Breaking Down Trump's Potential Trade & Economic Policies | Stephen Miran
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Alright, looking back another episode of four guidance and today I have a very special episode um for long time listeners of four guide they will recognized the man on scene here, doctor Stephen moran. He is senior strategist that has some bay capital. He is a fellow at the manhattan institute, a posy research.

He has worked at the us. Treasury during the trumpet administration and he is coming back to three months ago. He's on the show and he released his active treasury insurance paper in tani um was a mother very smart economic participants and and researchers and doctors.

And he's back here again today to do a launch interview for a new paper that he has that just gets into the the new economic cools that are facing today that are really based in the the recent election that occurred with trump and a lot of the economic tools that he has been discussing. And so he wrote a paper that he is excited to be releasing in tana with this interview that really gets into the weeds of understanding the economic implication. So uh even it's really great to heavy on the show. You know, really honor that you chose us to to come here discuss your paper and I can make to get into IT.

Yes, thanks for having me back. You know, I think that the last time the paper would not rely you mentioned before made made some waves. And so for guidance, you know, is the premier spot for to building important, exciting the research, as far as I can tell.

something that yeah, yeah, it's going to be great. So the title of your paper is a users guide to restructuring the global trading system. I would love to just allow you to just set the stage in terms of the context of that paper why you wrote IT. Before we get into the specifics.

I guess let me let me first by giving a little disclaimer. You know I speak only for myself and my own views um you know these are the views they are going to hear today, just reflect my own thought. They don't reflect uh, anything relives to the trump campaign. They don't advise anything religious to trump transition. Reflect this theory the views of hudson bay capital of an inherent instead, it's purely, it's purely my own, my own impression of things.

Now that said, I think, uh, you know where we're to frame this paper the way that the way that i'd think about IT is to say that from one, the popular vote for republicans, but the first time since two dozen four uh, he delivered both chAmbers of congress and the White house you know he has a very strong democratic Mandate for pursuing, uh, what he said that he was going to do on the campaign trail, a media portion of which is to restructure the global trading system to make IT more fair and or several to uh you to americans his supporters present trump. They tend to think that the system is unfair towards towards american workers. And they've talked a bit of variety of things we'd like to do to try and make IT, uh, make IT let to make IT more fair and more secco.

But I think there's a lot of confusion in markets about exactly what the tools available are and what are those tools do and exactly what's going to happen if we use them. They're certainly been a lot of what I would consider to be politically motivates as historia about them uh uh about the tools. And I think that is important to understand the range of options that are available.

And so the way that i'd concept ze this paper is to think about IT as sort of a catalogue of what the options are, right, if you want, if you want to start restructure the bible trading system, what are the tools that are available to you? How do you use them? What are the side effects that might that might happen from the from using those tools that you might not like? And then what steps can you take to try and mitigate the side effects, to try minimize the first consequences in the economy? And so you know the paper is designed, I think, to try and help market practitioners, uh, get a sense of what are the options on the table, what might be coming down the pipeline. It's not advocacy for the particular policy that sort of more I think there's a lot of a lot of uncertainty about what the actual tools themselves are and how that would be used.

awesome. yes. So obviously, gonna have the paper linked in full detail with the show here. But aside from that, throughout this episode here, we're going to actually unpack some of the specifics and just provide a showcase of these specific applications in this catalog that you mentioned of.

So I just want to start off the back here by just level setting on getting an understanding of the context that we're heading into with the result of this campaign and why are even talking about these of of terrorist attack. So I love for you to just begin by impacting this, this regime that we live in, a of the us. Dollar reserve complex.

And what are some of the current issues that were starting to see the wise? Are you mention the idea, economic and baLances? I would love for you to just explain what are those economic and baLances and why have they occurred and why is they leading to the discussion of these new potential tools?

Yeah, totally. So look, I think I think it's important to you if you're if you think that the global trading system is is is an unfair and in need of some restructuring, uh, I think you need to ask why is that the case? right? Like what's what's out of whack, right? Why do we run persistently, uh you know, very deeply negative trade baLances.

Why is the current account not, uh, baLances for more than a few months, uh, on any reasonable basis in almost tough a century? What's going on that uh you know that that we run these these these mbale ces, the international sector and the answer is that the dollar, uh, the currency markets have not been able to reach equilibrium that would baLance straight, right? Normally in economics, you'd think that one country exports lot, another country imports lot.

The exporting currency goes up, and that pushes the exports down and the imports of the other country down as well. And that leads to our straight right, sorry, towards trade baLance. Currencies move over time to baLance trade, uh, and equilibrate international trade, right? That hasn't happened, right? So the question is, why hasn't that happened? Uh, the answer, I believe lies in the sex that the dollar is the goal reserve currency and there is insect, you know, more than one model for determining exchange rates, right? There is the trade model that I just discussed.

But there's also models for international finance for investing where currency values are the functions of the investment opportunity said in each country, right in the net world, currencies move up and down in value, uh, because investors want to only assets right now, I think where things get out of lack is that investors or certain investors, savers wind the buying dollar assets, reserve assets, us treasury securities, not necessarily because they like the return profile of the of space. They think the yield is a little bit higher in this part of the yellow curve and a little bit lower in that part of the od curve. Another country and that there's a good reason throwing know this U S.

Security over that german bonder what german bonder or whatever. Um but they buy U S security for reserve accumulation purposes, right and there's many reasons why foreign savers would buy reserves. Sometimes it's to manage their domestic c currency.

That's the case of you know china and sometimes it's efficient trade between two totally different countries, right? If you know indonesian, australia are treating with each other that trade is probably being collateralized and facilitated by us treasuries, right, regardless of the return characters of the U. S. Treasury, right? When that trade is occurring, they don't stop and ask OK unsupplied rate, living high or low as and moving up or down.

Is that that had gna hike? Or is that if I have gone to cut, right, like they has to buy those security to to to facility trade IT with each other? And what that does IT creates a very asic demand for dollar securities, right? That demand for dollar of securities is totally insensitive to any of the fundamentals of the trade baLance, fundamentals of the U S.

As an investment uh as an investment option among different asset classes um and that very inelastic demand for U S. Treasure securities pushes the dollar up right and IT keeps the dollar overvalued and elevated, and IT keeps other currencies artificially suppressed. So that trade winds up never balancing in the current account winds up never balancing.

And this is a type of, this is a type of legal liberating the economist would sort of think of as as what I would describe as a tripping words, right? The after the buildin economist, robitaille. And if you push IT too far, there's lots of stuff let written in on the trick, dilma, where this arrangement eventually get so out of wacked, IT breaks down the reserve of currently collapses. And bubba, and you will look, we're really far from something like that. I don't think anything like that is very plausible, but the persistent insects on trade have certainly been something that has devastating ted large sash of this country over the less decades.

Yeah so you mentioned the this trip in world idea, and I just want to quote out A A session of the paper here related to that. But you you write that indeed, the paradox of being reserve currency is at a leads to permanent in deficits, which in turn lead over time to an unsustainable accumulation of public and reign dead that eventually undermines the safety reserve currency of such large data economy.

So you know obviously you're articulating there is is whether the natural you know continuation that this leads to in the trip world that you mention. Um I just want to circle back on on just unpack the implications and also like the real world implications of what that means to have. What you're basically saying is that we have a persistently overvalue U S.

Dollar because of that being apart like the key asset within this system. You know you mention this idea we just talked about in terms of twin deficits, but there's also simply implications on on the manufacturing world. And I think that is in a lot to the societal and real world implications of this trump policy. They are sorry to see there. So with lodges is on act like what are the real world implications of the idea of a persistent overvaluation of the U.

S. Although, yes, so totally so if you take, you know, look at, like you said, if you, if you take the truth dynamics, no sort like all the way to the limit, you get to the lama a turning a tipping point, right where bad stuff happens. Look, that's not plausible in in in, you know probably in my lifetime, but certainly not in the near future.

Uh you know in in sort of U S. Financial markets. Uh but what this in lala tic demand does do is that creates lots of demand for dollar assets.

That is just the function of trade between the countries, right? IT has nothing to do with the the united states, right? Uh, or IT may have to do with other countries managing their currencies, right? Made building their currencies, whatever, whatever the reason that pushes the dollar up over the longer term and that creates persistent trade baLances and prevents the dollar from depreciating in a way that would deserve to baLance trade over the over the longer term. As a result, you get this persistently larger uh, in longer term trade deficits and current account deficits, which have had united of severe economic consequences for manufacturing in the expert sector in this country. And I think that this is driven a significant portion of know of some of the of some of the reason why why present trump really searched back into power OK.

So something that that was really interesting that I learned from this is you you discuss the because there's always this idea, okay, you know the world reserve currency, you know the U. S. Is run such high deficits.

And the question is always is, when does the start mattering? Obviously, you just nail that the the, the logical end of IT. But what was really interesting was this discussion and analysis we have around just the the total share of GDP of the U.

S. Verses, the rest of the world. So that to me was really interesting because as you showed that some charts in the paper is that decades ago when when the share of total GDP was quite high for the U.

S. IT, seems like this wasn't as much of an issue. But what I am understanding and increate me from wrong is that as that total share GDP has been decreasing, it's LED to these increasing strains is out correct?

Yeah, that's totally correct. And so if you think about IT this way, so so just just imagine that there's trade going on between you eight, two third countries, like I like I said australian a few seconds ago, right? If there's small relativity states, then they could buy treasury's to fiscal date trade between them.

And I wouldn't really wouldn't really affect our markets because the follows are just too small, right? But if their big reality of united states and then they buy treasuries facility trade between them, then IT is going to accept our markets because the flows just become larger as a share as a sheer of the overall, uh as a share of the overall treasury market, right, overall dollar market. And so if you think about, you know, this trip dynamics, creating an equal liberum in currency markets that starter away from equalize meta baLances trade from the truly climbing, right?

That distance is gonna really small as the U. S. As huge as a share of global economy, right? That distance is gonna grow as the U. S.

Are of the global economy declines, right? So as you've had much faster growth from china and lots of other countries in the last twenty years in the U S, share of global GDP declined, right? It's gone up in the last two years, right, which is sort of coincided with with which is sort of coincide in the last ten years, so which is coincided with A A decline in um in the size of these effects on on the economy um but as as that the U S.

Share global GDP has has declined. Uh the distortions imposed on the U. S. Economy have grown as a result right and so the U S.

Economy decline from about, know about forty percent of global economy in the six years, something down to a low of about twenty percent or something. You know, like going to the g fc or something, right? And that was, you know, of course, the period at when the U.

S. G. P was declining was of course the period of the most aggressive uh losses in the manufacturing sector.

Um you know and I think a good portion is because this dickle librarian, uh this trade disc liberum, that's a function of what you would think of as the train calibrating right? And of course, there are you know consequences of this demand. There's the higher dollar. You know people say that there's a lot that there's much of were bordering rates that is a result. Personally, I don't think that's such a huge fact because the name states are as much more expensive than lots of other .

peer countries that we have. Yeah then there is the third cost you mention, which is this idea, financial extra territory um so three love were taking a few times to make idea how to say that properly, but i'm based on those consequences within this trip world and these distortions that you just mentioned you know on comes the idea of terrorist right? So now we have this idea of terrorists being a potential solution that bring back that at reliability um so maybe as we bring IT to the discussion of terrifying, just get everyone in the same playing field. You could just explain the road you know economics of terrifying how they work and how they interact with currency as as being sort of the release while in a way.

yeah sure. So but before we get there, I think we should absolutely IT the point you made a second ago, which is financial or territory reality. I think I think if you think about this huge demand for reserve as it's right, like to push the dollar up.

Okay, we just discuss that a bunch, you know, pushes interest rates down. I think IT doesn't push them down by a huge amount because I just don't see that the U S barring rats is I don't see consequences. The us baring rate is that much lower uh then then the rest of the world.

Um but IT also gives you the ability to impose U S economic or U S policy on the worlds without having to move military assets, right? And so we can sanctions people, we can cut them at the global trading system. Uh, we can you we can bring economies you know like we did to iran in north and and we have north korea.

We can bring them down to down to the right and really improvers them by using the financial sanctions system that's built up around the dollar and the treasury security as the global versa currency and asset right, that ability to impose our will in other countries is a function of us being the reserve asset, right? So the real the real trade off, I think the tradeoff is often presented as as one of lower borrower yields, right? I don't see that.

I don't see that myself. Uh, when I look at you of economically, when I look at global financial markets, I see the real tradeoff is one of being the ability to have enormous power globally without actually using military assets through the financial sanctions system. First is a trade off of having an overvalue dollar.

Uh, that does that does damage on on our manufacturing and export sector, right? That's the result of of the terms of trade issue, right? Of the fact that you there is a currency assignment now there are various steps you can take to address the currently missions on, uh, one of which is to use teraphim right which is a tool that president trump t used extensively in his first time of office uh and which I expect we will see a lot more of uh in in the near future and and I think that you know people have broadly speaking, um got the forecasts about terrorists very, very wrong, uh, as they often did last term as well.

I think they haven't. They haven't one of the working the way people thought they would you know in in particular. I think if you look at the experience over the over the last trump administration, you know there was zero design able rise in there was zero disna rise in inflation in the macedonia ic data. They were zero design able drag on economic growth right in the macroeconomic data as a result starts. And these were not you tributary small terrorist s uh you know I think the experience generally speaking, uh you know was was pretty good.

Yeah maybe we can use um that previous administration twenty thousand nine as a benchmark to understand these mechanics. You're right, you trick parris is sort of this like quite loaded term right now where people here and intuitively think, okay, you know there's going to be high inflation ah you know it's guaranteed but obviously you broken IT down that is a lot more nuance than that. So maybe we start with the first step there, which is how do these know what are the economics of carrots? And then how does that the currency offset dynamic that you explain also come into the fact that we can use the twenty nine hundred and ninety, as I got as a benchmark k for this discussion.

Yeah, totally. So look, I think I think what people have failed to appreciate is that, uh, currency, as we said a moment ago, you know, like they move to find an equilibrium, right? The questions, what equilibrium are they finding? And when something changes in international trade or international capital flows, currencies will adjust.

Uh, you know in in in part as a result, right to partially reflect that. And so what happened last time in twenty, in two thousand nineteen is basic. If that the dollar moved, uh, the removal moved to pretty much offset the tariff on on china.

And so if you look at the effective terrify, uh, on china in the twenty thousand twenty nine hundred and trade war, the effective terror ate went up roughly seventeen you know, seventeen point three, something like that seventeen percent of point. And the reason effective rate is less than twenty five percent is just because, you know some products are exempted. You know uh there are some there are some exemptions that all sorts of reasons why I be effective IT maybe different than the natural rate um or the announce ate.

So the effective rate went up by about seventeen. What happened to dollar china? Dollar china move from a low from the low and dollar china to the high and dollar china over this period, rate of the trade was coming to a close in the forest and teen, uh dollar trying to move higher by, I think, about fifty, fifty, fifty and eight person points.

What that meant is that the move in the currency almost completely, not entirely, but almost completely, all set the change in the tariff, right? What does that mean? right? So, so it's work through the economies of this, right? What does that mean? That means that the after tariff dollar import Price of goods coming from china was practically unchanged, right? Not totally unchanged, but practically unchanged.

And for such a big move in the tax rate in the terror rate, right, the actual after dollar import Price was almost unchanged, right? So that's why we didn't see significant inflation, right? And actually, over this period, inflation went down, not up, right? If you look at the.

I inflation and pretty much went side ways. If you look at you if you want to look at P C E inflation, which you know the set targets. And of course, i've writing extensively about that know. But if you look at PC inflation, they went from slightly below the sets target to even further below the sets target over this period.

The reason we didn't have any material inflation for what was actually a substances shock to to policy, uh, is because you know, markets financial markets moved in currencies of service and in the end, you know, IT IT, IT turned IT tended not to matter. And of course, there's all sorts of implications for that, not just for inflation, but for who bore the burden of this, right. And so if you get to a situation in which, uh, you know treasuries taking in revenue because of the terrorist income crisis domestically don't materially increase because the currencies are upset them, but at the same time, there are may be weakened even further.

The net of vat is that china's purchasing power effectively went down. Chinese consumers effectually became poor because their currency went down at the same time that revenue came into treasury. So I think that the way that a lot of uh, you know, a lot of economists who would look at this and would look at the experience of strategy AR synthetic ticket to the administration would say, look, this was actually very successful.

Uh, you know, china paid for the revenues, you know that treasury took in. There was no material increase in inflation, and in the mack economic data, impossible to find IT. There was no material increasing inflation and there was no material dragon growth. Uh, and so you know things tended to actually work out pretty well from last time. Now, of course, of numerous microeconomic studies that argue otherwise that i've sort of addressed in the paper and happy to go into that if it's it's if it's of interest to you yeah.

I think we grated to compare because obviously nowhere a micro show we always like, I intuitively think, for the top down, but would be curious to contextualized the bottom of considerations.

You know there are a whole bunch of academic studies that have come at last few years of of the trade war that basically look at they tend to look at surf product level Prices and sort to say, okay, you know, Prices moves up for this much terra good compared to the other good that wasn't terrible to, therefore, we're gonna tribute, you know, passed to the tariff, right? And these academic studies, and I guess I discuss a number of them, know, know a link in in the paper, you likely tend to find a territory completely pastor, right? Which again is is the exact opposite of what I just said happened to the macro economico.

There is this question of how to recognize the macroeconomic data with the macroeconomic data. And I since there's there's a handful of answers to this, right? One of them one of the things that I that I find most best ways of is that, uh, you know, we export causes what economists recall, a significant identification problem for the microeconomic studies.

And so if you think about china is leading the terrace by sort of reexported through third countries, right? So they send the product to vietnam or mexico or something, they do like a tiny amount more value added to them. And then IT gets counted, and the entire thing gets counted as vietnam's or mexican exports unity state instead of a chinese export, united states.

The ninety percent of the value added this from china. That's a way of getting around the terrace that I think a trap administration will really look into cracking down on, but has have been certainly in practice for for the last four, five years that create IT is an impossible problem. And to identify the experts that are chinese, right? So if china engages in the export for the product that he would have to absorb, the terrifying that I can pass through the Price increase to consumers, those products get labeled as be at the meuser mexican instead of chinese.

The products that china fails that I can pass through the terrifying to the consumer, IT will continue to export d this from china because they can make americans bear the cost. Right now, whether you there's there's a whole economic literature on who bears the cost of taxes of for all different taxes, called incidents in the public finance literature, tax incident. And you know, the bottom lines, this literature that whoever is more as economies take in elastic beira attacks, someone who can adjust their behavior to avoid the tax will not pair the tax.

Someone who can adjust their behavior to avoid the tax is forced to bear, is force to bear the economic bird in the attack, right? In these academic studies, what you get is that goods that can be good goods that china would have to absorb the increase on, they want to be labelling them as the the atomizer mexican or whatever, right goods that they was consumers highly in, elastic on, and the chines in those consumers will have to absorb the the tax increase on, continue to be labeled as chinese. That creates an international table empirical problem in the microeconomic data for for correctly identifying which goods are hit by the tariff s in which good are not hit by the terror.

And so I think that causes that causes a major error in the conclusions of these papers. And of course, that there's a few other you know, a few other things wrong with this literature as well. You know, I think that they study some short term effects when they should be thinking you have some areas long time effect. I think they also find you know a coupled and find that the best is you know much more for the whole seller than the retailer, that the importer, uh, sort of absorbs higher Prices, but that they can't but they have trouble passing those Prices on to final consumers. And so even though so consumer Price inflation doesn't move higher, but retailer uh, you know whole seller or retailer margins go down and the margins of the selling companies go down rather than the consumer Prices is moving higher.

Look, I think that if you have a competitive market over time, these companies will find ways to avoid you to to improve that, right? You'll be competition among chinese exporters to lower their Prices because that more you, the currencies move so they can do so right for the you know the the importers will move their business elsewhere. So I think there a whole brief of reasons why i'm skeptical of the conclusions from that literature.

I think there's, you know a motivated reasoning going on. And I always come back to look where was the evidence in the macroeconomic data. I I don't see any. So okay.

let me see if I got the street here. So IT feels like basically know for a practice or listening to this and trying to the piece of park understanding the potential applications of this policy. There's there's two main considerations. The first one is the context of the business cycle that we're in when the territory implemented.

So you know as you mention the degree to which the currencies will move, you currencies can move for obviously know Price in the area of also to move all the reasons, you know like we're in the economic cycle, whether we're hiking or you know Loring interest rates. So there's considerations to the the currency moves, other base on wear and the business cycle. And then there's also you know this idea of currency offsetting you.

You've mentioned the paper that um the underlying idea of IT is based on a number of assumptions, and i'll quickly summarize my you want being the exchange right must move by the right amount. Primitive and intermediate value added in final exports originate predominantly in the exporting nation, pass through the exchange rates to exporter Prices is complete. Importantly, since imports are often invoice in us dollar, the exchange rates don't automatic effect.

Instead of strengths in the U. S, dollar improves exporter profit. Margins of exchange rates do not pass into Prices. And then last way I mention part three, from wholesale import to retail consumer Prices is complete. So basically, there's this bucket of warra in the context of the economy and then these key assumptions that are big. Da, is that correct?

Yeah totally. And and look at you know I think there's a variety reasons why currencies move to offset turfs, right? And I I I go through some of the medical literature on why that happens, right? You know the tariffs h ita baLance improves and so all equal, the currency would move upset that. Uh, the time the terran country, uh you know the central bank may decide that IT has to hide grades a little bit because growth has improved.

Inflation in lation may be may be moving up and that will also caused the current to move and then force all those are those outcomes, right? So there's a whole bunch of reasons why currencies with offset terrors, and there's a whole bunch of reasons why, you know, there's various cross current that might not be that might prevent that. Now one thing I would mention is that if you look at the twenty, twenty, twenty nine and experience, it's true that the fed was cutting rates at the time, which some people point to.

Is that the reason why the dollar pier, however, those demand of hikes that the market was looking for in that period actually was declining, right? The spread, the yield ds spread advantage of of two, your treaty notes over g seven treasury notes is actually declining over that period because the market was actually pricing out fewer future pettis, right? This is a period in which the fed that was halfway through the hiking cycle that was extra a hiking cycle would go much, much further.

And in fact, hiking cycle shortly stopped and then when reverse, right? And so even though the fed had been hiking over some course of this period, the actual market implied amount of fed hall Christians related to other countries was declining over this period. So the currency was actually moving against interesting ict differentials and not with interest differentials, right? So so it's not a really, uh, convincing explanation for why the diver tire in two thousand and twenty? I mean, look, no.

Is IT possible that the currently does not set things this time? Uh, you know sure it's possible you know like an x or could you know hit anywhere you know like things happen right ah you know but again, in to all of equal arguments. And if the dollar was if the dollar was uh, depreciating for some other reason, IT would depreciate by more in the absence of the terraces. Um and you know I I see a little reason to expect that this would play out differently than twenty eighteen, twenty nineteen, of course. You know that is disagree.

Yeah yeah for sure. Um okay. So last question before we moved to actually concept realizing what might actually happen in this specific upcoming passes is um just making sure that we've covered our base in turns understanding what is this trade off idea. So really what IT comes down to is. okay.

If if if we were trying to figure out is whether these terraces are going to be inflationary or not, you know you eva table in the paper there, will you break IT down, which is IT really comes down to how much does the currency offset the change in the terf? So you you break down, you know, what's the potential fact and inflation, the incidents, trade flows, revenge area. So is there anything you want to there before we get IT to conceptualize?

And what might actually happen here? You know, a look I think I think know the terrace were non inflationary in twenty years and two and nineteen uh I think that that that seems very um you know very strong um confidence to me um I think a lot of the reason why they weren't inflation, he was because the currency moves to offset them. If you don't if the currently moves to accept them, you don't get inflation.

Treasury takes in revenue and the and the tariff country ultimately pays the cost of the of the terrorists because they are personal power declines, right? And by the way, it's worth noting that as he looked about the amount of revenue that the terrorists raised, IT was a Better third of the cost of the tax cut jobs, right? So in that sense, you know, the tax cuts on americans were financed by taxes on china, right? So I think this dispute is an overall very successful package when all these things work together.

correct? If you don't get currency offset, right? Oh, sorry, you know. But if that happens, then you ultimate you know Prices experienced by americans haven't changed very much. And so there's little there's little incentive for firms to really uh you know move their supply chains quickly or aggressively, right?

Um and so you might wind up not having such a huge impact on the trade baLance because, uh, you know things haven't really moved enough to incentivize huge adjustment of of of trade flow because the ultimate Prices was offset Price changes were offset by the currency. However, what you've that is, you've been improved burden sharing. And so if the U.

S. Is providing reserve assets to the world and that has exerted a significant downside pressure on our credible sector, on our expert sector, on our manufacturing sector. What you've done in this context, where you've managed to raise revenue paid for by wear currencies from other countries, is you've improved burden sharing because the revenue that the government takes in that finances, lower taxes and higher government expenditure for americans was effectively paired by the by the terrifying, right.

So burden sharing has been improved. If you don't get currency offset, then you have to deal with the effect of the higher Prices. You will experience some relocation of trade flows because the higher Prices will incentivize companies to move their supply chains.

So that will cause the paterson of activity that will cause companies to make out of china or ever being carved, cause them to move back to U S. Friend, sure, whatever. Um but you will also collect less revenue because the imports from the tariff nation come down, right? So there's ultimately a trade between do you want revenue or do you want to reallocate trade from the rest of the world.

And there's there you there's a attention between them. But I think in the eyes of a lot of I would imagine that the eyes of a lot of folks that are going to be working in, in the true ministration, either as comes as pretty good, you you either sort of bring lots of industry back and and you know get the manufacturing sector here blooming or you is kind of revenue. I mean, no idea of those considered to be about everyone.

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Customers to payment interacting few legal disclosures I crack in dosa ash legal slash disposed okay, so let's get into speculating a little bit on the ramal possibilities of what could occur here during this this trumpet administration based on some of the ideas that theyve said so far. So you know, on aggregate, you mentioned the paper that there is a distinct possibility that overall trump ticket and that being out right distinct lation ary. So I I want to break a part in piece meal. Why that is? Because obviously, there's the terrifying aspect. And I want to dig into specifically what we're seeing that might happen there and then also some of the other economic policies that they might be pressuring in terms of, you know drill baby drill is get some oil going, lower oil Prices at the same time that you know we're lowing tax rates uh, for corporations in those ideas is so just would love to hear overall how you're thinking about that and how you're going to do some of the conclusions you have on on what could happen and and what are some of those other possibilities.

If you think about what happened in two thousand and twenty and twenty, you know, we had three hours cent employment and a declining inflation. How is that possible? I think that the way that that was possible is that the admins, istra's, was taking extremely active step to liberalize the suicide to facilities supply I grow.

And so therefore, even as demand was expanding, bristly, the supply, I was able to expand at a similar pace so that you could have very low employment, very strong GDP grave and still not experience material inflationary pressure. A major part, a major part of that is, is regulatory. Now you know economists tend not to really do a good job studying regulations because it's hard to measure.

It's very easy measure tax rate IT turns out actually maybe it's sometimes not so easy, but it's much easier to measure a tax rate, you know like, uh, the terris twenty five percent or I just tell you a moment ago, it's actually the effective of terriers seventeen points. So it's feel if still not so easy measure taxes, but IT is much easier right? Then applies generally speaking to most people, you know you have lots observations.

Pretty easy, right? Regulations are like very head or genius, right? Every company is facing like, uh, different regulatory set of things that cares about because is involved in different types of activities. There are many, many different agencies that issue regulations. They are enforced uh with extremely varying degrees of a of of of uh activist sm um and so as a result, you know economists do a bad job studying regulations, but they are enormously important for they're enviously important for uh for how the how the economy functions um and they're important not just because um you know they determine what type of activities undertaken, but they make everything more expensive right you have to um you know you have to comply with the regulations, right that require significant legal and complaints.

Uh cost you have to engage activities that increase the cost doing business um because you have to sort of spend money on stuff that you wouldn't necessary spend money on, uh you're prohibited from doing on the things that can be very discount to build a factory uh or house uh you or or whatever product is that you you're trying to build and these things get into the entire economy right um and last trump administration, I had a rule called one into out uh which means that for every new rule a that that federal officials wanted to put on the books in the code of federal regulations, they had take two old ones out right, said the repeal, two regulations for every new one. Who knows what is going to be this time um at his talk at the economic club in new york president trump suggested one in tennelly um which obviously much more aggressive than one two out but you know I think that this this is very, very significant for the economy. I think that is enormously underappreciated by economists, just how difficult this makes the supply side.

So for example, if you could build tons more housing um in the economy at a much cheaper cost because you turn you know because you don't have to sort of comply with all these regulations and there were no the zoning concerns or whatever the prince housing would be much lower regulations prevent construction of additional supply which restricts supply, which keeps Prices are are event very inflationary. So deregulation is not just didn't flapper is out right deflationary um in the extent to which you are capable and and quick and doing IT can determine just how deflationary and the through also in the energy. Robert and I think that getting energy Prices lower is a traditional te priority for for for the incoming administration, be a traditional priority for becoming administration.

Energy doesn't do everything right. It's not just, you know yes, it's filling up your filling up your tank at the pump of every week, but that costs to filling up the tank, uh, you know also applies to all the workers that go to every job. And so uh, every company has to pay its workers more over time, uh, if there costs a living increases because the gas Price goes up, right? And so when you get the gas Price down, everything becomes cheaper. IT goes into all men in factory IT goes, you know, IT goes into everything. Energy Prices go into the entire economy and I think that the administration be pretty determined to make energy abundance uh energy cheapest uh a real thing um to get uh american induction in the american economy booming um which know is very powerful um for growth and very deflationary as .

well something in the paper imation is that how the the administration is viewing national security and trade. Is basically intertwined. I wants to ask you how unique is that circumstance and how does IT leading IT to how they might actually implement terrace? Because you had mentioned there that they could end up doing like A A stage gate staggered approach to terms that at us. So just we love to hear how unique is that idea of have inter point in those both and how does that you know create some implications and how they actually implement tariffs?

Yeah totally so um so this has actually been the default for, I think, a lot of american history and certainly have to go back to the cold war uh you know sort of trade policy and in security policy were deeply entertained in the U S know the united open IT to markets and provided preferential terms uh preferences, trading access to a lot of countries, uh you know preferential, terrific as well to a lot of countries are in the world.

Because he was interested in rebuilding democracy. He was interested in creating new democracies. IT was interested in fortifying democracy.

IT was interested in creating analyze against the civil globally because we were in a cold war right uh IT also had the idea that IT was under no other no obligation to enrich the soviet in and the tellers and in reaching one's uh mortal enemies uh duri man called war could prove to be a major strategic mistake because that media enemy more dangerous um and so tree policy sought to deny advantages to the soviet union sallies and give advantages at great cost to americans to realize in an attempt to set have create buffers against the so but you know the notion that the two would be separate, this sort of really know very ninety nineties and the history type of attitude that there are no real security threats, right? But hey, gets what you know, it's twenty twenty four in their real security threats again. Uh and so I expect those to become increasingly enter a entertained over time.

Uh the idea that you can do that you have another country that that says its school is to display you as the is the global head demon and basically to to destroy your emin in your society over the course of decades um you know be a that you would structure trade policy to enrich them and impoverish ourself uh you know that have seems I I think kind of silly. So I I do expect these things to grow increasingly, uh reenter twined over time. Um and I think you know what you're mentioning is that is is the implementation of the terrace will be uh aimed this, right?

So you so one of one of the things that I mentioned is that you know the term members that people are talking about are much bigger than the tariff numbers that we had in two thousand and two thousand. You know certainly sixty percent on china, ten percent on on the rest of the world know those are much larger numbers than we had last time. Um to avoid shocking the economy, uh, I think it's gonna important to um gradually implement them, right?

I think you don't want to go from zero to sixty overnight. You don't want to go from zero to ten overnight. Uh, I think that, that user will create some more market volatilities, and I think, uh, investors would want.

And so I think it's could be important to pay attention to doing those in a way that markets will find acceptable, right? So what is that? What does that look like? Expect that will ultimately end up in a place where it's something like we give to china.

Here is a list of demands that, that we have. Here is a list of things that serious adult countries do, uh, in the globe trading system that they do sort of to make to make trade a work fairly between trading partners. They respect in lecture al property. They don't still in the lectures property. They they do recipe al market access you they don't do non tariff areas know also they let their currencies uh you know reflect the trade baLances is all sort of things right um that you think that you know china might you know might might have to do um and you once they have this list, you you say something like, okay, you know here's if you have to do to be you know a responsible adult economy and until you do that, you know we're instead to do terabits gradually inconsistently and do something like two percent of months every months indefinitely here's the lifts.

Here's what you have to do to be an adult until you do IT you don't get true to like an adult um I think an approach like that would wind up giving terrace very, very gradually um with very clear forward guidance, the type of ford guidance that at this podcast is the decor right and and IT reduced uncertainty right, which is why you use for guidance right? And I think that if if corporations and investors have a lot of uncertainty over where things are going, um you know, are we gonna have terrorist s of zero or sixty or ten or twenty one of the coming down the pipe is that if it's just one time, that I can sort of just take a one time hit and then look through IT and not really changing any any of my behaviors. I think if they have clear and gradual for guidance, you will do two things.

First, you will reduce uncertainty. And with reduced uncertainty, you have lower of volatility. IT would lower will tell you have a much easier economic adjustment to the new policies. And I think I will also give them a time and force IT to adjust their supply. If you have two authors supplies to to the new reality, if you think that there's a one time shocked to terf rates, you know, a terrorist, just one from zero to to fifty or something, you know, and map IT and then I can adjust to that and then, you know it's over. Maybe you don't just spacing, right, because the shocked was a one time thing is a one time here to you, you know it's a one time that you can you can move on from IT if there's no end in site.

If the tariff should can continue indefinitely, I think there's a lot more incentive to adjust supply chains to reduce the risk exposures that we have to china that they export critical, critical stuff to us that, that absolutely critical for financial security purposes that they could just cut off on. Uh you know because you know because they don't like us or something that guidance over time, uh, you sort of gives foresight IT gives clarity, IT eliminate on third to and IT gives incentives for long term action. And most importantly, IT doesn't give incentive for urgent action.

If if you're corporation, you know that the terrible are going up two percent a month and definitely, uh, you don't have to act tomorrow, you could take your time and take six months a year, two years to deal with this because you know you know, you know that you know, you know that is happening. And so you're gona start acting today and making prudent planning for the coming quarters to make the adjustment. You don't have to sort of russia and do IT you today.

And so this is a way of minimalizing minimizing voluntier ity of uncertainty and facilities. The greatest amount uh of of sort of good corporate reactions to the to the you know the inevitable increase in trade tensions with china that the present is democratic mated to pursue to look no, I think that there is a lot of steps that you could take that move in this direction. And I think that the trick is going to be coming up with ways of implementing them that don't create too much mark of relativity, that don't create too much insurgent in the corporate sector and in that and that shepherd investments, I think, where we want them to go from national security perspectives.

So you mentioned that there is this idea of boksa terms of like how these are terrifying, actually get applied to different nations and how they decide around doing that because you just unpacked that a little bit further.

Yeah, sure. So you know the present trump is proposed ten percent. You know, that made some higher. And on the world as a whole, I think that first of all, those are likely to similarly or and say likely to. But I I, I, I, I would think that volatility could be minimized by similarly implementing those in a gradual in a gradual way, freezing them in over time. But then also know I would know I would think the ten percent doesn't have to apply evenly to the world as a whole.

And so something that's got besson, who's one of trump's sed economic advisors proposed earlier in the year, uh actually at a mini conference um was creating a series of buckets uh that you could sort of put countries into based on their relationship, the united ted states uh and countries and you know the the good bucket would have a very low terrify in person, and countries in the bad bucket would have the higher terror ate, you say, ten percent or something h imposed upon them. And then to your point about increasingly intertwining mencia security in in in trade, you know the criteria for creating those buckets um you know could be pretty broad, right? So they could have things like what are the terrify ATS that you put on us? You know we we want to have similar terrify tes to you that you put on us.

How open on your markets? Do you give us open market access? Uh, what non tare barriers do you have in place? right? But then you could also think of all sorts of security things, right? Do you pay you to obligations? Or do you circuit to obliges? Do you vote against in the eight thirty and nations?

Do you help, uh, countries like iran in russia evade sanctions? Um do you help develop ways around the ability speeds to to impose the same election territory reality that we discussed earlier? Early room with the right there are all sorts of uh, you know, security things and economic things that you could think of as comprising the bucket.

And you could imagine you could imagine a pretty broad set of criteria and in a larger number of buckets that sort of end up determining what tariff H H. Gets applied to different countries. So you know when you say something like ten percent on the rest the world, I mean, yeah sure I I could check out that way, but I don't think IT has to.

And I think that the terrorists s can be used to incentivize Better babe, from other countries when IT comes to sharing the defense burden, right? Just like providing reserve, current reserve assets puts a huge burden on the american economy. In the american worker, providing the global defense umbrella does the same thing, because we have to teach ourselves to find out security for the world as a whole.

And so if you can use terrify in this manner to incentify you, you give countries incentive to do Better job sharing the defense burden, do a Better jobs sheltering their loads of of, of providing that security umbrella, then I think you've improved burden sharing. For those things. And I think that you know the U S.

Economy is not fifty percent of global GDP anymore, right? And so by doing by doing something like that, burden sharing gets enhances. And I think that's a matter that will be a material goal of uh of how terrorists get used to restructure the militating system yeah and I feel this .

is where people are getting you know hung up a lot is as they hear the out right idea and and they misunderstand IT, that is a potential you know lever for negotiation to get to this idea of buckets. And you know you have to you have to come to the new realization that we don't live decades ago, like you just mentioned, in a world where you know the percentage total GDP share was much higher for the U. S and just simply isn't anymore.

So you do need to retaliate, ate away from that. So IT is understandable. So okay, so I want to mention a little bit on the second major component of of upcoming trumps policy administration economic polices.

And this is this idea of currency. So I just want to remind listeners of what we talked about at the beginning of the show, where we discuss the idea of a persistent overvaluation of the U. S.

Dollar and some of the potential implications of IT. So just going to read from the usual chapter of chapter three of currencies. Just a quite sentence here just you know promise here um but you you you write this in the trip world. The demand for reserve assets causes persistent deviations from the echo elimination in currency markets that would baLance trade this this quillie um in trade occurs because the real exchange rate is too strong.

Exchange rate overvaluation can be read dressed by as discuss above or by addressing the undervaluation of other nations currencies as occasionally floated by folks like president trump himself and his vice president nominee uh j events so with that in mind, I would love free to just unpack what are some of the potential approaches that they can take to we calibrating dollar valuation? Um you mention this idea of a lateral approach. This is a multi lateral approach. So person, you can just started by untaken the high level approach and there where are some of the this for possibilities depending .

on which have to go from there? Yeah totally so um so let me make a couple a couple of broadcast. First of all, um you know I think that there's there's A A an element of similar and comfort with terms. So there's two ways of trying to fix the evaluation, right? You could use terrace s or you could use a currently approach.

I think that there is journalism speaking a pretty broad, familiar and comfort materials s because the experience of the last administration, the currency stuff is, I don't want to say, experimental because IT has been used in the past, but IT hasn't been used for a long time, right? You you go back you know several decades, uh to sort of get back to the point at which he was actively using the currency policy in the way of discussing paper. So IT is a little bit more IT is a little bit more uh, you know unfamiliar to folks and therefore, maybe there's going to be more caution around using IT.

Nevertheless, I do think it's important to discuss the tools because they may ultimately eventually um beyond the table. Um and and I think in particular, there's there's A A lot of people in financial markets. Uh you i've seen ten thousand research notes arguing that there is nothing the administration can do to effect of the dog the value of the currencies and that's not true.

You know like there's tons of stuff that they could do if they want to and they have various effects that you can try and file um but you know they do if tools they do if tools to do them uh to do IT so barely speaking, there's there's two sets of approaches you can take to trying to affect currency markets. Uh one is a multiple currency cord. Uh, this has historically been the main with united states has pursued currency policy.

Any other is various means of unilateral uh unattentive uh attempts to affect the value of currencies. H and this is more of the type thing that other countries engaging and then have a historic engaging than the united states. Nevertheless, they are definitely our tools unable for doing so. If the president ultimately decided this is what he wants to do, the tools, the tools do exist.

And again, the reason when I wrote this, if do they think it's important for interest's to know the tools are there so they can think about a, how would I react to this happen? What would the market consequence of of this be multi err records right like have been very successful in the past right. So here you think about the paris accord, sorry, the the um cord, the police cord and the live record which happened in um you know you know they have in general been been quite sucessful at at pursuing um pursuing you know changes to the valuation of the dollar and other currencies.

Where are the economic consequences? You are more contested among economists um but the fact that they were able to move the currency markets is is is is not contested and in these multi lateral record, you know you typically you get you know large amounts of dollar buying you're selling by h you foreign central banks and reserve managers. Um there's a couple there's a couple issues uh that I see um thinking about this as as a major as a major means of moving forward gn currency policy.

Um one is you know I think that you know the bond market is defining different place and IT wasn't nates. Um we have a much higher debt GDP load. Um you know deficits are much higher now. Um we've lived through a know in the recent past, potentially a dramatic moments in the bond market. Um and I think that you know sort of if you are telling folks to you know basically go out and and sell their dollars, uh, you know I think that you have their dollar assets. I think that you know there needs to be concerned for making sure that the bond market takes IT well and the bond market doesn't become a does doesn't become uh concerned about that and that in the yields don't with materially higher uh as a as a consequence, there are uh and certainly with the bottle market the more fragile place than IT was uh and five years ago and IT certainly is it's certainly is something that I that I would think uh that I would think would be top of mind for addressing a should you go down the road of of trying to create A A currency court to get other folks .

to to sell the dollar got yeah you mentioned you know what possibly is any of naming at something like the parallel .

a court um which would be certainly in just yes so currency accords are are famous ly famously named after you know resorts rather negotiated braden woods laws the love which is not a really important location. And I think that that I think that they would be that would be a nice historical a nice historical statement for the administration. Have a more logo accord no far from the first person to to suggest that that might happen. Just my short hands for its its my short hand to concept tuition that what the shape of that could be uh that I spend a little time uh that I spend a little time discussing uh drawing a little bit on some stuff that that sult and poster has has written about us well uh in in his reading of what various perspective officials, uh you potential officials have said might happen um okay.

so you know when I hear about outrage changes in currency values, the first thing I think about is what are some of the mother tools that we have a special relation to the fed and how IT works with the treasury.

So obviously, we live in this world now where we have, you know, for example, the fed has swap line and set up with with a lot quite a few of of the the broad central banks that they can use as an execution to is also the exchange stabilization fun. I think I have a right from the treasury. So how how are some of these tools potentially coming into this? And also the relation between know as as you mentioned in the paper, Scott is right now the the front runner for for treasury secretary. If, for example, he ends up being the nominee and you have that run over there and then you have um what we assume is power consuming at the fed, how do those two worlds work together to achieve this policy whether the dynamics involved yes.

So if the multilayer policy, uh policy cord, basically you need to to convince other countries that are sitting on large amount treasure security, uh to relocate those dollar actions to assets of other currencies but probably their home currencies, right that um you know if they said before you runs you, you might be concerned about what happens to the bomb market in that situation.

So one proposal that you've been that you've seen floated around is that you combine IT with you combine the currency cord with a duration accord whereby if other currency if other countries are are selling some other dollar assets, potentially, they could also be extending the duration of their remaining dollar assets, right? So what do I mean by that? right? So they sell some dollar assets to make their currencies go and value to make their currencies reach more, more fair values.

And at the same time, for the remaining dollar assets, are they linked in the maturity, right? So there maybe treating bills they own for longer term debt, right? That longer term debt could be something innocuous, like the types of the thirty years that we or we could issue, you know, a signally longer term that explicitly for this purpose, fifty year to century bonds perpetuals even could be possible for this for this environment.

And the reasoning for that is that IT helps IT addresses the issue of worrying about pon deals, right? Um because you're creating you're creating a significant demand for U S. Long term paper that would offset the decline in demand for a long term paper.

And IT also helped qualify the relationship between queen trade and security umbrellas. And so if you think about the defense umbrella the states is providing to its trading partners, that defense umbrella is the sort of a public good. And so IT needs to be IT needs to be financed by the type of, uh, by the type of investment that this this ouldn't tell.

What that does is a create a transfers, introduce risk from the U. S. Taxpayer, foreign taxpayers. So this is an additional in additional elements of burden sharing to finance the global provision of reserve assets in additional level of burden sharing to help finance the provision of a descent umbrella.

And the trends that industry rests from us to them and IT creates Better solve cy in the us central market and they will keep U U S. Yellow low and prevent them from from uh in pingping. On the economy, there are a couple significant problems with this approach.

Uh, you know that they need to be tackles. One is, uh, the purpose of reserve accumulation, as you know, is so you can defend your currency in the crisis, right? Other countries can defend their currencies in the crisis and and cover imports. Uh, should they have a current crisp you need build today, you or at least much shorter term notice for that.

Uh, if you need liquidity because you're having know your brazil and you're having currency crisis or you're talking you have access whatever you need liquidity, you don't want duration, you don't want very long term assets that are not liquid and that will be significantly below par. If you have to sell them in a potentially if you have to sell them in a crises, right? You want stuff that's going to be treating at power that you can easily cross reads and you know and raise liquidity to buy backs in currency.

me. So if they extend from bills into century bounds or perpetuals or whatever, you know look um that creates liquidity problem for them. That that ob is the entire purpose, having a reservation folio to begin with for many of these not all them, but many of these guys that can get be gotten around with through creative use of swap lines, right? So just like the bank term funding program, that swap duration from banks last spring during the way of the regional bank failures and allowed them to post long ger from debt in to the fed in in exchange for short term reserves.

Something similar could be done here, right? If they if they had a crisis, they could have a swap line with the fed that allowed them to host back there or or the exchange stability ation fund, uh the treasury could do IT without with that if they wanted tip and create a swap line that would allow them to post back at at par there a long term security bonds and in receiving exchange, a short term and short term financing um that they could use to defend their currency. You know if if if they had to, you can can you can get around that problem by by creative structures as the set has one in the past.

And as as possible, the second significant barrier or to this type of approaches, that you got to find someone willing know who has the U. S. Dollar us.

To sell, right? right? And where is the, you know, paua love? You know, those were largely done with europe in japan.

Uh, japan is still sitting up, sorry, still sitting on a huge pile of, uh, a reserve of assets. Uh, but europe is no longer sitting on a huge pile of dollar reserve assets. Uh, and japan's are not big enough to really solve the problem.

H indeed, the major dissect liberating problem is between the U. S. In china. So a lot of the reserve assets are in countries that um we don't have to have a relationship with that we had with know europe in japan in the eighties. Um and so getting them to voluntarily agree to this type of the court is going to require sticks and cards right in the area. Sticks tariff s give you leverage.

Terabits bring, uh bring someone to the negotiating table tarifa delivered the face one deal with china, which they walk away from during the by administration, you know, terrace, give you the type of leverage to try this this, but you need to take in character. I think it's going to be a harder, a harder lift. You know, potential wasn't in the eighties.

interesting. okay. So i'm going to do my best here to try that somewhere as that big pictures here.

And you can just let me know i've got a wrong or right or you want to IT further contexts. But basically, okay, considering this idea of we're in the U S. Reserve dollar complex, there's that extra territoriality annamite that you have.

So okay, as as the U S. Had money, we're going to a lot, we're going to protect you. But exchanged for that, you know there's going to be you know, part of that card is that we will protect you, but in exchange for that, you need to help us.

What are that problem here? Because we have we have the issues with the long bond yids that could get a little bit unsure in this dynamic. So in exchange for that, you need to take on and absorb a significant in a very long duration debt.

Now obviously, if you know rates are increasing for whatever reason, those bones could be trading below par, as you mentioned. And if you for whatever reason, they are having to protect your currency, you don't want to be selling these bonds on a train to blow a par and take the loss. So instead of that, you're you're you're gone to hold those long duration bonds.

But we're going to set up something similar to the bank term funding program where you can actually swap those in at par with us just in case um I were going to set to hold up on a bucket IT system depending on you know like how friendly are and then the the the terrorist program is going to be also stack on top of that is law, which is the stick side of things that you mention. How does that say? Is that right?

Yeah but it's it's all it's all potential. You know like I I emphasize that trying to trying to show people the catalogue of tools that you know that that could be used and sort of think through with the market consequences of them are uh, i'm not um you know i'm not part of the trm transition effort and uh you know I can't tell you that's going to happen. Uh, I can just tell you, look, you know here's you know, I think people are are insufficient appreciating the creative, the inflexibility with which the areas tools could be used, trying accomplish what the ends are yeah yeah I excess.

And I think that's the really important lesson is I like never doubt the creativity in in finding these neutral ls and methodologies to achieve their means. The last question here is a wrap up is obviously just you know, the concern for market for market practitioners is the potential volatility markets impact.

You make a few points, which is obviously that know in truth size a lot of his success as a president that is tight to performance of the stock market. So you know just some closing thoughts of perspectives I would love in terms of how you're thinking about the impact of market volatility from these new emerging tools? Yes, sure.

So I think I think that's a great point. So know, I think that present trump is somebody who cares deep ly about central markets right here, somebody who cares deeply about the economy. And don't forget, financial markets can drive the they can be driven by the economy and they can also drive the economy.

And if if you had, you know, sort of significant unwanted volatility and venture market IT can create a drag in the real economy that you probably don't want. So he is somebody who is very attentive to financial markets in the third term, and I would expect him to continue to be attentive to finance markets in a second term. That means I would expect them to come up with ways of implementing these policies in ways that didn't derail financial markets and didn't introduce too much relativity and met the longer lines of the graduated ford guidance that I suggested earlier.

I don't know that, that's the policy that they are going to do, but I think that are going to be thinking of ways to eliminate the harm that could come from too much uncertainty to your voluntier ity happening all at once. Uh, and look for ways, look for ways to to mitigate that. The other thing is that then we didn't really get to chat too much about the about the unilateral al means of lowering the dollar for time constraints.

But that's fine because I think those are even been more experimental in terms of thinking about what what they would look like in and those tools exist. You can use those tools if you've decided this is what you want to do, but there are potential of volatile risks to doing so. And then there are steps you'd have to take to try and minimize the volatility, which is a totally different nature in the type of all the different terms.

We are a tools that you would use along the way. But when you put this together, I think IT implies that you know you use terrorists first and then you know and then only then would you think about doing some currency stuff. And there's a couple reasons, right? Like one terrace give you leverage, as we said a moment o so if you're doing some certain of deal, uh, you get Better terms of the deal. When you have more leverage, you do the leverage.

T right? Caffs are, uh, more familiar and they are more comfortable as we discuss before, right? There is not a big fear to using them because they they know how they work last time, right? I think there's some uh, you know some uncertainty over how currency approaches would actually want to working in practice because they haven't really been used in several decades, right? And so I think that there will be therefore, reason to treat a little bit more cautiously on that grounds, even though potentially over the horse of four years.

You know if the president said that's where where he wants to go, that's where is going to go. But I I I think that you know I think that there would be some some caution at first, right? So I think that if you put if you want to put that together, I think you should get to get to tof, you know, pretty much up front, uh, which is not you know which is not very for radical sensus.

You know, I think you know quite bullish for the dollar. And we're seeing that in markets, right? We're seeing we're seeing that happen. And eventually I may turn around and as other currencies to appreciate more torture their fair levels if if we start pursuing a dollar driven approaches and currency driven approaches. Uh, but you know, I think I think that sort of of where you end up at the start.

well, look, that was a fascinating hour. The paper is fantastic. It's really the question on everybody's ads right now is and the minds is, what does this all mean? You know, we hear these these ideas of terrace, but you know, you don't want to just listen to the headlines on news because as he explained in this paper, it's so much more new, less than that.

So I think this hopefully very helpful. And again, as you emphasize this, this is just A A potential guide and idea and catalog of ideas that they can experiment with, potentially use just to really. Help us understand what are some of the potential implications as move for IT.

So you know really appreciate you bring this ford. I think this paper will be very helpful for the best the community at large and and also obvious see makers potentially. So I think it's really great um and yeah really thankful that you came on the show to presented to us. See look.

thanks. We're having you back. It's it's a thrill in earning to be here and thanks taking the time to to discuss the stuff I think I think for for interesting interesting for years .

yeah yeah to say to the least. But you know I think also to say is that it's a lot a lot of IT is warranted. You know there's these things that are occuring.

They need to be dealt with, like as you ve shown in the the the charter of the share joke global GDP. We live in a different world now and things need to be addressed. So I think that's a really important take away for for myself. 对 什么？