Odd Lots Live: What to Watch on Election Night and Beyond
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M. We're in the middle of a truly wild presidential race pitting a democrat who wasn't on the ballot until this summer against the republican who is convicted on thirty four file counts. But the wildest thing might be this guy, if you already believe in the constitution, you're just signing something already believe, and you can want a million dollars.

awesome. I max chaffin. And this is citizen iron three part series from ironic, where we investigate iron mosques on precedented support for Donald trump while you on ink, on apple podcast or whatever .

you like to listen blomberg audio studios, podcasts, radio news.

Hello, and welcome to another episode of the adults podcast.

I'm Tracy l way and I wasn't joe.

This is very special. This is actually this must be our fastest turnaround time on an episode ever.

Well, IT is election day. Yes, I think we had a technically a fester turn around day on the day of the .

bottom of of bridge collapsed OK fine. But this was like four hours of content that we are squeezing, a very timely episode. So what you are about to hear is a live recording of the allots podcast, multiple panels, multiple conversations that took place on november forth at a recording in front of a live audience in new .

york that so today is election day. Last night, with election eve, we figured to budget people, if they have preferences in this election, were very anxious looking for something to do other than just sort of refresh the internet and refresh twitter all night. So you are why not get some of our favorite guests over the years from the podcast and get our friend who we always love, uh, seeing our listeners and hang out and talk politics and policy for a little.

What Better way to spend election day than listening to, uh, some live recordings of the office ts podcast? So what you are about to hear is a selection of the conversations. We had some amazing guess.

So we started with zoie luu. SHE is, of course, a senior fellow for china studies at the council on foreign tions, and we had heard with Jordan snyder of the china talk podcast. We've spoken to both of them before, but we had a great conversation about what's going on in china right now and what could possibly happen with U. S.

China trade, right, and then where this particular episode will pick up. Then we had a conversation with neural data of renesas macro research sunda ammon's, executive director at employ america. And we had a special guest that we kind of have to explain here for a second because otherwise some of the conversation might not make any sense.

We had v mosh vez, and he is a prediction markets Better. He's a writer. He's a legendary designer of magic the gathering decks.

He's an advisor to Polly market. He used to be a gene street trader. We're gonna to have a on some time. Tracy, just totally separate.

He was great. I just want to talk to him about .

construction and in street. Let's do .

like episode. okay? In addition to all those things, set up a betting pool on manifold, for which podcast he would actually appear on in twenty twenty four. And one of those options was up.

right? He set IT up at the beginning of the year. And so there's all different possibilities which podcast will be appear on. And just again, to sort of set the stage, we never announced that this view is going to be part of. This is our mystery guys, is our mystery guess. But we flash the market onto the screen behind us while we are, at a caveat, the a place where we recorded the episode. And then during the conversation, we watched as the market slowly replaced very the up and down .

IT was very strange.

My belief in efficient market has been pleasantly IT.

This is actually really interesting. There is someone in the audience who was using free manifold tokens to bring the probability down. Even sv was actually on stage. So a live experiment in how prediction markets work.

how they actually, right. Actually, one of the things you'll is we talked a lot about one of the constraints and prediction markets being a capital constraints among traders. So here's A Y who apparently had no capital constrained because he had free token.

And you see how much that destroy is that. So we started off that conversation to about all things markets find what to walk. And our headliner .

of the evening was brave tsr, he of a senior fellow at the council on foreign relations, one of our favorite guests we've had him on.

I can't even .

remember how many times. Yes, he was also a trade advisor to U. S. T, R. Entire under the by administration.

So someone who definitely knows what's up when IT comes to, I guess, the sausage making of trade policy. So a fantastic group. A great evening. Big thanks to everyone who came. And if you weren't able to make IT in person, we hope you enjoy this version right?

So start off, uh, check out our first our conversation with sanda, neil S. V. We have some great guests coming up now .

is your chance to make money.

get on manifold. Have one of the people i'm not going to say who he is, but one of the people that we will be having on the show is an avid prediction markets trader expert in this area. And i'm not GTA say who he is.

but it's a mystery.

Truly guest. So let's bring uh to the stage in no particular order. We have a neel data of rena's mro research, frequent od lives guess.

And we have sona ammons of employ america, another frequent odysseus. And we have this V M. chavez. He is a writer trader into prediction markets in the staff.

And currently on manifold markets, there's a twenty percent chance that he appears on odd lots in there are twenty twenty four. So do a little test of prediction markets or sorry, efficient markets right here live on stage. So thank you so much.

He's ready to insider trick. He hasn't ter traded on his own market yet, but it's just sitting there. We will see the odds move. We'll see if the old .

they should be at a hundred percent.

So I guess prediction markets are debunked. If they don't immediately move to one hundred percent, actually view less. Start with you when you look at any prediction markets and .

you the polk .

trader predict y there IT is IT moved up to forty four percent and it's still not high enough .

like it's .

still really this is literally on the stage right now.

Like how do you know the bed? Yes, but you know that .

you should take IT farther? Yeah it's up to four. Okay, whatever. Maybe if someone oh.

there is go someone tweet .

this out, there's still fourteen percent uh, gains to be made, the I R, fourteen percent in like thirty seconds and club. Anyway, when we see these odds, not for this market, apparently, but when we see this Polly market and calls, I odds that they say whatever, how seriously should we take them?

I take them at least seriously as any other data point or source of information that we have available. They are the best thing we have .

up to ninety four percent. There is still a chance that you're not appearing ing on this stage right now.

Yeah why do there the best thing we have? Like please explain in the context of this still being stuck at ninety four percent?

Well, if you're are on the internet, what other sorts do you have other than the actual broadcast? Like obviously, if you're looking at the not just the polls but like the actual baLance and you're like, oh, I guess we know who on then that's Better than a prediction market.

But anything short of that, that we have is going to be incorporated into the prediction market, right? So like the polls, the aggregations, the projections, all of that gets worked into how we trade the prediction markets. So for the prediction markets to be wrong, there has to be a systematic mistake, and those mistakes do to happen. And you can infect profit from them. But IT had not to .

be very large new. What about real markets? And you know you're always watching what's have what I said, real markets ah the ticker D J T H, what's happening in rates, maybe regional banks. What are you like seeing over the last few days? Or what are you going to be sort of watching in terms of the real markets and how they trade?

Well, I I mean, my work suggests that the sort of trump trade, particularly with respect to fixed income markets, wasn't so much trump. I mean, as IT was just stronger economic news. I mean, you have to remember that the increasing probability, at least up until recently, that you know trump would um you sweep into the White house that was so exciting at the time of you know meaningful data surprises to the upside.

We had a strong jobs number, stronger retail cells. Jobless claims have been low. So I think it's less about politics and a lot more ah just about the data as it's been coming out. I mean, in terms of what i'm going to be watching in particular, my sense is that people will just replay the twenty sixteen playbook if if that's what happens and if you get the alternative, in which case I think it's likely that you know a vice president, Harris wins, you probably get a republican center. You probably see you know oralia fixed income sanda.

What are you watching? Because with polls. So at obviously, there's a lot of people have strong opinions about the usefulness of polls. I kind of think lake, who is answering the phone anymore if someone an an identified number is calling them IT feels like there's a bias to towards a certain demographic that's actually picking up the phone. But what are you watching?

Yeah I mean, I think there's a clear limit on what polls are going to tell you be on a certain point. I think that itself this kind of tells you it's close. It's probably fifty fifty.

Your ability to the design fifty fifty or sixty forty is pretty limited, even like you could make a case for sixty forty for either side. But beyond this, like we don't have a lot of information that pulls tell us polls are scammers. Now what do you mean by that? There are some establishments that seem a little less scrupulous that do a good job of gaming the rating systems.

So I guess like to give the finance, energy. I so passive is active, like the idea, just like, okay, just trust the aggregation more so than individual polls. But now we have like a weird set of partisan or quasi partisan pollsters have come in less transparently methodologies.

And the attempts to make process to Better understand who's Better, who's worse, is not great. So we actually have like aggregates that I don't pay as much attention to relative to do just like, okay, there's a good poll from republican installation or democratic installation. There are some good ones on other side that's got more information in IT, but even then, it's like very limited as a ceiling.

I mean, i'd be more curious to see about the geographic distortion. So obviously, swinging states come out seven P M onwards. We get some early states report early but are read.

So you seeing the this geographic dirigo tions can be kind of interesting because that's actually the polarizing thing I see, which is urban like urban versus more democratic, trending suburban versus rural. And it's like ultimately about the margins and how those shift relatives are twenty. That's like still not really clear about how many new trump photos can come out of the would work.

There were a lot in. And how much will a lot of those suburbs swing further to the left? Yeah, these are all kind of open questions. I don't think we have great ways of benchmarking probability be on a certain point.

Zv and sca maybe um can you explain the hurting controversy? I've been seeing a lot of tweet like a polestar are hurting and what's that and then and I don't how do you heard exactly like what is that all about like so doing?

So the idea is if you have a poll and you come with the same result, and every other pollster, everyone is saying Harris post one or trump post one, you come out of Harris post one or trump post one or zero, then no matter what happens in the election, this is not your fault, right? You didn't grow up. But if you were to say how us post for and then trump wins that state, then suddenly everyone looks at you and goes, you're terrible.

Your career is is over your and nadia and to us or extend if it's trumps for. So what a lot of these politicians very clearly doing ratisbon analysis of the polls is they are cooking their books, putting their fingers on the scale to make sure that their number comes back very close to what everyone else is saying. And there are only a few like york times morning console that are clearly not doing that. And often they're also things without take a poll and we'll see the result is like way off and the maybe they just won't release IT or they'll find a way to adjust IT or whatever they have to do and next server post recently on twitter, the chance of all of these polls coming in this close, even if the race was actually tied on the order of one in nine trillion. So it's clearly just not coincidence.

So what actually happens on prediction markets on election night? I imagine like things are going to be moving quite a bit. But also, when is the actual payout occur for trump forces? Harris.

so the payout depends on the exact terms of the contracts. So four years ago, we had a lot of very interesting discussions going on behind the scenes and a lot of very public yelling as different sites proposed to pay out. Based on defected, biden had actually won the election, and other people very much just speeding, the biden hadn't want the election.

And in fact, buying trump long after fighting had won the election. That was weird. Yeah, I made some money on that. That was .

kind of .

awesome. And so I mean, like the best before election day, they did okay, I want them, but I should to help my money. The best effort was so much Better.

Ah but the way that works is there's an technical rule for when the bet pays out and this can vary based on where you bet. So they know what are the ways to do, what did you say? okay.

If the networks call the election, then that count because they are being very conservative these days and then we pay out immediately no matter what happens that way. You don't have to hold IT for weeks and weeks, including if there's n't. Another dispute, which you know we all hope there isn't, but you never know what that will happen.

IT occurs to me. So you're now at ninety six percent chance of appearing on out lots IT occurs to me there maybe some ambiguity of the rules because this this audio could I don't want to drink IT, but maybe IT never comes to see the light a day. And so maybe just the same way people are wondering the technical rules of your contract here and whether interviewing you on this stage is the same as appearing on the podcast.

Let's get to a little micro o neil um moeti policy. Have you been contacted about being either the next fetch or being on the F M. C. In the event of a trop Victory.

What you trying to say.

i'm not saying anything. I'm simply asking whether the transition team has reached out to have not a role not been contacted.

And I would expect you though I know people that are the traffic in those circles. okay.

Do what do you like what you think about the medium term trajectory of monetary policy under a theoretical trumpet administration or a haris administration? Does uh, tomorrow I sort of change outlook on that type of policy?

Not really. I mean, I think in terms of um what I typically do as you know, I don't let political outcomes really affect my kind of near term decision making in terms of what my monetary policy calls is gonna.

I think the next few rate cuts are really just baked them in regardless of who wins um and that's because I think the underlying dynamics in the economy are still kind of pointing to slower growth, but I inflation and probably ongoing monetary policy recommendations. So I don't think that's onna change know before the first quarter of of next year. So I think they'll keep cutting. It's really just about how much they will come out.

I be curious to get your take on this as well. Like what kind of a omy or how would you characterize the economy that either Harris or trump will inherit?

So I mean, all things considered like employment still very high, inflation is generally falling. I mean, each month is their bumps. It's not a bad hand to be given.

Protectively growth looks like it's picking up a year um at least for the time being, all these things are pretty good. At the same time, the new's point there are gonna some for seeing signs that grow will be slower and q four and probably q one. And for that reason, like we're going, I see some some bumps in the road.

I don't think that policy is going to be changing on a dime even if like trump goes for really aggressive. Terry fs, these are not things. It'll be done overnight.

And so that's like the kind of friction in the system. Everyone likes to talk about politics and how is relevant to markets and there will be some election reaction. But it's like as twenty sixteen kind of told you, right, whatever correlation structure was their preelection isn't have to be their post election.

And I do think that's something to be mindful of as far as like policy will take more time to change. I think it's pretty clear that if it's a haris administration, it's probably with a republican senate, there's like some compromise on tax policy. You're not gona get big things done.

But I don't think there's even like a huge appetite within the democratic party to do big things. That's a little different terms of like the body passed legislation, right? But in terms of republicans, they actually have a good shot and try fact that, right?

If that happens, then the box opens up, they might cut. Corporate x is more, but is also more discretion on on like trade and immigration that job could wield. Well.

I was just going to see me if you go back to twenty seventeen and remember that discussion around monetary offset. We are all talking about monetary offset because the idea was, well, you know, trump is going to be this sort of inflationary demand and know the feast to do do all this sort of red hike stop set at in hand sight. There wasn't really a monetary offset then did up doing more or less what they're planning to do.

So I just think it's it's important to kind of try to separate these things out and just sort of take the world as IT comes. You I think that's as opposed to trying to forecast in front run sort of potential fiscal outcomes. I mean, if you're the fed.

we do you see anyone or you're backed out of fifty percent.

How did that happen?

You fall in one, someone hit the cell and apparently the order book must not be. They are like, I am going to take my province at ninety six percent and I guess the order book was pretty thin because whoever just sold you like really got a bad Price on that. So you shouldn't have sold whoever that was.

Um you okay there go. Um yes, we got to get some liquidity here. Is anyone doing like do you see people in your world trading cross between the prediction markets and the real the real markets? I don't want to call them all market. You know do you see much of that whether like you know this, should this level of confidence not consistent with this thing we're seeing and I don't know bitcoin or something like that?

Or are you seeing much of them? So you are you earlier asked what happens on election night and what happens election night is that the odds will move dramatically and they will respond very quickly to every piece of news. And there's both the reaction that happens when the news is available to those who are paying attention.

So like the counties, the numbers line there, some people done information from the colonies, have the ready and details, and they're going to stay ahead of the game. And then there are the people who are watching the news. They're like, oh, they've network called wisconsin, and they sudenly know the money comes in.

But of course, this kind of apparatus isn't like I remember that last time, like the people always follow on twitter, clearly new stuff before the official calls, and yet the market seemed to react to the calls of many cases.

That's right. So if if you know what the calls are going to be, you can clearly make some money by doing something before the market moves. But this is often true of that.

There's there's one set of people who have one set of information and the set of people who have a different set of information, which is the coming to them, slower there, there more square action. There are more but sophisticated, and they still help make the market more accurate in general, but they're often predictable somewhat in advance. But there are our transaction costs.

And I know one of your people.

when we have so much capital, like all the major players on election, I are going to be somewhat capital constrained in the prediction markets because they're often going to see there are some sort of systematic is facing this sort of opportunity and they're gone to have to watch the bankers and so they don't spend too much, right?

So in a situation where everyone's looking for these big miss pricing, but then like you have these different waves. And then more of the things you notice is the early movement on the protection markets is often actually ahead of the financial market movements and things like currently, things that are open. And you can, in fact, make money for real if you are watching about this, because the beta thing is real, right?

So like you going election, that you say, okay, what is going to be the trump beta for everything in the world, right? Every currency exchange, every instance, still trading whatever you can get. And if this was going on during market hours, IT would be so much more fun.

Who's actually treating on the prediction markets like walk us through the typical person who's doing this and whether or not that introduced some bias into the probabilities because I imagine you know for something like Polly market, you have to have a VPN. You have to be somewhat cyp to literate. Yeah yeah. So like does that influence some of the numbers that we're seeing?

So you could be a french multi mogan air, uh, you could be a Scottish teen is the other traditional joke. But the answer in of all types of people around the world are getting into IT.

But yes, because it's polling market, you see a difference between poly market and say no cause or you know these other sources is predicted that are allowing americans in and that aren't cyp to because there's absolutely a bias in who has easier access to poy market, who wants to get involved in poy market, who's eager to do that. And that bias is favoring trump. H this year, trump is much more for crypto.

You see these associations in various different ways. So polymer has been several points stronger for trump than other other similar production markets. And you could also, of course, argue that i'd know its power market is fine and then everyone else is bias. And like, know who is really to say you're .

up to ninety eight point six now sca, tell us more about what specifically you're going to be watching. You mentioned the rural urban splits. S, that even in the red areas, we may get signal from some of these things.

Are there bill weather conney that are useful to watch? Lucky economy wisconsin is like that crucial lucky account. Now you're done this and is there anything like that? Like what what talk more about how you're going to be consuming the information .

of morning yeah the other counties are basically fake. So like what matters like you can have we've had twenty, twenty and twenty sixteen where p hacking .

isn't IT because you can always find some county that always vote for the winner. But IT doesn't necessarily make anything.

You I mean, we have every county is moving somewhere at the margin, right? And every marginal vote council if like, let's say Harris really well I just trimming trump s margins and rural counties that's like a big deal in the same way that trump s ability to amplify them in twenty twenty was very underrated by the polls, by general expectations among forecasters that he was able to scale, rule turn out, even the percent margins, which people obsess about.

Percentage margins in a lot of deep red counties did narrow in twenty twenty. But just because turnout was ramped up even further, trump got more margin. And so a lot of states were lock closer than what the polls predicted.

You find your ways to close to the counties, whether it's a urban, suburban, next urban, rural, whatever way you want to swing IT the that closed, every single one matters, right? Every part of IT like there's going to be some movement among the urban counties. Those among they are trending blue and every vote counts on either on all of them.

So IT doesn't really make a lot of sense to like obsess about a particular county where if IT slips from red to blue, that can happen at the exact same time, a bunch of red countries that are deeper red become even reder. And that's like what happened in florida, for example. So we had like panel as county was highlighted as that chooses the winner.

And IT wasn't in two thousand and sixteen. He was hills burn county and that wasn't right. So these flat blue and IT didn't really matter. And it's it's a good warning for a lot of the election I coverage.

I know one of your favorite things to do is to terror apart the I sm manufacturing survey. What happened to the vibes like the soft data post the election? And how should we measure IT? I guess not the ism. Clearly.

what what I mean you mean when right now? No.

after the election next week.

I mean, I think you would I would expect to see a pretty meaningful increase in consumer confidence in small business sentiment primarily because, you know, small business sentiment, I mean, that survey really skiles. I mean, think about who's putting IT out as the N F I B. What do they do? They're a living organization on behalf of, you know, sort of right wing causes.

So my son is that the small business sentiment number would go up a lot. Consumer confident would probably up a whether that actually translates into real consumer spending. I I have my doubts, but that's kind of what you saw after the the twenty sixteen period, right? And similarly, uh, you saw a big decline in sentiment after um you know after the twenty twenty election but again, that doesn't really translate into uh into what people were actually doing.

So um you know I think twenty sixteen was an interesting case because things like the I S M which you mentioned, I mean trump was coming into office at that time at the front page of sort of a global manufacturing recovery. So the the so called sort of trump boom, I mean, that was there was an albay boom and IT was a, you know you saw that cron boom. I mean, everyone was kind of feeling at at at the time.

So I wasn't just us specific this time around. I mean, manufacturing, Frankly, looks a little slug ish. I mean, there hasn't really been much there's been a lot of construction of manufacturing facilities. And I know scandals scant has been pointing that out quite a bit. But but if you look at actual manufacturing production, you know hasn't really been great shakes.

Is election uncertainty. And you see this like in the anodos comments on some of these surveys, whether it's the I sm or the dallas fed, which always has very colorful and a total aspects election under certainty real? Or is that just a code word for people who preferred trump? Hoping that that's the outcome and then that maybe changing their outcome out their outlook.

i'm sure, is fine. both. I think there's like someone .

really deals not happen because like we don't know. I think i'm serious. Think about all the inactive legislation.

right? So if you say there's like if let's A I R A, maybe parts of chips have come up understanding y parts of the infrastructure real. These are things that are cast as these are all left towing items that bite and past.

And if it's like depends on whether trumps going to be an officer or or not. If you perceive IT as like multiparty fifty proposition, if he is in place, then it's kind of stick. If if trump employs IT may or may not stick. Now I can actually see like a case for like if you have any business attached to a government contract or a government subsidy that might actually be genuine. And I think I think there's also of some partisan.

but also, I think genuinely speaking in my career, I mean, you talk about the sort of formal measures of policy uncertainty like the one from nicolas bloom that's widely cited. My experience is that when that index is high, it's usually a time to go long equities, right? So so when policy uncertain is high, it's usually a time to dip your town into the market. It's a buying opportunity for stocks. historic.

What do you see .

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Can we hold out in the line and talk about, like, what everyone's day is actually gna look like tomorrow? Like how are you spending the election? Let's start with you.

So I said, I mean, the election is actually a very small part of what I try to do on a data day basis. 好， probably I mean, just the front on a show probably be spending some of my spare hours working on this piece that I was talking to you about.

Thank you. We have a new daily odd loss newsletter and knew has promised to be one of the contributors.

So we have a piece coming from him. So IT just sort of gives me an opportunity kind of step back because I have no edge. I don't try to pretend to have an edge on on on political stuff.

Um and you know one of the things i've been thinking about is just this sort of you know this neutral interest rate. I mean, no fts talking about all the time and just expLoring the ideas. They are like a dual neutral rate.

I mean, for example, the neutral rate for housing, I mean, whatever IT is that it's not working. I mean, housing is not working with margins rates here. So the neutral rate for housing is clearly a lot lower. Then maybe IT is for say, the housing, I mean the the labor market, I don't know.

I mean so um and so if if if you sort of buy into that, I mean I would imply that the fed needs to do A A bit more to get um you know certain areas of the economy going. And if the feds lost the ability stimulate housing, you know I think that that that's a potential problem. So i'll probably be focusing more of my time on that as opposed to checking out the returns. And I don't know what is a kaou account or something.

Um I too working on a peaceful er converts that report coming as well on productivity. But um I look elections are we will like numbers changing and like following them, which is probably most of of you. I'm gonna guess on some level, if you're interested in finance and markets, um yeah this is a fun exercise of like seeing how margin shift I have some spread cheat prepared for myself just to contract things if the new york times needle isn't up and running, yeah I will probably IT easy the day. But I maybe I catch an APP, and then I will probably be up till of these three m.

So as a writer, I want people to read what i'm writing, and I want you need to think about IT and pay attention to IT and learn from IT. And I want to influence them. So this past week has been the case of, if I write about something, no one's going to pay much attention to IT because they are going to be focused on the election.

And so I kind of take this time off because i'm not going to try and put anything up except for my week. We update until after the election is settle. So instead, I have had a chance to like programs and tools that are going to help me write over the long term. I might go see a movie, have a nice long lunch, you relax. And then, of course, in the evening, i'm going to absolutely be following how the prediction markets up in various windows and various devices.

Some of the screens do you have.

I have three thirty screens, so I have have one horizontal and two vertical on the two sides. Yeah, at the trainer you have six. But now that i'm trying to stay away from that, like I think with three is about right. And so about one of them will probably various prediction markets, especially poly market in various different markets within them. So you need a lot of space. And then you know you're watching the television like everybody else and you're watching twitter and you know you're just trying to get through IT and process IT because you know like even if you don't really want to pay for his attention, like what else are you .

going to do tonight? What is, is anyone gonna doing we really quickly? Why is there not? Why has the spread on some of these markets between to, say, kell, SHE and poly market not been argued away? What is the constraint to free morning?

The constraints is liquidity and access to the market and the capital costs of committing the capital of multiple places, moving the money in and out. Everyone's kind of a little bit terrified every time the initially and cropt transaction that somehow i'm going to vanish or is something wrong is going to happen. I mean, this is very, very unlikely and any given transaction is going to happen.

But I definitely have an opinion. By the way, I want to be clear. Like I said, I who knows which one is wrong. I I very strongly believe that the power market, uh, line is the one that is biased in the situation due to the access issues. Whether I think that the line at the other markets is much more effective of what the line kind of showed in my quote, cents.

be actually really quickly is that you mention productivity, and I know you have some thoughts on productivity view. In fact, you just mentioned coding up some tools to make your life as a writing easier. I think you both have some different you think we're going to have like fifty percent G G D P growth in the coming year on year because of A I something like that?

No, not fifty percent this year. No, but no come .

like you give us give us the short the shorts and opposites of what you think is coming for productivity growth.

I think that the skeptical line on productivity growth is we're talking about, you know percent per year every year on the course of ten to twenty years. And I think that sort of the ultimate bare case for A I just doesn't do what we want IT or expected or hope you would .

do in the bull case, single varity .

super intelligence world completely transformed.

great. It's going to what's your what's the gist of the productivity and then also knew, but what's the gist of your productivity piece that you have coming for the old lodged daily newsletter?

yes. So just speaking, in terms of the realized data, and I tried to start from house, the data measured what are we actually capturing, which may not be indicative of sort of conceptual what we associate production productivity. But productivity growth actually have performed post pandemic in a pretty meaningful sense relative to what we are seeing.

Pop pandemics of free pandemics, roughly ly one in point four percent. We take sort of longer look, and we've been done post pandemic period. Something like two percent maybe is one point nine, maybe two.

But that's like on an annualised basis, that's pretty meaningful deviation. And there are like a lot of reasons why. But I think that all kind of has to come back to like the measured set of transactions, inflation adjusted, divided by total hours worked.

That is basically our most measurable version of productivity is comes with lots of flaws. For example, google maps that everyone uses on a data day basis, right? It's ad supported, right? It's not supported by a final expenditure.

IT should filter in somehow into our productivity statistics, but we don't have a great way of saying how and estimation that's actually really hard. So for example, is a lot of things that like A I can make our lives very efficient and same the internet mental, our lives very efficient, but I didn't necessarily lead to a lot of transactions. And that's kind of the open question. That's like for a lot of A I breakthrough, how that leads to IT may improve a lot of welfare, but the actual nuts in bolts of how at least of more people spending in ways that are reflecting real things and not Price increases, that is like actually a big part .

of the ball game. Neo, any thoughts of .

productivity? Um I mean, I grew a scandal. The measure data is what the measure data is or the data R M is over, you know, two percent.

That's very strong. I think for what that means for me is that basically this is one reason why we should not worry about inflation. okay.

And and that and that should give the fed um you know plenty of cover, right? Be and this is something we talked about earlier in the year, right, is that it's one thing to to see the inflation data. It's going up without having like a rational framework for why it's gona keep doing that.

And you know the fact that productivity has been fairly robust over the last year, I think IT means a couple things. Number one, we should sort of resist the temptation to kind of buy into the stagflation story. You can't really have deflation of productivity doing what it's doing um but IT also makes the likelihood of like some inflation reacclimatise ghe unlikely as well.

Like where is that coming from? Unit labor costs growth over the last year is basically zero. So you know for a for a fed that has a very labor market centric view of how the inflationary process works, the robust growth and productivity that we've seen I think is an important kind of you know uh story in terms of mitigating inflation risk.

Um if you had to choose, what would you says? The biggest constraint for trump and Harris both like is a political you know maybe you like Harris gets in and doesn't have a try vector like. Maybe the republicans would have is that something like the deficit choose one for each?

Well, I mean, personally, I think that it's going to be I mean, the markets have been sort of like all the unified gop. But I mean, even even even if even if he was to be a unified gep government, the margins in the house would still be very, very thin. It's not like they can just steam roll whatever the holly wants, you know, next year. But I would I would probably say the bond markets, the constraint, I mean, you have to be worried about how what's the appetite gonna in the fixed income market to fund a huge sort of deficit, not spending plan sanda.

I I go back .

to the politics, I think like american government makes IT very hard to pay, pass things in general from in the wisdom of that uce. Once a debate is just even under a unified government to news point, like least marcos, I still has a lot of leverage. Susan Collins, as a lot of leverage, they probably will pass some things easier to pass things under unified government and under divide government.

But that's probably still by the constraint IT was the constraint and bite in, in a twenty and twenty one and twenty and twenty two. I mean, even though industries are going up, the real question was, was gee manchin wanting to say yes to? And so even if like, we can debate how much, what's the nature of public finance constraints, often times they are reduced ultimately to like the hard ball politics.

I've eluted to this before, and I don't want to like let IT shade my view, but I would like mortgage rates to come down in the next two years. Do we need to get do we need to like, do we need a spending crackdown? Do we need to go into austerity mode to get mortgage rates back to roughly somewhere in the ballpark of the twenty ten?

I mean, I would say to the extent you can free of real resources, right? yeah. I mean, to the extent you're actually reducing inflation or getting the fed to be more confident about the willing this lower industry, that would .

probably be the main make. I will let my mortgage fact how I assess the economy.

but i'm just say, um yeah but I think that's like the tRicky thing you can do a lot of deficit reduction that doesn't as soon move the needle on inflation or the fense reaction function. But the health care costs, for example, right? Healthcare costs in general need to be constrained. They do have a pretty direct role in inflation outcomes. And because of those two things, that's a pretty strong nexus for if we could reduce healthcare inflation by half a percentage point each year, that would be a very big deal for what the fed would, what you get to last mile of whatever the fed is trying to achieve.

V can you say a little bit more like about the spread she'd set up that? Um can't do you mentioned your spread sheet to as the data is coming in tomorrow? I mean, is what would be really care about, right? Like the numbers started to come in. They get posted on what secondaries of state websites and set a like how are the traders ingesting that in that process to be ahead of like when the network say they called this concept.

So it's going to very a lot from trade to trader, from house to house. And you know a remarkably large number of people just don't do this. And that's clear by because you look at the financial markets over time, and I haven't the most reason like is like twenty two carefully in terms of the reactions, but you you definitely see these delays.

And like if there was a lot of participants in the market who were keeping code, yes, and incorporating that money, that information, incidently, that wouldn't happen. So the right ways to do IT involve things like setting up automatic interfaces with fees websites to just pull things into your spread cheese, right? right? You have your excess spread.

They contain all of the county by county data from all of the returns. And then ideally, you want to figure out what that imply is about the results. And the technically correct way to do that is a busy and calculation.

IT takes new account all the information because you don't know which piece information you're going to get. You need to know how to feed them into your calculation. And then that should then output a range of distributions with various probability of various different outcomes. And you put them into your beta on various things that based on those elements and you figure what the Prices is supposed to be in.

then you make the good traits. Weren't you at je street before? What was an .

election night like there? Well, on the all hands on deck, right, everyone, is there is a working night, and you use what tools you have, and you know, you use what instruments are available for you to trade, because the middle, the night. So like you know obviously if the U S. Stock market was open, everything would be dramatically different. But you are .

somewhat limited. And I have one last question um as A A I productivity optimists, like I don't know anything about how to code a um system that will adjust all the data and set up a basic in model in your vision of what A I could do. Can I in a couple years could I go to ChatGPT and say like right the code that will pull this in, then build some kind of model.

you can do .

that now right right these ganda. And neil, thank you so much. Um I feel prepared. B is IT ninety one. So there is still remember guity about whether he .

was on stage or we are still unsure.

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podcasts are the the final stretch here with brad set or senior fellow at the council for foreign relations. Better to tie up all the desperate things we've been talking about uh, in the previous two sessions than brad. Um we always enjoy speaking with you because we can basically throw anything.

See, the record holder is close.

Yeah i'm pretty sure you might be close to the top for number of all, lots appearances. But why don't we start with something really specific? Because you publish a paper recently all about globalization.

The title is the surprising resilience of globalization, an examination of claims of economic fragmentation. And your conclusion was basically that we are still globalizing into some extent since twenty sixteen. We've globalized even more. Walk us through how you come .

that uh well, first, thanks for inviting me and thanks for asking me about, uh, my recent paper. You are the first person who actually seems to have read the whole title.

I promise. I did actually read. I read IT earlier today, but I am impressed.

And then thanks to everyone for sticking around. Appreciate IT. So most papers, or many of my papers, originate out of a sense that a narrative has taken hold, and that narrative is sort of perpetuated itself, even when that narrative isn't fully backed by all of the detailed data.

And there have been two narratives that have been, they're closely related narratives that have been very prevalent and prevalent at the I. M F, prevalent at davos, prevalent in the financial media, prevalence on bloomberg. One is that the world is the globalizing, and the other, which is related, but not quite the same, as the world is fragmenting, different political blocks are interacting less economically.

That thesis seemed at odds with A, A couple of things. A one, I spend a lot of time, don't why looking at trade and pharmaceuticals? No, just as an interesting in subsector of the global economy S A hobby.

yeah. I I am certainly not paid for my odd take on the pharmaceutical industry. And the pharmacy dal industry has continued to globalize us.

Imports of pharmaceuticals have doubled since twenty sixteen. us. Imports from low taxes.

Redactions, which is a big part of pharmacy ticals trade, is not with low cost juristic tions as low tax restrictions, but half of our imports are from five tax tubs. They've doubled. One quarter of those imports come from the great country of ireland.

So that's not a story of the globalization. That is a story of continuity. It's a story of globalization continuing because there's a tax advantage shelter globalization. But then the other component of the argument is the one that sort of irritate people. I looked at the data.

Everybody tries look at the data and you know if you look at the data for china, biggest economy and the biggest potential source of fragmentation mean you can fragment with russia, which has happened but fragmenting that china would be big and ah I didn't really see the evidence. So china's exports to the world are up by about of manufacturer are up by about a trillion dollars, uh, since twenty nineteen. So I sent the peak of the trade war sense, the pandemic.

China's imports up, manufacturer up two hundred billion. China's surplus of manufactured goods is up eight hundred billion, and i'm pretty confident because they have some sense of magnets. And that's not all trade with russia.

There's a little bit which is trade with russia. But IT is mostly because trade deficits among democracies have risen. So the classic offsets to china is surplus over the deficits in the U.

K. The us. In india, not geopolitically aligned with china, but the global counterpart. So my overarching thesis is the world has continued to globalize, but in unhealthy ways, unhealthy because there is still a lot of tax driven globalization. And unhealthy because this increase in china's exports is a reflection of deep weaknesses, which have already been discussed in china's domestic economy, which make china incapable of growing at th Epace a t o nce w ithout r elying m ore n orthwest o n e xports. So that's the theme .

um a lot to chew on and that actually we're going to do. But the the trade war that started in twenty eighteen does IT show up with the data in any meaningful sense. Like when you look at the data now, there s some counterfactual where terms have put in put in place. Do you see fingerprints of IT?

Yes, the most obvious is that you, the us. Is the one country country that currently doesn't import any cars from china. Sense the trade war.

Uh, china has become the worlds bigger auto exporter, and the U. S. Market is effectively for now waldock. Uh, if you look at china, the bilateral trade data between the us.

And china, the first thing to notice that they no longer agree in the bilateral data from the U. S. side. We think our trade with china has gone down and significantly.

If you look at that same data from the chinese side, china thinks its exports to the us are broadly unchanged. Now you can still say there's an impact because chinese exports to europe, the obvious counterfactual, have gone up. So there is some evidence of a bille atrial decoupling.

There is a lot of evidence of tera avoidance. And then at a global level, there is no real evidence of a serious decoupling fragmentation because a serious fragmentation, in my view at least, is one where china runs a smaller surplus with democracies, where china trades baLances among the the accents of autocracies. That clearly .

hasn't happened. You mentioned earlier tax incentives to globalization, and i'm trying to think how to frame this question. But like why are we so obsessed with tariff if you know the ultimate cost of product is not the only thing driving decisions about where it's made and where it's going?

I mean, in all honesty, I think it's because Donald trump on the twenty sixteen election, Donald drum p believes terror matter. Donald drop is is a tarifa man. He's really is the other one has, look, there is absolutely no lobby, powerful lobby, that is pushing back against importing more pharmacology from ireland.

And there's a very powerful lobby that wants this current pattern to remain. By producing outside the united states and moving intellectual property outside the united states, the american pharmaceutical industry has reduce its agent effective tax rate to ten, roughly ten percent. Why wouldn't you want to maintain that? The opposite side, the loser side, is the mostly the taxpayer.

There's not a lot of jobs at stake there. There's so a couple of a shocking to me little nugget. The U.

S. Arm's udal industry, a top six companies roughly made sixty to seventy billion dollars in twenty twenty three top six companies. Those top six companies paid collectively on a little bit offsets, zero in tax to the us.

Federal government. They reported losing money on their us. Operations, even though the us. Has well known much higher pharmacy ticket Prices in the rest of the world.

And they report making all of their profit and pain, all of their attacks in other jurisdictions. So everyone except the U. S. Taxpayer, seems to win.

What was the effect, if any? So one of the things, regardless of who wins tomorrow's vote, at some point there is going to be the tax cut and jobs act is going to come up, though I think the corporate side is permanent.

Isn't that part is going to be less controversial or not going to be a thing? But what was the effect of the tax cuts and jobs? Because there was some impulse, at least claimed that, oh, this will encourage companies to recognize their revenues in the united states and crack down on that to some extent, at least in the role of pharmacy ticals, as you've describe, that hasn't happened. What was the intent and what was the effect of that? bill?

Look, first of all, you broke my heart, but I saying there's nothing this onna happen on the corporate taxes next year. Is there like IT is obviously gonna be part of a negotiation OK .

IT is the .

great chance that we have to correct some of the flaws, in my view, in the tax doing .

the corporate. I doesn't expire automatically the way some of the personal.

So how how much detail do you want to go into? The twenty one percent does not expire the ten and a half percent low guilty rate, which is for your global intangible income, which is goes up to thirty point one two five, of course some people care about. And the foreign ive in tangibles income tax or city goes up to the god awful high rate of sixteen percent.

So there are some rates. So what happened with the tax cuts and jobs? That first of all, the corporate site was a total revolution.

Before the tax cuts and jobs act, the U. S. Had a system called deferment, a deferral, where profits earned abroad, in theory, word tax at the U.

S. Headline tax rate of thirty five, but only if the profit was returned to the united states. Profits were never returned to the us.

Companies borrow, rowed against their offshore profits. And that was essentially a system that sort of worked, but IT meant that us. Companies had on the U.

S. Side of their baLance, shea, lot of debt and on the foreigner of their baLance sheet, a lot of assets. IT wasn't great.

So the main thing the tax cuts and jobs that did was IT got rid of defero. You pay tax as you go once you pay your us tax, you're free to move your money wherever you want. That was supposed to bring a lot of money back.

Obviously lower the headline x rate from thirty five to twenty one IT created. This new global minimum on tangibles, which is sort of a strange concept but essentially intellectual property that everyone pays on their global income. So in theory is sound territory, but it's not entirely.

And then I created a separate low tax rate, the foreign rived in tangibles income tax rate for companies that move their intellectual property back to the us, and used the two export pharmaceutical companies make most of their profit. Although they don't say IT on their us sales, they prefer to keep their intellectual property and production abroad and remain in the ten and hf percent guilty bucket. So no change there.

Apple, same thing. Microsoft, broadly the same thing. But some companies did adjust facebook and google, return their intellectual property to the us.

You see, this is very clearly in their corporate returns and now cell their intellectual property to their irish p city. Everywhere they book most of their ad revenue globally. Caul com is also adjusted as global tax lesser.

So it's not a story of no change, but IT is a story of mixed change. And IT is a story where, least in my view, the six biggest pharmaceutical companies clearly paid less to the U. S.

Government after the tax cuts and jobs act than they did before, because they actually had to bring some money back from their offshore tax of series at the thirty five percent to cover their ongoing cost. And apple now mostly for even more complex reasons, but apple books more of its profit in ireland than in the united states. And apple is now paying roughly as much in tax to ireland as is is paying to the united states.

That's wireline and as a sovereign alf's. And so there are still changes that could be put in place that, broadly speaking, wouldn't significantly increase the corporate tax burden but would increase the amount that the biggest, most successful us. Companies pay in the us. So hence, you broke my heart. You said there's .

nothing to be done that would just be being ignorant.

That is just being ignorant. I realized I should have set this in the intro. But in addition to writing and researching and tweet about all these issues, you also have real life experience.

When IT comes to trade policy, you were an advisor to A U. S. Trade representative, Katherine I, who has also been on the show. Maybe you can't get into specifics here, but like give us a sense of what the most surprising thing was when you are actually in that adviser role. When IT comes to the construction, the rail politician, I guess, of making trade policy.

I guess one surprise, and it's just a cultural thing about U. S. D. R, as I previously worked at the U. S. Treasury, um is that financial markets, which are the obsession of this town, was the only this crowd are waited IT about the zero in u sr. Internal decision making.

People do not look, get a report on what happened in the market at the start of a significant meeting at u sr. Whether that would be kind of the norm at the us. treasury.

So culturally not driven by the market. Culturally, U. S. Trade policy is driven by lawyers. And lawyers care a lot about process. So I think what surprised me the most is the weight that is given to following the procedural naias of the various different trade laws, which I think they are actually quite relevant, trumped ward to win, which I personally, thirdly, do not hope is the case, but that those procedural noise become constraints on how quickly he can restart various trade wars.

You mentioned in the beginning that globalization continues despite all the memes and despite all the narrative, but you described that as an unhealthy form of globalization. Where is there a point where IT was healthy in your view? And is the returning point where the globalization process went from healthy to unhealthy?

So in general, I think globalization in the one hundred and ninety had a different impact on the us. Economy than globalization after the one thousand nine hundred nineties. If you look at at trade patterns in the one thousand and nineties there, there is a significant and interception in the asian financial crisis.

And I think most people in asia was the global ization went wrong in the one hundred and ninety. But during that period, broadly speaking, exports and imports were both expanding symmetrically and you didn't have an expansion, an explosion of the offshore baLance sheet of big banks and their special investment vehicles like the obsession of wall street and the three global financial crisis period. So to me, that was a healthy or form of globalization.

What went wrong? Well, a technical thing, check the box. Made IT really easy for us companies to shift intellectual property offshore, that at least a wave of tax driven globalization that we have not yet, in my view, been able to rain in a created incentives where ever broadening sectors of the U.

S. economy. So one of things I point out in the asia economic strategy paper is that semiconductor equipment manufacturing, actually a pretty strategically important industry, has between two thousand and five and twenty, twenty three, twenty four moved a lot of its manufacturing and all of its profits to southeast asia.

Why we thought that was an our strategic interest is beyond me. But he wasn't just a one off. It's been a continuous ous process.

Then obviously, china is the WTO. The chinese surplus explodes. And I think that generated a period of unhealthy globalization as well.

And so that's why i'm a little worried right now that the increase in china's surplus judged on the a global basis is not on the bilateral basis against the us, is on a magnetic comparable as a share of world GDP to that a scene immediately after W T. O. entry.

Direct lending has been .

one of the most dynamic areas of the private alternative space these last few years, having grown massively as a source of capital for both corporate borrowers but also financial sponsors that have kept going from strength to strength. And i've needed that private capital to Foster the growth that they ve been experiencing for leading alternative investing insights. Listen to speaking of alternatives from P. G, M.

This week joined bloomberg podcasts for complete coverage of this pivotal election.

November first will be the most important date in the history .

of our country. This will be a tight race until the very end will .

have both up to the minute coverage and deeper dives with bloomberg news now and the big take. Listen to our latest reports on election results throughout the night with frequent short audio updates, five minutes or less straight to your podcast feed with liberal news. Now, these are all close races.

Those polls just closed in most of the states .

could be a very long weight for some of these races to come in to go deeper and understand the impact the us. Election will have on the global markets list to the big thing, our daily podcast with in death analysis about what's playing out across the .

country when you bring a case about election process into court creates suspicion.

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There seems to be some consensus about diagnosing the problems in the chinese economy, so not enough domestic consumption to high savings, etta. And yet IT still seems relatively committed to the export driven model. Why is that?

The py answer would be that there can be no consensus in china that doesn't include presidency. So actually, I don't think there is consensus because I think president SHE doesn't share this. I think president SHE, generally speaking, views support for households as unproductive and a views investment, particularly investment and high tech sectors, as productive. The intellectual leap that given checks to households taking less from households let's households spend more, and therefore supports investments, not just consumption but its supports investment throughout the economy is not one that president SHE obviously shares so yeah I don't think there is yet uh consensus.

Um one of the things that people love to talk about is just forever for as long as is the future of the dollar. And you know just want those things people just .

love to talk about IT.

i've noticed yeah when .

you look that is not a topic that I prefer to talk about, but I talk about talk about, right?

Tracy, what he introduced, you said we can ask bread anything so this is the moment when you look at unhealthy globalization. Do you see any strings on the existing the dollar regime? Or any reason to think that there is going to be a meaningful change in the trajectory of dollar usage, either within the trade for goods and services globally or the use of dollar in financial transactions globally?

Not really. So there has been one obviously important and significant change, which is the the sanctions on russia. Now russia is one of the top ten global economies, but uses a lot of oil.

And the world ones oil, we mean, in this case the U S, the E U, the sanctioning coalition, the g ten countries have generally not actually sanctions dollar in europe yet. But even though we have not sanctions dollar in europe payment, russia obviously is very concerned that we could, particularly because we frozen all the central bank's assets. And that was a pretty big step.

Russia, to be fair, was the country that did the most before to twenty twenty two of the invasion to reduce dollar usage, didn't get rid of IT. But russia had moved almost all its reserves out of the dollar, and IT certainly removed all of its reserves out of visible dollars, soft that the us. Can see in this Normal data reporting.

And IT had migrated to basically using the euro for most of its a oil and gas transactions. Now that you could say that just logical, russia traded mostly with europe before the the, the invasion, but I was using the euro to dominate trade with china, not the u on, not the dollar. And I think the main lesson of the sanctions IT has been that if you want to diversify out of the dollar and you want protection against sanctions, which is the one thing that you get with diversification out of the dollar, diversifying out of the euro isn't diversifying enough.

So you essentially have to diversify into using the u on now the one as a bunch of disadvantages. The one is not accepted globally. If you're an african country and you get you on for selling something to china, you can use that you want to buy stuff from your neighbor is not that kind of global currency.

yet. The dollar in your O R. And in general, holding financial assets in union means you've been holding a appreciating currency with lower yells and in the dollar. And then by the way, china uses its geopolitical and you want you mostly spend over its trade leverage pretty aggressively.

And you would have to assume if you have a lot of your financial assets in you on or your trade is denominated on, that you are potentially subject to chinese financial pressure. So you get a little bit of defense against us and european sanctions, but at a pretty significant cost. And you just don't see IT.

So one one and IT, because IT goes a little interesting. And was this if was sort of striking to me because I hadn't been to china for quite some time, I was little nervous about IT, to be honest, and heard A A A bank treasurer from a big chinese bank talk about how they were thinking about the world. And you know what that chinese bank was worried about? I was worried about the fact that huan lendon rates were being forced down, and that was squeeze huan net interest margins.

And fair things is what all banks tend to worry about, although was striking to me that this bank treasures was simple as saying the official landing rate, which the chinese have been deemphasizing, was actually really important. Other thing he was complaining about as well, there's all these landing quotas. Like, again, like I thought you'd reformed your commercial or banks you weren't doing quoters, no, no, no.

Quotes for manufacturing quotas, for lending to innovation. The treasures obviously was sort of implying quoted that required us to lend to companies that we're going to generate losses in the future. So what was the great hope? Well, the'd looked at the japanese bankin system and discovered that the japanese banks do this great dollar business that generates half their interest income.

And they looked at that with with the envy. You could choose your own interest margin in dollars, and you weren't forced to lend to loss making companies in dollars. So just as an anecdote, you see growth in the dollar business offshore doll business of chinese state banks, which completely runs against the d dollar zone narrative and is very much a function of china's own domestic weakness.

So I think that to me, that was telling you had a great line in the paper just going back to the like lending quote of point. But you said free markets appeared to favor a country that hasn't freed its own market. I eat china has probably benefit the most from the trade liberalization of the one thousand nine hundred ninety and early two thousands. Why is that?

Well, again, Tracy, thanks for really closely reading my paper. I actually thought I was a good line. You're the first first and is noticed IT.

I throw in like hopefully like some windy equips and forty page paper, just a test to see if anyone actually reads you did. Look, I am not the first to make this observation. I think it's an observation that has influences politics and policy in the united states.

Stand in europe. China does not have a full market economy. The government runs the banking system. The banking system still dominates the distribution of credit within the chinese economy. IT favor some sectors over others.

The chinese state, in its mini layers at the central government level, but also at the provincial layer level, provides a lot of equity investment and for chinese companies, and so you can argue that china doesn't just have one industrial policy kind has twenty, because all the different provinces have their own industrial policy, trying to build up provincial champions that become national champions, and in the process they get cheap capital, very cheap capital. There is an the private equity industry in china exist, but it's not demanding you've level up to get a fifteen percent internal rate return. Um IT is IT exists to provide a bit of a veneer of private capital for storage investments and strategy sectors.

There's a lot of patient capital that is gone in to sectors that are quite capital intensive and that are willing to accept high risk and low rates of return, in part because IT is state capital. And as a result, in those sectors where this internal competitive hot house generates globally competitive products, production migrates to china. So that is the the trend that was famously exhibited in the solar industry.

Joe loves excavators. It's a slightly different story. But you know, twenty years ago, china was important, a lot of elevators actually from the united states, and then caterpillars sets up shop in china than a book of chinese companies with state capital backing them.

And not all state owned get into the excavator business. Then chinese demand for excavator goes ballistic with the property market and the property market tanks. And guess who's exporting excavators to the world? China, so, and obviously everyone's patrimony that this is same pattern will replicate itself in electa cars and potentially legacy semiconductors and potentially cutting edge ships. But that's a little there's a little tech war going on this up then .

if trump wins tomorrow, look, IT seems very plausible that we could get some sort of radically different approach to everything, certainly on the trade front. So let's just sort of accept that, that you know again, per of the models and the aggregators of fifty percent chance if here's wins, as you see IT, what are the priorities when looking at unhealthy globalization? Not like necessary what she's thing, but from your perspective, what are the priorities towards addressing this unhealthy version of globalization they described?

Look, well, I would start to some degree with some of the points that secretary yelled and lao brain or have made about china's own unbaLanced economy. And fundamentally, the us has, in my view, and interest in a more baLance ed chinese economy. And we have an interest in convincing our allies and partners who also join us and put in pressure to get a more baLance of chinese economy.

That's a long, hard slog. IT depends a bit on choices china makes. So one interesting in example, I find IT interesting in your trump talks a lot about replacing the income tax with terrace s. That's been one of his ideas is is unclear if you're actually going to do IT, but it's an idea.

China currently collects more revenue from tiffe than from its personal income tax and already has achieve this partially because it's still as somewhat significant terrace and partially because IT only collects one percent of GDP and personal come tax, which is a very low number, we collect eight. So that, to me, is necessary, is a part of the broader policy package that generates more baLanced chinese economy. But IT is not something that the us.

Congress can change. So the other component for addressing unhealthy globalization is something the us. Congress can change, which is the us.

taxa. So my immediate priority, if I were given advice to, hopefully president Harris, would be, look, there is a budget negotiation. Washington, dc.

Will be consumed with the exploration of the tax cuts. Twenty twenty five is a fiscal year. IT is a year which is set up in dc to debate the structure of taxation. And republicans, and this is conventional wisdom, have an incentive to come to the table, because if nothing happens, we have a Cliff and all of trumps personal income tax cuts expire. Republicans don't go to washington to raise people's tax, so they have an incentive to bargain.

And my hope would be, as part of that bargain, some of the remaining incentives in the corporate tax code that have clearly encourage or not discourage the migration of intellectual property and production outside the united states get address lobby where i'd start. I also think one of the the tensions, and one of the tensions in trades poh trumps trade policy, was the bilateral terrors are way less effective than he thinks you can get around them really easily. You put ninety five percent chinese content, a few screws in southeast asia.

You go to a zero tf rate. It's trivial to get around with a little bit work. So biotic terrors don't really work. But trump of them, one of the tensions in by administration views on trade and can widely accepted is that the by industry and talked a big game about frenching working with allies. And then in thanks to joe mansion, your friend.

very important, U.

S. Senator, thanks to your mention and we have an inflation reduction act. And thanks to you mention that inflation reduction act didn't treat our friends very nicely. So I think there's a lot to do to kind of harmonize our industrial policies with our our eyes.

And they have to make some changes to I think the europeans are ridiculously obsessed with following a super strict interpretation of what the W G O allows, which means that they won't h do by europe on their A E V subsidies inside europe. Uh, even though china clearly did by china on its evi subsidies inside china, they just didn't write IT into the law. They just never qualified a foreign made car, actually initially never qualified a battery made in china by a foreign company.

That only happened after the chinese companies, which now dominate global batteries, got a good foot hold. China's been super restrictive. And I think europe should be symmetric.

Do a kind of by europe deal. And my idea is, is that like the we have by U. S, you have by europe, we will what I learned at u sr.

You can deem european or I goods to be american for purposes of qualifying for U. S. subsidies. And we would offer to do that if europe would deem american goods to be european for qualifying for european subsidies. So we kind of each create an open market, tods each other, while being pretty restrictive towards china. So those earth, I think, to me, the cut in edge of policy in the .

haris ministration, would you be open to a potential position in a house administration?

I had a suspicion you might ask. I have never turned down an opportunity to serve 百分之。

So that was our live recording of the podcast at caveat in new york. I can't believe, after all that the it's actually election day now .

I did we find a listening who's gonna in, I forget, did anyone? I I think there's the one question we forgot to ask. We put .

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Thank you. Again, four years, but all those things in the maintain.

So we leave IT there. Let's leave IT there. This has been another episode of the all sorts podcast. I am Tracy l.

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