WEBVTT - Treasury Secretary Scott Bessent Talks Bonds, Gold and China 0:00:02.520 --> 0:00:07.040 Bloomberg Audio Studios, podcasts, radio news. 0:00:07.880 --> 0:00:11.520 Joining us for conversation live on Bloomberg TV. The seventeen 0:00:11.600 --> 0:00:14.480 ninth Secretary of the Treasury, Scott Besson, Secretary Best and 0:00:14.520 --> 0:00:16.360 it's good to see you, sir, Jonath's good to see 0:00:16.480 --> 0:00:19.880 a warm congratulations from all of us to you. Quite 0:00:19.880 --> 0:00:22.360 an arrival from what was it, Little River, South Carolina. 0:00:22.720 --> 0:00:27.360 Yes, it's an American success story, orly in America. 0:00:27.080 --> 0:00:29.920 To the office of Alexander Hamilinson with some unique experience. 0:00:29.960 --> 0:00:32.199 How is that going to help you, sir, approach some 0:00:32.240 --> 0:00:33.919 of the challenges in this economy. 0:00:34.000 --> 0:00:36.479 Well, Jonathan, the way I look at it, for my career, 0:00:36.520 --> 0:00:40.480 for thirty five years, I've been sitting outside the room 0:00:40.520 --> 0:00:42.920 with my ear up against the door or trying to 0:00:42.920 --> 0:00:45.599 look over the transum, trying to figure out what policy 0:00:45.640 --> 0:00:47.880 makers should do or going to do, and how that 0:00:47.920 --> 0:00:51.160 would affect the markets. Now I'm inside the room trying 0:00:51.200 --> 0:00:54.000 to figure out what everybody outside the room expects us 0:00:54.040 --> 0:00:57.600 to do, how the market's going to react, and what 0:00:57.760 --> 0:01:00.840 the economic and market implications are or short term, but 0:01:00.880 --> 0:01:04.480 more importantly medium term, and how that's going to affect 0:01:04.480 --> 0:01:05.640 the underlying economy. 0:01:05.720 --> 0:01:07.400 We've got a lot to discuss. So let's start with 0:01:07.440 --> 0:01:10.319 the debt market. What people expected you to do, maybe 0:01:10.880 --> 0:01:13.560 was changed some of the issuance for treasury. Something that 0:01:13.600 --> 0:01:17.640 you'd said back last summer about then Secretary Yellen was 0:01:17.640 --> 0:01:21.759 that Yellin had taken control of monetary policy through treasury issuance. 0:01:22.080 --> 0:01:25.320 Then you're basically maintaining her plans. Can you help explain that, 0:01:25.400 --> 0:01:27.360 help us understand where you're coming from. 0:01:27.640 --> 0:01:34.400 Sure, So the previous administration shortened some of the duration, 0:01:34.840 --> 0:01:38.399 and we haven't shortened it further. We've just kept the 0:01:38.440 --> 0:01:43.080 policy in place. And I believe over the medium term 0:01:43.440 --> 0:01:47.920 it's going to play out as it becomes clear that 0:01:48.760 --> 0:01:54.960 everything that President Trump's administration is doing will be disinflationary. 0:01:55.360 --> 0:01:58.040 We're going to bring down energy costs, we're going to 0:01:58.040 --> 0:02:02.840 bring down regulation, what DOSEE is doing in terms of 0:02:02.920 --> 0:02:06.960 cost cutting, and I think once the tax cuts and 0:02:07.040 --> 0:02:12.480 job aacks is made permanent, then you know we can 0:02:12.520 --> 0:02:15.919 have a revenue increase cost decrease. And as you said, 0:02:16.040 --> 0:02:18.120 is the nation's top bond salesman, I got a pretty 0:02:18.120 --> 0:02:18.639 good story. 0:02:18.960 --> 0:02:21.680 So what's the medium term? Help me understand that. What 0:02:21.760 --> 0:02:23.680 is the medium term? And then once you see all 0:02:23.720 --> 0:02:27.040 those things. Let's say those ambitions become reality, then do 0:02:27.080 --> 0:02:28.880 you start to think about term again the debt. 0:02:30.520 --> 0:02:34.520 Sure, but that's a long way off, and we're going 0:02:34.600 --> 0:02:38.040 to see what the market wants. As Lisa noted this 0:02:38.080 --> 0:02:42.040 morning that and it's fun to see someone who believes 0:02:42.080 --> 0:02:47.880 that Fed minutes are exciting that the Fed said that 0:02:48.000 --> 0:02:51.160 they may stop their balance sheet runoff. So you know, 0:02:51.600 --> 0:02:55.520 easier for me to extend duration when I'm not competing 0:02:55.760 --> 0:02:56.959 with another big seller. 0:02:57.200 --> 0:02:59.000 So when do you think that time would be end 0:02:59.040 --> 0:03:02.160 of the year or further down into the administration's term. 0:03:02.639 --> 0:03:04.600 It's going to be. It's going to be path dependent. 0:03:05.280 --> 0:03:09.320 We're still seeing sort of the residual Biden inflation that's 0:03:09.360 --> 0:03:14.560 still coming through. Uh And I think as a the 0:03:14.639 --> 0:03:20.760 market starts to realize what we're doing and inflation starts 0:03:20.800 --> 0:03:24.359 to drop, then we will we will see. So it's 0:03:24.360 --> 0:03:28.760 going to be path dependent. That's the eventual goal. But 0:03:29.040 --> 0:03:30.760 you know, I'm not going to signal it now. 0:03:31.160 --> 0:03:35.200 When you mentioned the Fed minutes, participants indicated yesterday that 0:03:35.680 --> 0:03:37.800 one of the problems they had was they were waiting 0:03:37.840 --> 0:03:40.080 for Trump policies to come into place. 0:03:40.760 --> 0:03:42.680 Do you think that those policies. 0:03:42.720 --> 0:03:46.360 When you think of tariffs, potentially deportations, immigration, this can 0:03:46.400 --> 0:03:48.920 be inflationary. Is it going to hold back the FED 0:03:49.000 --> 0:03:50.480 from cutting rates? 0:03:51.040 --> 0:03:54.480 Well, to the extent the team transitory at the FED 0:03:54.560 --> 0:04:00.560 is still they has any credibility. I would say that tariffs, 0:04:00.640 --> 0:04:05.000 if they have any price adjustments, are the most transitory 0:04:05.040 --> 0:04:07.480 thing there are, So I don't think that should hold 0:04:07.520 --> 0:04:10.400 them back very long. And I would point out that, 0:04:10.520 --> 0:04:12.800 depending on what number you want to use, ten twenty 0:04:12.880 --> 0:04:16.000 million people who came across the border, we had the 0:04:16.000 --> 0:04:18.440 worst inflation of forty years when we added ten or 0:04:18.440 --> 0:04:20.760 twenty million people. So I'm not sure why people are 0:04:21.440 --> 0:04:24.320 saying that it's inflationary to tell them to go home. 0:04:24.600 --> 0:04:26.400 So when you look at team transitory, do you think 0:04:26.440 --> 0:04:30.160 the next move for them would be a cut emory? 0:04:30.360 --> 0:04:34.120 I have said publicly that I will talk about what 0:04:34.160 --> 0:04:37.680 the FED has done. When I was a market commentator 0:04:38.040 --> 0:04:40.760 and investor, I would talk about what they should do. 0:04:41.600 --> 0:04:44.960 Now I will leave it to them, and sure Powell 0:04:45.040 --> 0:04:48.719 and I have a weekly breakfast. We saw each other 0:04:48.880 --> 0:04:51.560 yesterday and I will convey my thoughts there. 0:04:51.800 --> 0:04:53.480 Well, let's talk about what they have done. We can 0:04:53.480 --> 0:04:55.640 comment on that you said you're willing to They cut 0:04:55.680 --> 0:04:58.160 rights one hundred basis points going into the end of 0:04:58.320 --> 0:05:00.599 last year, and I don't think happened yield to the 0:05:00.600 --> 0:05:01.240 long end rows. 0:05:01.279 --> 0:05:02.200 They didn't decline. 0:05:02.440 --> 0:05:05.280 Do you think Feller reserve easing contributed to high long 0:05:05.360 --> 0:05:05.880 end yields? 0:05:06.000 --> 0:05:07.960 Well, Jonathan, I would just say the point of cutting 0:05:08.000 --> 0:05:10.840 rates is to cut rates. So if they cut rates 0:05:10.839 --> 0:05:15.800 and rates went up, then there probably was something there. 0:05:17.400 --> 0:05:20.080 I thought that the rate cut in September, I said 0:05:20.080 --> 0:05:23.800 it maybe even on your show here, that it was oversized. 0:05:24.640 --> 0:05:27.520 The market responded, But now we're seeing term premium come 0:05:27.560 --> 0:05:31.200 back down, so we'll see what happens from here. 0:05:31.400 --> 0:05:33.839 Do you think the current rate right now is enough 0:05:34.240 --> 0:05:37.040 to bring down ten year yields over time just by 0:05:37.120 --> 0:05:39.000 virtue of being restrictive? 0:05:39.440 --> 0:05:41.680 Again, I'm not going to comment on current policies. 0:05:41.800 --> 0:05:43.680 I am curious you talk about how you do look 0:05:43.680 --> 0:05:45.240 at the ten year yield every single day. 0:05:45.600 --> 0:05:46.120 I love that. 0:05:46.480 --> 0:05:48.240 I love that you're the top bond salesman in the 0:05:48.320 --> 0:05:51.400 United States, and I'm wondering, are you expecting it or 0:05:51.440 --> 0:05:54.480 hoping it to go down from here? Is that necessary 0:05:54.520 --> 0:05:57.040 to reach to achieve your three percent growth target? 0:05:57.320 --> 0:06:01.520 Well, what's necessary are they underlying conditions? So the underlying 0:06:01.520 --> 0:06:04.719 conditions that we need for yous to come down for 0:06:04.839 --> 0:06:08.520 growth to go back up. We've got this affordability crisis 0:06:08.560 --> 0:06:13.640 in housing, We've got an affordability crisis in the auto payments. 0:06:13.839 --> 0:06:17.320 So one thing that would be very stimuative. And as 0:06:17.400 --> 0:06:20.880 Jonathan mentioned earlier, the tenures come down. Our rates have 0:06:20.960 --> 0:06:24.080 come down every week since Donald Trump's been president. So 0:06:24.560 --> 0:06:26.920 if we can continue that for fifty two weeks, that'd 0:06:26.920 --> 0:06:30.960 be great, and it'd be very it would be a 0:06:31.400 --> 0:06:34.320 win for the American people, which at the end of 0:06:34.320 --> 0:06:38.200 the day, that is our goal. So if we do 0:06:38.320 --> 0:06:40.440 what we say we're going to do, if we can 0:06:40.760 --> 0:06:44.640 rein in the budget deficit, if we have non inflationary growth, 0:06:44.640 --> 0:06:49.440 if we bring down energy prices, and I think now 0:06:49.480 --> 0:06:52.159 that I have the numbers on the inside, there was 0:06:52.560 --> 0:06:58.280 a big contributor to this massive inflation was a regulation. 0:06:59.000 --> 0:07:04.000 I think you said earlier this morning that the what 0:07:04.200 --> 0:07:08.120 if these things cause inflation? You know some aszam Marie 0:07:08.240 --> 0:07:11.000 just said, some of the policies, Well, what really happened 0:07:11.080 --> 0:07:14.800 under the previous administration was you created a demand shock 0:07:15.440 --> 0:07:19.800 with government spending, but it was met by supply constraints 0:07:19.920 --> 0:07:23.080 as there was more regulation and Trump one point zero 0:07:23.120 --> 0:07:26.880 we created demand shock with tax cuts and it was 0:07:26.960 --> 0:07:30.200 met by a supply side response of less regulation. So 0:07:30.600 --> 0:07:35.160 you know, the Biden administration created this inflation that a 0:07:35.240 --> 0:07:40.120 demand shock and constraining supply is the ultimate recipe for inflation. 0:07:40.320 --> 0:07:43.200 So and now you want to count spending the DOGE program, 0:07:43.240 --> 0:07:44.640 let's talk about it. You've called it one of the 0:07:44.680 --> 0:07:47.680 most important audits to government ever. You remember the Clinton 0:07:47.720 --> 0:07:51.240 tried something similar, the National Partnership for Reinventing Government. How 0:07:51.280 --> 0:07:53.760 different will this be and what kind of cost savings 0:07:53.800 --> 0:07:54.880 are even the team thinking about? 0:07:55.000 --> 0:07:56.960 Yeah, and John, I can go all the way back 0:07:57.400 --> 0:08:00.440 the given my tenure in the business, and go all 0:08:00.480 --> 0:08:02.680 the way back to the eighties to the Grace Commission, 0:08:03.000 --> 0:08:06.680 and they had some great the ideas, most of them 0:08:06.720 --> 0:08:11.280 not implemented. I think that the Clinton Gore initiative, I 0:08:11.280 --> 0:08:14.640 think a lot of that was academics. So this is 0:08:15.040 --> 0:08:20.200 people on the ground all areas of government, and it's 0:08:20.240 --> 0:08:23.680 moving quickly. And I really do think it's unfortunate that 0:08:23.760 --> 0:08:28.440 it's been lampooned and they attack the way it has. 0:08:28.800 --> 0:08:32.160 But when it's being attacked like this. It tells me 0:08:32.200 --> 0:08:35.240 that there are a lot of entrenched interest in terms. 0:08:35.800 --> 0:08:39.160 When you're moving people's cheese, they don't like it, and 0:08:39.200 --> 0:08:41.560 it's not their cheese, it's the American people's cheese. 0:08:41.600 --> 0:08:43.640 Well, how about putting some of that cheese back into 0:08:43.640 --> 0:08:47.079 American people's pockets. How inflationary would those five thousand dollars 0:08:47.080 --> 0:08:50.360 potential DOGE checks be that the President spoke about yesterday. 0:08:50.480 --> 0:08:53.920 Well, I think again that if we are bringing down 0:08:54.080 --> 0:09:00.640 energy prices, if we are cutting the regulation and so 0:09:01.280 --> 0:09:05.839 I think that it's a to quote the Vice President 0:09:05.920 --> 0:09:09.160 during the campaign, I think it's holistic, and I think 0:09:09.240 --> 0:09:15.079 that it's all kind of one mosaic. If you were 0:09:15.120 --> 0:09:18.840 to inject a lot of money into the economy, because Emery, 0:09:18.920 --> 0:09:24.600 think about this, that we are at this massive deficit 0:09:24.720 --> 0:09:28.160 to GDP six point seven almost seven percent, So what 0:09:28.200 --> 0:09:31.200 will be happening on one side, You'll be bringing down 0:09:31.480 --> 0:09:36.400 that spending in the economy. So very easy mental model 0:09:36.920 --> 0:09:41.280 is every three hundred billion is about one percent of GDP. 0:09:41.960 --> 0:09:45.760 So every three hundred billion that DOGE is able to save, 0:09:46.360 --> 0:09:49.479 could you put that back in the economy into people's pockets. 0:09:49.800 --> 0:09:52.400 One thing potentially that could happen, and people are questioning 0:09:52.440 --> 0:09:56.520 it is maybe remarking gold. Elon Musk, who's leading DOGE, 0:09:56.800 --> 0:10:00.400 was talking about maybe going to Fort Knox make sure 0:10:00.400 --> 0:10:02.880 those gold reserves are there. That comes under your purview. 0:10:02.880 --> 0:10:04.760 Do you have any plans to visit Kentucky? 0:10:05.800 --> 0:10:07.520 I don't have any plans. I can tell you that 0:10:08.480 --> 0:10:11.160 we do an audit every year. I can tell the 0:10:11.200 --> 0:10:16.480 American people on camera right now that there was a 0:10:16.520 --> 0:10:20.400 report September thirtieth, twenty twenty four. All the gold is there. 0:10:20.679 --> 0:10:23.320 Any US senator who wants to come and visit it 0:10:23.600 --> 0:10:25.720 can arrange a visit through our office. 0:10:25.800 --> 0:10:28.120 Gold was your biggest holding when you were a hedge 0:10:28.120 --> 0:10:31.400 fund manager before you divested to become the Treasury secretary. 0:10:31.440 --> 0:10:33.240 So you know the value of where gold is right 0:10:33.240 --> 0:10:35.560 now versus where it's marked on its balance sheet just 0:10:35.640 --> 0:10:38.760 north of forty dollars an ounce it's close to three thousand. 0:10:39.400 --> 0:10:42.800 Is it under consideration for this administration to revalue gold? 0:10:43.240 --> 0:10:45.719 I think that somehow when we were telling about the 0:10:45.760 --> 0:10:49.280 Sovereign Wealth Fund and I said monetize the balance sheet, 0:10:49.400 --> 0:10:51.679 I can promise you that's not what I had in mind. 0:10:51.840 --> 0:10:53.840 So it's not under consideration, not on the table. 0:10:54.040 --> 0:10:55.160 That's not what I had of mine. 0:10:55.840 --> 0:10:57.600 When you look at the DOGE savings that you have 0:10:57.720 --> 0:10:59.560 so far, how much is that going to go to 0:10:59.600 --> 0:11:03.600 offset some of the tax extensions that we see. What 0:11:03.720 --> 0:11:06.760 other savings are you looking at that potentially are crucial? 0:11:07.120 --> 0:11:13.360 Well, again, they're just getting started. And one of the 0:11:13.360 --> 0:11:16.800 shocking things to me has been when we talk about waste, 0:11:16.800 --> 0:11:20.640 fraud and abuse, we all think of what comes out 0:11:20.679 --> 0:11:23.080 of d C. We think of some waste and fraud 0:11:23.120 --> 0:11:26.199 and friction costs. Because one way to think about this 0:11:26.280 --> 0:11:29.720 is twenty five percent of the US economy flows through 0:11:29.880 --> 0:11:33.800 Washington d C. So if we can cut the friction 0:11:33.960 --> 0:11:39.000 on that, that's a lot of savings. What we are 0:11:39.000 --> 0:11:42.720 discovering now in waste fraud and abuse, there may be 0:11:43.000 --> 0:11:44.959 much more fraud going on than we thought. And I 0:11:45.000 --> 0:11:46.920 think you're going to be hearing about that over the 0:11:46.960 --> 0:11:47.400 coming week. 0:11:47.480 --> 0:11:48.400 Can we hear about it now? 0:11:49.000 --> 0:11:50.840 I think you're gonna hear about it on the coming weeks. 0:11:50.960 --> 0:11:52.640 What kind of fraud are you thinking about? What kind 0:11:52.640 --> 0:11:53.800 of fraud have you identified? 0:11:55.120 --> 0:12:00.520 Again, i'd refer you to so now out of you, 0:12:01.080 --> 0:12:03.959 I'd refer you to some of the statements by Lee 0:12:04.040 --> 0:12:05.120 Zelden at the EPA. 0:12:05.600 --> 0:12:07.720 Okay, well, we can build on that in the weeks 0:12:07.760 --> 0:12:09.960 to come. I can refer to you some comments from 0:12:10.080 --> 0:12:12.040 the Washington Post on defense cuts. 0:12:12.400 --> 0:12:13.280 They're reporting that Pt. 0:12:13.360 --> 0:12:16.080 Hexseth, the Defense Secretary or the senior leaders of the 0:12:16.080 --> 0:12:18.760 Pentagon and throughout the US military to develop plans for 0:12:18.800 --> 0:12:20.800 cutting eight percent from the defense budget in each of 0:12:20.840 --> 0:12:21.760 the next five years. 0:12:21.840 --> 0:12:22.680 You're aware of that plan. 0:12:23.800 --> 0:12:29.120 I'm in contact with Secretary Hegesits, and we're working very closely. 0:12:29.600 --> 0:12:32.559 And again, I'm not going to jump the gun here 0:12:32.720 --> 0:12:37.719 on TV, but I think everything's on the table and 0:12:37.920 --> 0:12:41.000 can things work more efficiently. 0:12:40.920 --> 0:12:42.439 When it comes to the defense budget. 0:12:42.480 --> 0:12:45.920 We've spent more last year on our interest payments than defense. 0:12:46.480 --> 0:12:48.840 So are you hoping for twenty twenty five to spend 0:12:49.720 --> 0:12:51.840 more on defense than the interest payments? 0:12:52.760 --> 0:12:55.480 Well, it would depend how we got there too. That 0:12:56.400 --> 0:13:00.680 does defense spending go down, does the interest go down? 0:13:01.200 --> 0:13:02.680 We'll see what that calculus is. 0:13:02.720 --> 0:13:05.280 I've got to focus on tariffs too. Revenue raising is 0:13:05.360 --> 0:13:09.200 part of that story. Reciprocity, national security. You want fair trade, 0:13:09.240 --> 0:13:11.520 but that we all want fair trade. The President has 0:13:11.520 --> 0:13:14.880 discussed reciprocal tariffs. He's mentioned the Europeans also offered to 0:13:15.000 --> 0:13:17.640 drop auto tariffs. Could we start there. Have the Europeans 0:13:17.640 --> 0:13:19.840 actually made that offer? Can you confirm that. 0:13:20.520 --> 0:13:26.520 I haven't seen that, but possible. I think that good 0:13:26.520 --> 0:13:30.480 thing about President Trump's negotiating style is people put things 0:13:30.600 --> 0:13:34.160 that were not on the table before on the table 0:13:34.360 --> 0:13:35.400 very quickly. 0:13:35.760 --> 0:13:39.320 So that would be reciprocity and maybe negotiating. But to 0:13:39.440 --> 0:13:42.679 offset the tax cuts, where's the revenue raising. 0:13:43.160 --> 0:13:48.280 So there could be Not everyone is going to give 0:13:48.320 --> 0:13:55.400 on every point, right, So the Europeans seemingly put forward 0:13:55.480 --> 0:14:00.680 very quickly auto terrorists, but not every country is going 0:14:00.760 --> 0:14:04.439 to do that. My view, as I've said before, China 0:14:04.520 --> 0:14:07.199 is the most imbalanced, unbalanced economy in the history of 0:14:07.200 --> 0:14:10.680 the world, and they are trying to export their way 0:14:10.800 --> 0:14:15.720 out of what is a very serious recession, and the 0:14:15.760 --> 0:14:17.959 rest of the world can't do that. They can't dump 0:14:18.120 --> 0:14:21.200 Chinese goods. They're going to have to rebalance their economy. 0:14:21.400 --> 0:14:25.880 So tariffs on Chinese goods went up ten percent, and 0:14:26.000 --> 0:14:30.560 a lot of that again Mexico, Canada, China. That was 0:14:30.600 --> 0:14:32.600 in response to the fentanyl crisis. 0:14:33.120 --> 0:14:35.720 China is the only one though that those terriffs have 0:14:35.840 --> 0:14:37.320 actually stayed in place. 0:14:37.440 --> 0:14:38.560 Is that the opening salvo? 0:14:38.960 --> 0:14:40.520 How high do you think Trump wants to go when 0:14:40.520 --> 0:14:42.560 it comes to Chinese terraffs Well, I'm. 0:14:42.400 --> 0:14:44.600 Not going to give away as negotiating hand on TV. 0:14:45.560 --> 0:14:48.560 I do have my first call with my Chinese counterpart 0:14:48.600 --> 0:14:51.640 tomorrow morning, so I look forward to a very productive discussion. 0:14:51.800 --> 0:14:53.240 What's the first point you want to bring up? 0:14:54.760 --> 0:14:59.040 That we want to work together? And as we said, 0:15:00.040 --> 0:15:04.040 a lot of the precursor ingredients from finanol originate in China, 0:15:04.520 --> 0:15:06.680 so we really want to put a stop to that 0:15:06.880 --> 0:15:07.520 very quickly. 0:15:07.800 --> 0:15:10.560 Historically, there's been some currency concerns with regards to China 0:15:10.600 --> 0:15:13.120 as well. In the conversations we had you before taking 0:15:13.160 --> 0:15:15.880 up this post with you, you mentioned that some countries, 0:15:16.040 --> 0:15:18.080 some currencies are undervalued. 0:15:18.480 --> 0:15:20.200 Is China one of them? Is that something you'd like 0:15:20.240 --> 0:15:20.720 to remedy? 0:15:21.280 --> 0:15:26.120 Yeah, well, Jonathan, what I've said is, make no mistake, 0:15:26.200 --> 0:15:29.360 the US still has a strong dollar policy, but that 0:15:29.400 --> 0:15:33.920 does not mean that bilaterally other countries can weaken their 0:15:33.960 --> 0:15:38.800 currencies versus the dollar or manipulate their currencies. But specifically 0:15:38.840 --> 0:15:42.120 on China, China is a very difficult currency to value 0:15:42.320 --> 0:15:45.080 because I really think that when we think about the 0:15:45.520 --> 0:15:48.359 value of the R and B, it's in three different equilibrium. 0:15:48.960 --> 0:15:54.600 On any academic model, say purchasing power parity, it's cheap. 0:15:55.000 --> 0:15:57.320 On the other side, you have one point four billion 0:15:57.360 --> 0:16:00.600 people who are subject to capital can controls and they 0:16:00.600 --> 0:16:02.520 want to get some of their money out of the country. 0:16:02.920 --> 0:16:05.520 And then you have what I would call the X factor. 0:16:06.000 --> 0:16:10.200 If you put money into China today, what's your belief 0:16:10.760 --> 0:16:14.040 that you will get it out in two, three, four years. 0:16:14.120 --> 0:16:18.120 So it's very difficult to come up with a point 0:16:18.280 --> 0:16:19.640 value of the currency. 0:16:19.800 --> 0:16:22.000 You've talked about the desire to have a strong dollar 0:16:22.000 --> 0:16:25.000 policy for the United States, But is a strong dollar 0:16:25.040 --> 0:16:27.760 at odds with the idea of bringing industrial production back 0:16:27.800 --> 0:16:29.920 to the United States and sort of speaks to some 0:16:29.960 --> 0:16:34.760 of the concerns about other countries trying to devalue their currencies. 0:16:34.800 --> 0:16:39.800 Well, I think that we will necessarily have a strong 0:16:39.880 --> 0:16:42.360 dollar if we run good policies, and I think we're 0:16:42.360 --> 0:16:47.280 going to run good policies if we if we cut 0:16:47.280 --> 0:16:51.080 the trade deficits. When you think about the trade deficit 0:16:51.280 --> 0:16:55.480 is a combination of terms of trade value, the dollar, 0:16:55.960 --> 0:16:59.400 and our own budget deficits. So if we bring down 0:16:59.600 --> 0:17:06.439 the budget deficit, then I think everyone if we are deregulating, 0:17:06.560 --> 0:17:10.120 if we make the tax cuts permanent, if we make 0:17:10.160 --> 0:17:16.240 the US more bent business friendly, then everyone, all the 0:17:16.280 --> 0:17:19.080 reserve managers in the world, all the private investors are 0:17:19.080 --> 0:17:21.480 going to want a piece of that, and the dollar 0:17:21.560 --> 0:17:25.920 will be strong. But we will be able to push 0:17:26.040 --> 0:17:33.000 back on that through good policies, through productivity, the US productivity. 0:17:33.560 --> 0:17:36.080 I think that I've been meeting with a lot of 0:17:36.119 --> 0:17:39.760 the tech leaders lately, and I think we are very 0:17:39.800 --> 0:17:43.760 close to the cusp of this AI finally coming into 0:17:43.800 --> 0:17:46.000 the productivity numbers. Do you think that a. 0:17:45.960 --> 0:17:49.240 Strong dollar is necessary in order to offset some of 0:17:49.280 --> 0:17:52.600 the costs that could be otherwise associated with the tariffs. 0:17:54.280 --> 0:17:58.480 Traditional economic theory would tell you that the dollar strengthens 0:17:58.560 --> 0:18:02.520 on the tariffs. Who knows what we've already seen since 0:18:02.640 --> 0:18:07.280 the dollar appreciation since November. Fit markets live in the future, 0:18:07.560 --> 0:18:10.960 so have we already priced in some of that? And 0:18:11.280 --> 0:18:13.720 on the other side, what we are trying to do 0:18:14.280 --> 0:18:21.000 is to get other economies to successfully rebalance. My conversation 0:18:21.280 --> 0:18:27.480 tomorrow with my and this is really just an introductory conversation, 0:18:27.680 --> 0:18:30.479 but as we go down the road, the Chinese need 0:18:30.560 --> 0:18:34.680 to rebalance their economy in favor of consumption, that they 0:18:34.680 --> 0:18:39.119 are suppressing the consumer in favor of the business community. 0:18:39.480 --> 0:18:44.440 So as that happens, then they will increase their demand. 0:18:44.520 --> 0:18:47.720 Same thing in Europe, you know Mario Drogy For any 0:18:47.760 --> 0:18:50.119 of your viewers who didn't see it, Mario Drogy had 0:18:50.119 --> 0:18:54.680 a fantastic editorial this weekend in the Financial Times where 0:18:54.680 --> 0:18:58.480 he said, look, we have put the equivalent of more 0:18:58.560 --> 0:19:01.920 terrorists on ourselves or terraces on ourselves then the US 0:19:02.000 --> 0:19:06.320 could ever contemplate. So could you get a very strong 0:19:06.400 --> 0:19:11.320 euro Somehow they had an immaculate deregulation just quickly. 0:19:11.400 --> 0:19:13.520 You're having this call with your Chinese counterpart. Will you 0:19:13.560 --> 0:19:16.359 see him next week at the G twenty Finance Minister's meeting. 0:19:17.000 --> 0:19:20.880 I'm not going to Cape Town due to some domestic considerations. 0:19:21.440 --> 0:19:24.960 I actually think that he's not attending either. 0:19:26.080 --> 0:19:27.840 So is that what he's told you? 0:19:29.840 --> 0:19:32.119 This is the readout that we've gotten. 0:19:32.400 --> 0:19:32.760 Okay? 0:19:32.840 --> 0:19:38.440 So and again I also believe several of my other 0:19:38.520 --> 0:19:43.200 counterparts won't be there. I have been speaking in contact 0:19:43.240 --> 0:19:46.840 with them regularly, and then I will be seeing them 0:19:46.960 --> 0:19:49.800 at the spring IMF World Bank meetings in DC. 0:19:50.040 --> 0:19:52.200 I wanted to talk to you about national security as well, 0:19:52.520 --> 0:19:54.120 and the dollar has certainly got a role to plan 0:19:54.160 --> 0:19:56.960 on that. From the sanctions policy of the United States 0:19:57.320 --> 0:19:59.480 as we look back, do you think that's been misused? 0:20:01.160 --> 0:20:06.320 Excellent question, Jonathan that when I came into Treasury, if 0:20:06.320 --> 0:20:12.080 you think about sort of treasury is five pieces. There's 0:20:12.320 --> 0:20:14.639 irs on one side, the men on the other. But 0:20:15.600 --> 0:20:18.800 the main focus of in the building at Treasury is 0:20:18.920 --> 0:20:22.520 domestic finance, international finance. That's what I've been doing for 0:20:22.640 --> 0:20:25.199 my career for thirty five years. I was able to 0:20:25.240 --> 0:20:29.280 hit the ground running on that. The what we call 0:20:29.400 --> 0:20:34.159 TFI terrorism finance is where my biggest learning curve is. 0:20:34.240 --> 0:20:36.520 So I'm spending a lot of time on that, and 0:20:36.680 --> 0:20:39.720 I'm reviewing the sanctions policies. Why do we do what 0:20:39.760 --> 0:20:42.960 we do? Have they been effective? Are we running a 0:20:43.119 --> 0:20:48.080 twenty first century program as opposed to some outdated modalities? 0:20:48.119 --> 0:20:50.240 Well, the current sanctions are in place, and places like 0:20:50.320 --> 0:20:53.199 Russia to try to get Puttin to negotiating table. You 0:20:53.320 --> 0:20:56.240 are intricately involved in these in this deal. You were 0:20:56.400 --> 0:20:59.480 just in Kiev. You met with President Zelenski. Trump yesterday 0:20:59.480 --> 0:21:02.720 called zelen Is he a dictator without these elections and 0:21:02.760 --> 0:21:04.880 said that he better move fast or he's not going 0:21:04.920 --> 0:21:07.879 to have a country left. Does this language make it 0:21:07.960 --> 0:21:10.520 harder for you to get that minerals deal over the 0:21:10.520 --> 0:21:11.280 finish line? 0:21:11.359 --> 0:21:17.920 Well, look, I think President Vilensky unfortunately escalated and has 0:21:17.960 --> 0:21:22.800 put some daylight between the escalating that a lot of 0:21:22.800 --> 0:21:28.360 his remarks in Munich I thought were inappropriate. President Zelenski, 0:21:28.400 --> 0:21:31.199 when I met with him, assured me that he'd be 0:21:31.920 --> 0:21:35.240 the signing the minerals deal in Munich. He has not. 0:21:36.800 --> 0:21:40.160 And look, the real purpose here, and I think it's 0:21:40.640 --> 0:21:45.439 turned into this media circus that President Trump had a 0:21:45.600 --> 0:21:49.960 very elegant plan, and it was bring the Ukrainians closer 0:21:50.000 --> 0:21:53.800 to the US. Let's do this economic deal. And the 0:21:54.160 --> 0:21:57.520 even Carl Rove in the Wall Street Journal this morning 0:21:57.560 --> 0:22:02.399 approves of it that the US US with greater economic 0:22:02.480 --> 0:22:07.120 interest in Ukraine, provides a security shield. So the sequencing 0:22:07.280 --> 0:22:11.000 of what was going to happen was bring the Ukrainians 0:22:11.080 --> 0:22:15.160 closer to the US through economic ties, convince the American 0:22:15.160 --> 0:22:18.800 people and the American public, get them onside, and then 0:22:20.040 --> 0:22:24.160 tell the Russians go to the negotiating table with a 0:22:24.359 --> 0:22:27.920 very fulsome message that if we need to, we will 0:22:27.960 --> 0:22:28.960 take sanctions up. 0:22:29.280 --> 0:22:32.679 Well, what about tapping the Russian frozen assets and three 0:22:32.760 --> 0:22:35.760 hundred billion dollars? Would you force your European counterparts to 0:22:35.800 --> 0:22:38.840 not just have them frozen, but actually tap them. Trump 0:22:38.880 --> 0:22:42.159 talks about repaying the American taxpayer. Shouldn't Russia be a 0:22:42.200 --> 0:22:42.560 part of that. 0:22:42.920 --> 0:22:46.360 Well, what's happening now is they are being tapped. So 0:22:46.720 --> 0:22:52.920 the returns from interest, the returns from the freezed asset pile, 0:22:53.920 --> 0:22:56.439 is going to pay the Europeans. You know, what's very 0:22:56.440 --> 0:22:59.960