can issue that for you know, what's a reasonable 753 00:44:21,320 --> 00:44:23,520 Speaker 1: amount of debtload that you can run with? Right? I 754 00:44:23,520 --> 00:44:25,480 Speaker 1: mean a part of the reason why we have to 755 00:44:26,160 --> 00:44:28,600 Speaker 1: you know, back stuff the i G market is because 756 00:44:29,120 --> 00:44:31,839 Speaker 1: a lot of death that was issued was basically there 757 00:44:31,840 --> 00:44:34,719 Speaker 1: to do financial engineering, you know, buy back stocks and 758 00:44:34,760 --> 00:44:38,440 Speaker 1: pay dividends and all that stuff. So maybe our tolerance 759 00:44:38,560 --> 00:44:40,839 Speaker 1: for that going forward is going to be less. Then 760 00:44:40,880 --> 00:44:44,000 Speaker 1: a third thing, you know, portfolio investing. I mean, the 761 00:44:44,080 --> 00:44:47,080 Speaker 1: only the only then that's been driving those cloths is 762 00:44:47,440 --> 00:44:49,960 Speaker 1: where is the yield the best? You know A Sperry said, 763 00:44:50,280 --> 00:44:53,399 Speaker 1: you know, all issuing dollars because my local yields are 764 00:44:53,719 --> 00:44:57,080 Speaker 1: even higher. And then I'll buy dollars because my local 765 00:44:57,160 --> 00:45:00,439 Speaker 1: yields are zero. You know. So So I think when 766 00:45:00,480 --> 00:45:04,120 Speaker 1: you when you are a portfolio investor and and you 767 00:45:04,160 --> 00:45:06,560 Speaker 1: know your government can very easily put its foot time 768 00:45:06,640 --> 00:45:09,520 Speaker 1: and say all right, all this you know, yield chasing, 769 00:45:09,560 --> 00:45:13,120 Speaker 1: cross border stuff. Let's put an end to it. And 770 00:45:13,160 --> 00:45:16,120 Speaker 1: how about we, you know, issue more sovereign that you 771 00:45:16,239 --> 00:45:18,920 Speaker 1: buy that stuff and we spend the money on building 772 00:45:18,920 --> 00:45:23,560 Speaker 1: more hospitals, more dams. I don't know, you know, use 773 00:45:23,600 --> 00:45:27,440 Speaker 1: your imagination, but basically, at a time of worthy ends, 774 00:45:27,560 --> 00:45:30,359 Speaker 1: which is a theme we referred to earlier, I think 775 00:45:30,800 --> 00:45:34,840 Speaker 1: the emphasis is going to be on financing stuff locally 776 00:45:35,520 --> 00:45:38,319 Speaker 1: and and less less on the global themes. And so 777 00:45:38,400 --> 00:45:42,040 Speaker 1: I think this is just going to fracture the world 778 00:45:42,080 --> 00:45:44,640 Speaker 1: of finance for share, it's going to change it. And 779 00:45:44,960 --> 00:45:47,440 Speaker 1: I think it's going to make the world one too, 780 00:45:48,160 --> 00:45:51,080 Speaker 1: you know, a little separate islands floating in ocean, but 781 00:45:51,160 --> 00:45:53,880 Speaker 1: you're not going to be as connected and as global 782 00:45:54,160 --> 00:45:58,000 Speaker 1: as as we do. So both of you have mentioned 783 00:45:58,360 --> 00:46:01,520 Speaker 1: this idea of maybe reorganized thing supply chain so that 784 00:46:01,840 --> 00:46:06,000 Speaker 1: one country isn't responsible for making one critical item, and 785 00:46:06,480 --> 00:46:10,520 Speaker 1: Sultan you previously described the supply chain as basically a 786 00:46:10,520 --> 00:46:14,440 Speaker 1: payments chain. So I'm wondering what happens to the status 787 00:46:14,480 --> 00:46:17,960 Speaker 1: of the dollar in the international financial system. Do you 788 00:46:17,960 --> 00:46:20,560 Speaker 1: think we might see a concerted effort to sort of 789 00:46:20,920 --> 00:46:24,360 Speaker 1: move away from it a little bit. Uh, Perry, I'd 790 00:46:24,400 --> 00:46:26,920 Speaker 1: love to hear your thoughts and then maybe Sulton, well, 791 00:46:27,120 --> 00:46:31,120 Speaker 1: it's it's the the My view on these things is, 792 00:46:31,160 --> 00:46:34,080 Speaker 1: watch what markets are doing in at the moment. Everyone 793 00:46:34,120 --> 00:46:36,680 Speaker 1: wants dollars. You know that if they don't want gold, 794 00:46:36,840 --> 00:46:39,560 Speaker 1: they don't want You know that this is this is 795 00:46:39,600 --> 00:46:44,319 Speaker 1: what money is internationally. Um So. I think that it is, 796 00:46:44,719 --> 00:46:48,040 Speaker 1: and that the dollar is strong, not not weak. So 797 00:46:48,480 --> 00:46:57,200 Speaker 1: I don't see a move to a multi currency system. 798 00:46:57,440 --> 00:47:03,040 Speaker 1: Sultan story about breaking up the global global system into 799 00:47:03,200 --> 00:47:07,440 Speaker 1: individual nation states, I hope that doesn't go too far, okay, 800 00:47:07,480 --> 00:47:10,920 Speaker 1: because there's a lot of productivity games that come from 801 00:47:11,800 --> 00:47:17,120 Speaker 1: uh distribution division of labor internationally um And it's a 802 00:47:17,160 --> 00:47:21,120 Speaker 1: big productivity shock to to the globe if you if 803 00:47:21,160 --> 00:47:24,120 Speaker 1: you break all that down um so. But I do 804 00:47:24,200 --> 00:47:28,440 Speaker 1: think there's a there's a challenge to the globalization. Um. 805 00:47:28,480 --> 00:47:33,000 Speaker 1: I think that financial globalization could continue um even if 806 00:47:33,160 --> 00:47:37,080 Speaker 1: even if real side globalization is pulled is pulled back. 807 00:47:37,360 --> 00:47:41,440 Speaker 1: There are big efficiencies in having a single world currency 808 00:47:41,880 --> 00:47:44,640 Speaker 1: for trading and for and for finance. And I think 809 00:47:44,719 --> 00:47:48,440 Speaker 1: that we were we're seeing that it does require somebody 810 00:47:48,440 --> 00:47:51,840 Speaker 1: to manage it. Um. And that is if there's a 811 00:47:51,840 --> 00:47:56,200 Speaker 1: particular if there's a particular country that's issuing that currency. Um. 812 00:47:56,239 --> 00:47:58,600 Speaker 1: That's what we're seeing that the US is sort of 813 00:47:58,640 --> 00:48:05,280 Speaker 1: managing that and that's a responsibility. And uh it is uh, 814 00:48:05,320 --> 00:48:08,799 Speaker 1: it's it's a good thing. It's a good thing. Yeah, 815 00:48:08,840 --> 00:48:11,360 Speaker 1: I mean to two things I would add to that. Um. 816 00:48:11,400 --> 00:48:14,879 Speaker 1: I mean, I certainly agree with the productivity games we've 817 00:48:14,880 --> 00:48:17,719 Speaker 1: had from you know, specialization and all that. But I 818 00:48:17,760 --> 00:48:21,000 Speaker 1: guess that's precisely the problem that we were too efficient 819 00:48:21,840 --> 00:48:25,520 Speaker 1: and specialized. And you know, if you went to business school, 820 00:48:25,520 --> 00:48:28,040 Speaker 1: you would learn about you know, synergies and this and that, 821 00:48:28,200 --> 00:48:30,759 Speaker 1: and we can eliminate duplications and we can have one 822 00:48:30,800 --> 00:48:33,759 Speaker 1: company that makes breeding machines in the world. So I 823 00:48:33,800 --> 00:48:35,759 Speaker 1: would I would disagree with you, Perry. So I think 824 00:48:35,800 --> 00:48:38,120 Speaker 1: that is going to come under review. But hopefully we 825 00:48:38,160 --> 00:48:39,960 Speaker 1: are going to keep a lot of the good things 826 00:48:40,000 --> 00:48:43,399 Speaker 1: about globalization in in in place. We just kind of 827 00:48:43,440 --> 00:48:46,239 Speaker 1: recalibrate it. So let's put it that way. In terms 828 00:48:46,320 --> 00:48:50,120 Speaker 1: of the dollar, again, you know, I would have worried 829 00:48:50,160 --> 00:48:52,920 Speaker 1: if the FED doesn't do the writing in terms of 830 00:48:52,920 --> 00:48:56,719 Speaker 1: the spot lines. But again they did and so, and 831 00:48:56,760 --> 00:48:59,239 Speaker 1: so I think the dollar is going to probably come 832 00:48:59,360 --> 00:49:07,320 Speaker 1: out stronger from all this because of it, um and 833 00:49:07,320 --> 00:49:13,239 Speaker 1: and so that was that was a good thing that defended. Okay, well, 834 00:49:13,960 --> 00:49:17,600 Speaker 1: absolutely fascinating conversation. It was so good to have both 835 00:49:17,600 --> 00:49:20,040 Speaker 1: of you on. And I guess the next episode we do, 836 00:49:20,120 --> 00:49:22,000 Speaker 1: We're going to have to get James Sweeney on and 837 00:49:22,320 --> 00:49:24,960 Speaker 1: we'll have all three of you, the Money Market Trio, 838 00:49:26,600 --> 00:49:31,520 Speaker 1: the Three Musketeers, Let's do it. Let's I'm already looking 839 00:49:31,560 --> 00:49:34,200 Speaker 1: forward to that. It is really a treat and an 840 00:49:34,200 --> 00:49:36,000 Speaker 1: honor to get to talk to about the views. So 841 00:49:36,160 --> 00:49:50,239 Speaker 1: thank you for taking the time. Great, stay safe, So, Joe, 842 00:49:50,280 --> 00:49:55,480 Speaker 1: I thought that was absolutely riveting conversation. We touched on 843 00:49:55,600 --> 00:49:59,040 Speaker 1: so many of the sort of smaller technical themes, but 844 00:49:59,160 --> 00:50:02,279 Speaker 1: also some of the big picture themes. And what I 845 00:50:02,320 --> 00:50:04,319 Speaker 1: really like about talking to Sulton and Perry is that 846 00:50:04,360 --> 00:50:08,640 Speaker 1: they always bring that real world perspective. This is what 847 00:50:08,719 --> 00:50:12,720 Speaker 1: they're actually observing in financial markets at this moment in time, 848 00:50:12,960 --> 00:50:15,200 Speaker 1: or in the case of Perry, this is how real 849 00:50:15,239 --> 00:50:19,959 Speaker 1: world behavior can actually affect the flow of money. Yeah, 850 00:50:20,120 --> 00:50:22,719 Speaker 1: it's that really was a treat getting to talk to 851 00:50:22,840 --> 00:50:24,799 Speaker 1: both of them at the same time like that, I 852 00:50:24,840 --> 00:50:27,600 Speaker 1: don't have too much to add because I think they 853 00:50:27,800 --> 00:50:31,520 Speaker 1: said at all. I love um Perry's analogy of this idea. 854 00:50:31,600 --> 00:50:34,399 Speaker 1: We were building a bridge somewhere and that last mile 855 00:50:34,440 --> 00:50:37,359 Speaker 1: of the bridge has been destroyed. And until we know 856 00:50:38,040 --> 00:50:40,359 Speaker 1: what the end of the what the what the new 857 00:50:40,440 --> 00:50:44,560 Speaker 1: shore looks like? No wonder how things are so chaotic 858 00:50:44,640 --> 00:50:47,400 Speaker 1: and unstable and financial markets because until we have some 859 00:50:47,480 --> 00:50:50,800 Speaker 1: view of what that looks like, how can you do anything? Yeah, 860 00:50:50,840 --> 00:50:54,040 Speaker 1: And I think the conversation really crystallized the idea that 861 00:50:54,120 --> 00:50:57,240 Speaker 1: what we're seeing in markets right now is this cash 862 00:50:57,360 --> 00:51:01,399 Speaker 1: shortage or a run on cash and a non dollars specifically. 863 00:51:01,880 --> 00:51:04,680 Speaker 1: So it really highlights the centrality of the dollar, which 864 00:51:04,719 --> 00:51:07,680 Speaker 1: is something that we've discussed in a bunch of previous 865 00:51:07,760 --> 00:51:11,600 Speaker 1: All Thoughts episodes now, and it also highlights the power 866 00:51:11,640 --> 00:51:14,560 Speaker 1: of the FED right like the Federal Reserve right now 867 00:51:14,760 --> 00:51:19,280 Speaker 1: is basically responsible for keeping the entire global financial system 868 00:51:19,320 --> 00:51:22,560 Speaker 1: afloat uh. And I take Sultan's point that what they've 869 00:51:22,600 --> 00:51:24,880 Speaker 1: done so far has been great, But I guess my 870 00:51:24,960 --> 00:51:28,799 Speaker 1: question is if this were to happen again in you know, 871 00:51:28,920 --> 00:51:33,120 Speaker 1: four years time or a longer horizon, would the FED 872 00:51:33,760 --> 00:51:36,080 Speaker 1: do the same thing. Can we always rely on this 873 00:51:36,160 --> 00:51:39,520 Speaker 1: one body to sort of inject as many dollars as 874 00:51:39,600 --> 00:51:44,320 Speaker 1: needed into the financial system. Yeah, you know, thinking about 875 00:51:44,400 --> 00:51:48,400 Speaker 1: past episodes we've done, one that I would recommend people 876 00:51:48,480 --> 00:51:51,520 Speaker 1: listen to is David Beckworth. We talked to him last 877 00:51:51,560 --> 00:51:55,840 Speaker 1: summer regarding that Mark that Mark Partney speech at Jackson 878 00:51:55,880 --> 00:51:59,080 Speaker 1: Hole last summer. We've got a lot of attention because 879 00:51:59,080 --> 00:52:02,600 Speaker 1: he identified this exact issue, which is that you know, 880 00:52:02,600 --> 00:52:04,640 Speaker 1: we don't have a gold standard anymore, but we do 881 00:52:04,719 --> 00:52:08,160 Speaker 1: have a dollar standard, and essentially that everybody has to 882 00:52:08,640 --> 00:52:11,880 Speaker 1: all around the world. I love I think it was 883 00:52:11,960 --> 00:52:15,920 Speaker 1: as Perry put it, it's like European investors going to 884 00:52:16,120 --> 00:52:20,080 Speaker 1: Brazil for dollar investments, Like that is the world we 885 00:52:20,200 --> 00:52:22,759 Speaker 1: live in, which is that no matter where you are, 886 00:52:23,880 --> 00:52:28,400 Speaker 1: essentially you're scrambling and looking for ways to acquire dollars 887 00:52:28,440 --> 00:52:33,120 Speaker 1: or make money in dollars. And we're really seeing that 888 00:52:33,120 --> 00:52:35,440 Speaker 1: that sort of that need and demand on sort of 889 00:52:35,520 --> 00:52:38,200 Speaker 1: hyper speed over the last few weeks. Yeah. And the 890 00:52:38,239 --> 00:52:40,879 Speaker 1: other one has got to be here and Sumption from 891 00:52:40,920 --> 00:52:44,319 Speaker 1: the Bank for International Settlement. Yeah, he's done so much 892 00:52:44,320 --> 00:52:47,879 Speaker 1: research on this about specifically how a stronger dollar sort 893 00:52:47,880 --> 00:52:50,200 Speaker 1: of feeds into the rest of the world, and that's 894 00:52:50,239 --> 00:52:53,840 Speaker 1: certainly something that we're seeing again at this moment in time. 895 00:52:53,880 --> 00:52:56,960 Speaker 1: But and that would occur. I would encourage anyone if 896 00:52:57,000 --> 00:52:59,920 Speaker 1: you're at home, pull up a chart of the dollar 897 00:53:00,160 --> 00:53:02,239 Speaker 1: over the last three months and just look at the 898 00:53:02,360 --> 00:53:05,120 Speaker 1: straight lineup. It is really one of the most jaw 899 00:53:05,200 --> 00:53:08,759 Speaker 1: dropping charts. The stock market crashy is a jaw dropping chart, 900 00:53:09,200 --> 00:53:11,799 Speaker 1: but the straight line up in the dollar is the 901 00:53:11,880 --> 00:53:17,200 Speaker 1: sort of purest crystallization of this incredible demand for what 902 00:53:17,440 --> 00:53:20,480 Speaker 1: is essentially the sole global currency. Yeah, if you're stuck 903 00:53:20,520 --> 00:53:23,120 Speaker 1: at home, pull up the dollar chart and listen to 904 00:53:23,200 --> 00:53:25,680 Speaker 1: a couple of All Thoughts episodes all about the dollar. 905 00:53:25,960 --> 00:53:29,120 Speaker 1: That's that's a good use of time. I'd say that's 906 00:53:29,160 --> 00:53:32,960 Speaker 1: a good way to pass the quarantine. Yeah, exactly. All right, Well, 907 00:53:33,080 --> 00:53:36,000 Speaker 1: this has been another episode of the All Thoughts podcast. 908 00:53:36,080 --> 00:53:38,600 Speaker 1: I'm Tracy Alloway. You can follow me on Twitter at 909 00:53:38,640 --> 00:53:41,880 Speaker 1: Tracy Alloway. And I'm Joe Wisenthal. You could follow me 910 00:53:42,040 --> 00:53:46,120 Speaker 1: on Twitter at the Stalwart. Zolton isn't on Twitter, but 911 00:53:46,480 --> 00:53:49,120 Speaker 1: Perry is on Twitter, although he doesn't tweet enough, and 912 00:53:49,200 --> 00:53:51,359 Speaker 1: I he tweets a bit. You should follow him on 913 00:53:51,400 --> 00:53:55,240 Speaker 1: Twitter at P Maryland, and of course you should follow 914 00:53:55,239 --> 00:53:59,040 Speaker 1: our producer on Twitter, Laura Carlson. She's at Laura M. Carlson. 915 00:53:59,520 --> 00:54:03,720 Speaker 1: Followed the Bloomberg head of podcast, Francisco Levie at Francesca Today, 916 00:54:04,120 --> 00:54:06,759 Speaker 1: and you can check out all of the Bloomberg podcasts 917 00:54:07,040 --> 00:54:11,200 Speaker 1: on Twitter under the handle at podcasts. Thanks for listening.